Jaipal lost portfolio for questioning RIL’s output claims?

“The gas is mine,” Jaipal Reddy told Mukesh Ambani during one of about half-a-dozen meetings that the plain speaking political veteran had with India’s biggest tycoon.

Ambani was always polite but the meetings remained inconclusive, Reddy unable to accept the Reliance demand to double of the price of KG Basin gas. As oil minister, Reddy insisted on a full account of RIL’s inability to deliver on contracted supply of gas and wasn’t willing to accept what his officials said would be a $6.3-billion bill for acceding to RIL demands.

Reddy was ready to bear what he said was a moderate loss, but remained skeptical of RIL’s claim that a drop in gas production was because of “geological reasons” though Ambani denied any deliberate intent.

With meetings sometimes stretching hours, Reddy made the point that gas is sovereign property and RIL was only contracted to extract it and needed to realize it could not fix prices as if it owned the resource. Reddy had a point, but he would have known that no bets would be placed on the odds of his winning the battle with the petrochemical giant, given Reliance’s legendary clout in governments of all hues.

A brief phone call from PM Manmohan Singh in October 2012 informed Reddy that his portfolio was being changed. This didn’t come as a surprise: He was the latest of many who had experienced RIL’s clout.

Before him, during the UPA 1 tenure, Mani Shankar Aiyer also had a run-in with RIL. Though there was more than one reason for his exit as oil minister, his spat with the leading business house did not help his case.

Reddy accepted the portfolio change but it left him fuming and some seven months later he stubbornly and eloquently argued against hiking gas price to $ 8.4 a unit from $ 4.2. At the Cabinet meeting that lasted more than 100 minutes, Reddy argued there is no financial or geological basis to the decision.

His argument that the government’s expectation that an increase in gas prices will spur investment and reduce imports are ill-founded was supported by rural development minister Jairam Ramesh. Ramesh is understood to have said that while the government is offering incentive pricing, the prospects of gas were unverified. “The outgo is certain, the prospects are uncertain,” Reddy is understood to have said.

Power minister Jyotiraditya Scindia chipped in, saying a price hike will mean a rise in the cost of power; the outgo on power and fertilizer is billed at $6 billion (over Rs 36,000 crore).

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