Excerpt: Concerns Over GSPC’s Financial Deals Were Ignored

Probe agencies turned a blind eye to concerns over financial deals of the Gujarat State Petroleum Corporation.

(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.

Link Between Demonetisation and GSPC

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:

Urjit Patel was appointed as the governor of the RBI last September by the Narendra Modi government. Urjit Patel was also an independent director and the chairman of the audit committee of the Gujarat State Petroleum Corporation (GSPC) from FY’06 to FY’13. Narendra Modi was the chief minister of Gujarat in this period. [The] GSPC is a Gujarat state public sector company, under the ministry of petrochemicals and energy. The minister was Saurabh Dalal Patel. During this time [the] GSPC’s loans from banks ballooned from Rs 270 crore to Rs 14,000 crore.

The Comptroller and Auditor-General of India (CAG) has issued a scathing report on the borrowings of [the] GSPC, which has all been squandered away. [The] GSPC had a joint venture with another company Gujarat Natural Resources Ltd (GNRL) for many of its oil and gas blocks. [The] GNRL, contrary to its misleading name, is a private limited company and not a state enterprise. Saurabh Patel, the minister overseeing GSPC, is a beneficiary investor in GNRL.

Jairam Ramesh in an article dated 29 June, 2017

This has been revealed by the Indian Express in its investigative report on 22 November 2016. Urjit Patel, as an independent director and chair of the audit committee of [the] GSPC, not only approved [the] GSPC’s excessive borrowings from banks that he now oversees as RBI governor, but also failed to highlight this obvious conflicted related party relationship between the minister and [the] GSPC. Saurabh Patel was a close confidante of Narendra Modi.

Jairam Ramesh in an article dated 29 June, 2017

Ex-Economic Affairs Secretary Raises Concerns

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:

The annual report of GNRL shows how GSPC had allowed that company to have a share in several oil blocks it won in competitive bidding. GNRL was partly owned by Shri Saurabh Patel, the minister in-charge of the department in Gujarat. These findings raise very serious concerns about the way Shri Saurabh Patel had a free hand in the then Modi government of Gujarat and how valuable oil blocks that belong to the people of India were bartered away to foreign nationals of questionable credentials.

Letter by former Economic Affairs Secretary, EAS Sarma

I request you to investigate these urgently as the value of the hydrocarbon resources involved runs into thousands of crores of rupees and very influential persons are apparently involved.

Letter by former Economic Affairs Secretary, EAS Sarma

The Panama Angle

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.

Also Watch: Gujarat Polls: Cong Rakes up GSPC Scam, Asks Modi to Come Clean

Pleas on Deaf Ears

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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