Reliance and BP in India

Deep controversy

India’s biggest energy project has produced more squabbles than gas

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Readers' comments




"Success" in any field in most (if not, all) developing countries like India depends on how anyone is able to exploit the current culture of corruption and crime. That's one of the reasons why people from privileged families, well-connected people almost always 'succeed' there, irrespective of talent, personal integrity and professional ethics. The story of Reliance and its promoters (Ambanis) are no different.
It seems that time has come with fast spread of internet and cable TV, that many common Indians started asking questions, demanding accountability. Fast rise of the new political party by anti-corruption crusader Arvind Kejriwal is like fresh air for new generation Indians who want a sustainable change. Coming election is a watershed moment for India, more importantly for Indian politics and business.


If you look at the history of Reliance, we can see that this company has grown by misusing the License Permit Raj and many top politicians were hands in glove with the Amabanis. Though he is Harvard educated, Mukesh Amabni can not grow beyond the typical family controlled Indian business style.In fact there was a lot of sibling rivalry between the two sons of the late Amabni and even today they are rivals in some sectors.AAP is right in demanding a thorough audit of all the Reliance accounts.They want to rule India by proxy- This must change


Reliance's reputation of being expert in managing the environment is well deserved and rooted in reality. It would be ridiculous to suggest that Reliance is a clean company doing honest business, irrespective of the merits of this case. It is like hitting someone when driving drunk -- it doesn't matter whose mistake caused the accident, the person who was drunk is the one to get the blame.

Moreover, you don't adequately explain why BP paid top dollars for stake in the project where the production was rapidly dwindling.

It seems that TE is sympathetic to BP.

Shashank Sonthalia

Very misleading article. The author has probably been paid by Reliance to publish "facts" spinned by their PR team.

1. Reliance has taken an increase in price from 2 to 4$ by blackmailing the government. They even used their clout to change the oil minister.
2. The 2$ was agreed to by them and based on the same tender was awarded. Now if they later backtrack the country shall not suffer.
3. They have purposely reduced the production and will jack it up when prices increased.
4. Same gas is being supplied to Bangladesh still at 2.4 $
5 cost of production is 1$ only which has been declared by Reliance themselves.
6. If the project is making a loss he should sell it to the national energy companies.

The author should refrain from posting wrong information and spreading lies.


The Economist accepts there is deep distrust of Reliance amongst Indians at large. Yet it's willing to accept (without any independent evidence) all that Reliance says in the KGD6 matter. How pathetic! It rails against crony capitalism in the abstract, but when specific charges are brought, it defends the crony capitalists.


Arvind Kejriwal has very lucidly explained his issues with this project. I don't see those issues addressed in this article. Reliance should simply be a contractor to extract the gas. The gas must belong to the government. How can Reliance ask for market price for the gas that should not be their in the first place?


Fishy useless Article as it has not accounted/explained the core points but just goes on blabbering/spinning about relatively non critical issues.

1. How does 80 or what ever percent of Gas Exploration being managed by State Owned ONGC & others in India justify that increasing Gas Price just for the heck of it is fine So that a Private company can get potential wind fall profit in addition to the State owned company.

Even thou Profit to State owned company can come back to ALL Indians (provided the holes & pockets are sealed), but profits to a Private company will go to select few. So if ALL Indians Own the Natural Resource finally (as in a democracy) AND technically & practically the operations can be managed with the original pricing what is the need to increase the price.

Just because companies (public & or private) want more price doesn't mean that we allow it when their expenses dont justify it in reality and when there is already a ethical profit built in.

2. If the resource belonged to that private company, then it could have priced it based on what the same commodity/resource would cost if imported from else were into India. HOWEVER in this CASE the resource belongs to ALL Indians and not the company. So the price what we should be paying the company is what is the actual expenses to Setup & MANAGE the operations in a EFFICIENT manner Plus a ETHICAL Profit on Top.

3. Also if 80% of the Gas & Oil exploration is managed by ONGC and other state owned companies in India. Then I don't see any need for Private companies to be allowed in now, if their only motive is to make unethical WindFall profits, just because they wantTo/Can.

Rather fix the problem with State Owned Companies like ONGC by bringing in additional right talent into these companies where required as well as having accountable systems in place.

Irrespective of what some Industrialists/Capitalists/Economists may want to believe in their dreams, all PSUs are not failures.

In summary:

If Businesses are willing to work with Ethical profits it is good to encourage them, but if they want to loot then there is no place for them.

We are for businesses making honest ethical profit and not windfall profits just because they can.

I think over the next decade businesses & politicians have to realise that world is moving forward and that U cant have the principles which allow 85 of the richest people in the world owning more or same wealth has the 50% of the humans in the world to continue. (Not sure but likely that Rather if u increase this to 1% of the world richest population, then potentially most of the material wealth in private hands may be accounted by this 1%.).

Let us all learn to be responsible and ethical also rather than being just greedy always.

guest-swaoewl in reply to Rivka Mishra

If any investor thinks that crime and corruption ensures safety of his investment and guarantees sustainable higher return, then s/he should rethink to change his/her career. For short term, many investors may be little scared but in the long run, rule of law, decent corporate governance will attract more investment, besides encouraging many novel and new entrepreneurs which is almost impossible in India under the current culture of crime and corruption.

subodh pandit

Highly misleading article..$15-20 bn "cumulative" investments made, what exactly are "cumulative" investments, and by whom ???
As per careful reading of article Reliance invests $ 4 bn in gas pipeline (no other investment figure given in article), expects to earn $20-30 bn profits ! Who is profiteering here ?
"Cumulative" investment figure deliberately used at the beginning of article and then again in the middle to fool readers. "Trust deficit" of course, for Reliance and also disappointingly for "The Economist" ?

Lupe Wadosy in reply to skokatay

the economist no doubt approves of this arrangement because you guys are, after all, wogs, and are undeserving of access to energy resources that just naturally belong to white people

A Good business man will never pay anything more than Cost+ for anything he will buy. He will never agree for Import Parity Model (it is a good way of looting developing countries, especially when the resource is within that developing country). When that is the case why should a country pay based on flawed (when applied like this) Import parity model and not based on the proper Cost+ Model?

Rather if India wants to export this resource to some other country, then it should use Import Parity Model pricing (again with some good business acumen) to decide the price it will ask to the importer of our resource/commodity.

Put differently.

Just because I also need to import say Chai FromUSA2INDIA DOES NOT mean that I will pay my worker that same import price for the Chai he prepares for me locally here from my own local resources. Rather I will pay him what ever is the cost + a fair profit for his effort.

Rivka Mishra in reply to Sujit65

If you read the article carefully, you'd find arguments against the conspiracy theory of Reliance having manipulated the government - like the involvement of BP and Aker. Reliance may have a reputation for cronyism, but that doesn't mean that what you or anybody suspects is actually true. The facts suggest otherwise.

NonPseudo Secularist

Exploration means Uncertainty
Worldwide, Majority of hyped up energy exploration projects don't live up to their potential and many are written off (eg. Brazil OGX, HPT etc). Even energy majors, like BP in HPT, make mistakes.

Senseless socialist policy means Scandal
The root problem is Indian Government's socialist cost-plus strategy, for power and energy sector, which provides higher profit to high cost producer and lower profits to low cost producer. As a result, Corporations sometimes construct unviable and super high cost plants. Here is example of infamous Enron Scandal, Enron constructed a power plant at Dabhol, India in 1990s. Plant has very high fixed cost and operating cost with production cost 4 times higher then market rate.

Simple Solution
Replace cost-plus formula with reasonable royalty, and allow corporations to sell their gas, power etc in free global market.

Lupe Wadosy in reply to skokatay

"The people of India and the Government need to have faith in market economics and allow the market to set its own prices."

tgat's a nice idea, and it fits nicely with the neocons' professed belief in "free markets"

in practice, though, the neocons dont believe in" free markets" unless you're a corporation or country approved by the empire

for instance, the US has been blocking iran, pakistan and india's efforts to build pipelines from iran to india... based on the empire's previous behavior --"divide and conquer"-- we can assume the empire is deliberately interfering with efforts to reconcile pakistan and india

all this dovetails, i suppose, with reliance industries' efforts to preserve its dominace of india energy

and think of all the extra money reliance makes by not having to compete with iranian gas

so india, by knuckling under to the US empire and reliance industries, is shooting itself in the foot..

Wrt ONGC is agree to some extent, thats why If U look at my original response I have already mentioned bring in the RIGHT talent where required and put Accountable Systems in place.

But same time dont fan Reliance unnecessarily. Going by its own commitments to Us all Indians (thro Govt) by its contract and the way it has performed. It shows how inept & or crafty it is U decide either or both is BAD.

As for Rangarajan committee formula. Just because a formula is formed by a committee doesn't mean it is correct. U have to first check what was the brief given to the committee. If the brief to the committee is wrong, the result will also be wrong. And the sad part is the brief given to Rangarajan team was wrong. Please cross check those facts first.

Cost+ Model is the right way to price ones own resource or commodity for ones own consumption.

Rather Import Parity Model (with some good business acumen ;-) should be used by Us (i.e the owners of the resource) when we want to sell it to some other country (by looking at import parity across different suppliers at that destination country).

Vaibhav Chauhan

The figure is 9$ instead of 8$ per mmBtu by the current "re-calculations" by Reliance.
And someone needs to clarify the difference between wellhead price and Import price to us.

Rivka Mishra in reply to guest-swaoewl

The result of Kejriwal's campaign will be that serious long-term investors will keep clear of India. Kejriwal's arguments are nonsensical, and such arguments will never stand in a court. Kejriwal is a power hungry populist whose only aim is to create chaos.


While this may not be the ideal forum from which to post this question, I feel it is the best forum I could find. How does The Economist think the spread of fracking technology, India's growing energy needs, and the location of the Northern Indus Basin straddling the hostile Pakistan border will impact relations between the two nations?



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