In most of the big PSU corruption cases inquiries are instituted for the sake of formality. Small-time officials are made sacrificial goats whereas the big fishes are allowed to slip and go scot-free. Similarly it is alleged to have happened in the country’s gas major, GAIL India Ltd. The crucial file No. 87360 which has decisive and essential evidence of alleged connivance of top management officers in the crime is missing. The CBI in its preliminary enquiry report conveniently ignores the role of the senior management of the company and instead small officials and private companies have been made accused in the corruption case.

Bureaucracy Today known for the unbiased and fearless brand of journalism brings to its readers an in-depth and shocking report of alleged corruption in the Government-owned Gas Authority of India Ltd (GAIL)

The missing file

A File ID No. 87360 that was supposed to contain all the crucial information and evidence of involvement of Board-level GAIL officials in the alleged Rs 246.16 crore scam has gone missing from Gail office records. The GAIL in its RTI reply to Bureaucracy Today, dated November 26, 2013 acknowledged; “It is hereby submitted that the file containing desired inputs (having file ID as 87360) was not closed in the Pricing Department, hence it is not available. The same is also evident from the file Movement System report enclosed with the letter.”

A source on condition of anonymity informs Bureaucracy Today that “the file had gone missing from the database of the GAIL. The file was last tracked on July 25, 2006 when it was sent by EVS Rao, then (GM Pricing), to then Chairman and Managing Director UD Choubey at 12.18 pm. Later on November 1, 2006, as per record, the file is said to have been closed by Choubey”.

“Why are you so interested about the file movement? It’s our internal matter. Who gave you the information about this file?,” reacted SB Mitra, GM (Law), GAIL India, when the Bureaucracy Today reporter visited the GAIL headquarters in New Delhi to inquire about file No. 87360 which is related to pricing and the alleged favouring of six private parties by the GAIL.

Alleged corruption and its background

The case of alleged corruption pertains to extending an undue benefit of Rs 246 crore to six private power producers by supplying them cheap gas by GAIL India. The private players subsequently sold electricity at commercial rates against the Oil Ministry’s instructions.

Shockingly the top management of the GAIL in 2010 further entered into fresh agreements with the same companies without resolving the pending pricing issue, despite the crucial ongoing controversy of pricing since 2006. Astonishingly the CBI’s investigations and its Preliminary Enquiry (PE) are dead silent on this critical matter.

In the year 2000, six private companies, namely M/s MMS Steel, Saheli Export, Kaveri Gas, Coromandal Electric, Arkay Energy and OPG Energy entered into separate agreements with the GAIL. The public sector undertaking agreed to supply to the above mentioned private companies a fixed quantity of gas, as allotted by the Government of India. The period of validity of the agreements was fixed as December 31, 2010, though in individual cases, there were some variations.

The agreements provided for the extension of the period of contract. Insofar as the price of gas was concerned, Article 10 of the agreements stipulated that up to March 31, 2000, the price as fixed by the Government of India under a Pricing Order dated 18.9.1997 would be adopted. And after 31.3.2000, the GAIL reserved the right to fix the price as per the directives, instructions or orders of the Government of India. It was also stated in the agreement that the price was likely to be market related in accordance with the current policy of liberalization of the Government.

In other words, the quantity of gas to be supplied to each of the applicants was determined by the Government of India, by individual letters of allotment; and the price payable by the applicants was to be in accordance with the pricing orders issued by the Government from time to time. From the time the six private parties entered into gas supply contracts with the GAIl, till the year 2005, there were no issues. But, on June 20, 2005, the Government issued a Pricing Order bearing No.L-12015/5/-4-GP, revising the pricing methodology that was in force from September 18, 1997.

The decisions communicated by the Pricing Order dated 20.6.2005, which are pertinent for this Bureaucracy Today investigative report, are as follows: “Power and fertilizer sectors are critical to the economic development of the country and the output price of these sectors is either controlled or regulated by the Central and State Governments, who have to bear subsidy to a large extent for any increase in the output price. The specific end users committed under Court Orders/small scale consumers having allocations up to 0.05 MMSCMD also deserve priority in gas supply. Accordingly, it has been decided in the public interest that all available APM gas would be supplied to only the power and fertilizer sector consumers against their existing allocations along with the specific end users committed under Court orders/small scale consumers having allocations up to 0.05 MMSCMD at the revised price of Rs.3200/MSCM. This price would be linked to a calorific value of Rs.10,000 metre. Consumers other than fertiliser, power and specific end users committed under Court Orders/small scale consumers having allocations up to 0.05 MMSCMD and getting existing gas supplies through GAIL network, would be supplied natural gas at market related price depending on the producer price being paid to joint venture and private operators at landfall point, subject to a ceiling of ex-Dahaj RLNG (regassified LNG) price of US$3.86/MMBTU for the current year i.e. 2005-06”.

Two Pricing Mechanisms

It may be noted from the relevant portion of the Pricing Order dated 20.6.2005 extracted above, that two different pricing mechanisms were adopted. One was termed APM meaning ‘Administered Price Mechanism’.

The second was market-related price, which depended upon the producer price being paid to joint venture and private operators at landfall point. By virtue of Clause 10 of the gas supply contracts that the parties had entered into, it is obvious that the Pricing Order dated 20.6.2005 was to come into effect. By a letter dated 5.6.2006, the Government of India also sent a communication to the private parties indicating that as per the Pricing Order dated 20.6.2005, a revision of APM gas prices was to be carried out for all consumers, other than those in the power and fertiliser sectors, in a phased manner over the next three-five years. Accordingly, the Government increased the price of APM gas supplied to City Gas Distribution Projects and small consumers having an allocation of up to 0.05 MMSCMD, by 20% over the current APM price of Rs.3,200/MSCM for general consumers and Rs.1,920/MSCM for North-East consumers. The revised prices for other consumers were also indicated in the said letter. Thereafter, the GAIL sought a clarification from the Director in the Ministry of Petroleum and Natural Gas, by letters dated 5.6.2006 and 12.6.2006.

By Shalini Singh, New Delhi

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