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(Excerpted with permission from Paranjoy Guha Thakurta, publisher of the ‘Grand Illusion’. ‘Grand Illusion: The GSPC Disaster and the Gujarat Model’ by Subir Ghosh is available on Amazon.)
Once Narendra Modi had ascended to the position of prime minister in May 2014, the financial misadventures and cavalier way of running business at the Gujarat State Petroleum Corporation (GSPC) could no longer be kept away from the glare of the public. But with spin doctors working overtime on how big the deal would be, that was where the focal point remained.
What was astonishing was the manner in which the Oil and Natural Gas Corporation (ONGC) was made to bail out a bleeding entity. Reports of conflict of interest, arm-twisting and financial skulduggery kept appearing in the media, but to no avail.
On 26 November 2016, Congress member of Parliament Jairam Ramesh linked the demonetisation drive of the Union government launched earlier in the month, the Reserve Bank of India (RBI) and the GSPC:
Ramesh could well have been from a rival political party, but none of what he pointed out was untrue. None of this was denied by officialdom either; it is not easy to deny facts, leave alone refute them. This thread was pursued by former economic affairs secretary EAS Sarma, who wrote to the enforcement directorate urging the director to investigate the matter.
Sarma said that he had come across additional material:
When the directorate did not respond, he wrote again, this time bringing in the Panama Papers angle:
I find more distressing facts about GNRL. It was operating through six subsidiaries which include Heramec, Gorlas, Sigma Oil & Gas & Alkor Petro and Overseas. Both Heramec and Gorlas figure on the website of International Consortium of Investigative Journalists (ICIJ) and Panama Papers, as evident from the enclosed snapshot pictures of that website.
It is surprising that the ministry of petroleum and natural gas (MoPNG) should assign eight oil blocks to [the] GSPC knowing well that Heramec is a 30 per cent partner in Kanawara, North Kathana, Allora, Unawa, North Balol and a partner with ONGC in CB-ONN-2004/1, CB-ONN-2004/4 (see pages 71 and 72 of the enclosed GNRL annual report for 2015–16). It is equally surprising that [the] GSPC, which is a state PSU should involve Heramec and later GeoGlobal and Jubilant Enpro whose credentials are highly dubious.
Assignment of such a large number of hydrocarbon blocks to GSPC/GNRL consortium was in itself highly questionable. [The] MoPNG should be asked to explain the circumstances that compelled it to allot these blocks to the Gujarat consortium. In turn, it is distressing as to how [the] GSPC, a state PSU, under the administrative control of Shri Saurabh Patel, the minister, joined hands with such a highly questionable company, namely, GNRL and its subsidiaries and exposed itself to an enormous risk, which in turn got indirectly transmitted to MoPNG, knowing well that GNRL was only a family concern of the minister. This web of shell companies raises concerns about money laundering on a large scale.
The letters to the enforcement directorate or even the Central Bureau of Investigation (CBI) to pursue the matter evoked no response. The former bureaucrat even urged the Comptroller and Auditor-General (CAG) to order a special audit of the transaction between the GSPC and ONGC.
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As Sarma kept shooting off letters urging senior government functionaries to act, Ramesh on the other hand kept raising questions through his articles. On 12 January 2017, he wrote an open letter to the chairman of the Securities and Exchange Board of India (SEBI), UK Sinha. Calling for a SEBI probe into ONGC’s decision to buy the GSPC’s stake in the KG Basin gas block, Ramesh said the former had flouted listing guidelines and had not secured approval of minority shareholders for the transaction.
He wrote:
As per SEBI regulations, such material transaction between two related parties needs the approval of the minority shareholders. ONGC’s board resolution states ‘the engagement between ONGC and GSPC has set a pioneering example of synergy of strategies of Government owned companies in upstream sector of oil & gas industry.’
As per ONGC’s own admission, ONGC and GSPC are related parties of the Government of India. It is needless to say that there is indeed a strong ‘relationship’ between the Government of Gujarat that owns GSPC and approved its borrowing binge between 2005 and 2014 and the Government of India that owns ONGC, which suddenly after 2014 seems to have had a realisation that buying GSPC’s gas block in KG Basin is a virtue.
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