Fuel Policy

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FUEL POLICY

Theft of natural resources

Subhash Grover


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This book is dedicated in memory of

MY YOUNGEST BROTHER

RAKESH GROVER

22.05.1959 - 29.07.2011

WHO DIED IN AIRCRAFT ACCIDENT AT

ALIGARH, UP

ABOUT THE BOOK

Title : FUEL POLICY THEFT OF NATURAL RESOURCES

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Author : Subhash Grover

Owner & Publisher : M/s. Om Publication

Address for Correspondence of Publisher:

Om Publication,11, Gazetted Officers Colony,Ambazari Layout,

Nagpur-440 033.

Printers : Urdu Printing Press, Mominpura, Nagpur

First Edition : Dec. 2012

No. of Copies : 1000 (Under print)

Language : English

Size : 120 x 160 mm

Print Area : 90 x 160 mm

Paper Used : Bilt 70 gsm Maplitho

Suggested Contribution : Rs. 50/-

PREFACE:

With the complete monopoly of natural resources, bureaucrats hand in

gloves with the politicians, who are ruling this country since independent

have been systematically involved in making billion of dollars for

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them power to be custodian of national reserve and court has given them

freedom of looting. In simple and straight forward terms babus,

politicians who are no more than the watchman of the national assets but

acting like owner by stealing major junk of resources only for themselves

because the agencies responsible for checks and balances are puppets in

the hands of bureaucrats and politicians.

The recent agitation of IAC (India Against Corruption) it was revealed

that all the politicians, bureaucrats and executives are strongly opposed to

independent of transparency commission, competition commissioner,

CVC, CBI and want even CAG and Supreme Court to be subordinate to

the politicians through peoples court i.e. Parliament.

With 60% of parliamentarian who are not studied up to matriculation

and almost all top leaders hiding their background, more particularly,

education, criminal background and finance. There is hardly anypolitician who is worth calling an honest administrator or Pandit of

portfolio, for which are entrusted for managing the national assets. Out of

total 15% of parliamentarians do not know even how to sign and still

rely on use of their thumb impression instead of signature but comes in

the category of national leaders, average parliamentarians are having 9+

children and about 10% of parliamentarians practice bigamy but 95% ofparliamentarians are billionaires holding above 100 crores of rupees in

assets against the average income of common man which is half dollar or

26 Rs per day. The entire assets our parliamentarians have amassed is

during their political career only.

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How can we expect as an Indian with such a leadership, dishonest and

corrupt bureaucracy managing the country and nations resources will

be exploited for the benefit of common man.

The book pertaining to energy resource, policies and manipulation will

give a firsthand knowledge as to how Governments inefficiency,

dishonesty and ignorance of managing the resources has made a

common mans life so miserable that common man starved for the energy

after 65 years of independence for energy which is required for just two

times meal.

AUTHOR

INDEX

Sr. Page No. (From To)

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No.

1. Laughing Budha on Govts dole

-Monopolizing Energy Policy by the

Govt. (such as Mineral Oil, Gas, Coal,Forest ) - exploiting the masses.

8 to 13

2. Subsidy on Kerosene Pandora of

Govt. managed corrupt system through

PSU and how to avoid it

9 to 24

3. Black Gold Glitters in UV Light 25 to 41

4. Gas, Necessity, Politics & Corruption 42 to 475. LPG Mockery of Govt. Policy for

domestic use

48 to 49

6. Shale Gas 50 to 56

7. Why the Petroleum Product does not

attract provision of Competition

Commission

57 to 74

8. Alibaba Aur Solah Chor (free

allocation of goldmine entry strictly

for politicians)

75 to 87

9. CBM ( Coal Bed Methane ) 88 to 93

10. Clean Energy 94 to 101

11. Conclusion 102

12. Authors Profile 103

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LAUGHING BUDHA ON

GOVERNMENTS DOLE:

Monopolizing the Energy Policy by the Govt. (such as Mineral Oil,

Gas, Coal, Forest etc ) exploiting the masses:

It is important that we should look in to the energy need of the country,

more particularly; domestic energy for cooking and for generating

electricity. The energy for domestic purpose is derived out of 4 main

sources i.e. LPG / CNG / Petroleum fuel & Kerosene etc i.e. mineral

oil/Gas, which is under the total control of Govt. agencies more

particularly, under the PSU Oil Companies which is main cause of

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rampant corruption in the system and Govt. fearing loss of huge profit is

not willing to part with private players.

Secondly it is Coal which is also completely controlled by the Govt.

recently CAG report revealed allocation of coal blocks due to shabby

policies of Govt. has cost Rs One lac eighty six thousand crores of

rupees net loss to the nations exchequer and this was allocated by none

other than PMOs Office to help few business houses through politicians.

Since the Coal is allocated on quota system to the selected players, it is

not accessible to public at large for domestic use at least in the city. The

probable reason is pollution due to smoke. Alternative fuel is Wood

which is protected by Government under the Conservation Act as a result

sale of wood for burning purpose is practically banned. The only alternate

energy now is electricity which is scare.

The average cost of domestic electricity is Rs. 7-9 per unit on slab basedrates, besides use of electricity for high wattage heater for cooking from

the domestic meters is not allowed due to higher wattage and low voltage,

more particularly for cooking and if this option is exercised middle class

person has to change the entire wiring and will require higher capacity

meters. Even otherwise, electricity in Tier II cities is hardly available

for 7-8 hours per day and cannot be relied for its consistency, 90% ofelectrical distribution is also controlled by the Govt. or Govt. owned

agencies. It is for the Govt. to answer or to come out with white paper

what is the alternative fuel on which common person should rely after 65

years of independence for mere two times meals and if so how? The

straight answer is to decontrol entire Govt. machinery and Govt. to

concentrate only on exploration and production in Oil & Gas sector so

that national asset are not misused by controlling and marketing sale of

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hydrocarbon through PSU Oil companies, nowhere in world this sector

i.e. marketing and sale of oil and gas is under the government except in

India and simplest answer is for profit and personal gain. The Govt. is

only making profit in all monopolized sector of energy where the Govt. is

in control of end product though its employee, who are Pandora of

corruption. In power sector, Govt. is concentrating in issuing licenses to

private entrepreneurs for generation of electricity whereas distribution

and transmission is in the hands of Govt. The result - Govt. purchases the

power at very high cost and distributes it showing losses. Between 40 to

50% transmission losses are due to stealing electricity hand in glove with

its own employees and Govt. is not willing to hand over transmission and

distribution system to private parties. Similarly, oil exploration, PSU, E

& P, Oil companies are robbed out of its profit by selling its proven

reserves to multinational or big business houses for through away prices

and then selling the petroleum product first by charging huge tax from the

general public and then subsiding very small part at discounted rates,through PSU Oil Marketing companies in monopoly, so that Govt. is left

with no money for exploration and production. The result is these losses

are compensated by imposing tax at very high rates as well as charging

exorbitant local taxes resulting in the rampant corruption in the Govt.

machinery. The result is that the straight forward people are sufferers.

The theft is so common in supply point that every PSU Oil Company andtheir supply points are known to have been involved in several wrongful

activities. Moreover, 10% of crude, more particularly diesel is smuggled

through high sea and sold in open market by the smugglers, hand in glove

with our security services, whereas the local production is smuggled to

neighboring country or stolen openly through the pipe line.

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The Govt. and PSU oil companies are mere spectators or beneficiary

through private contractor or mafia, who are involved in hefty profit and

parting the same to PSU Executives. What is not known to the public that

5% total oil is pumped from abundant wells by the mafia with concurrent

consent of E&P Oil Companies, the crude is processed at local refineries

with the different nomenclature and sold as fuel.

For oil and gas reserves which our Hon. Supreme Court calls as National

Asset but justifying the raise in price in favor of private players + loss of

royalty revenue. Which in fact is link to production as such price is

directly proportion to profit in contractors coffer due to raise in prices

and tax over the sale price (as royalty also included in the sale price) Say

for example the price of petroleum product is increased by 10 Rs a liter

by PSU oil companies. The Govt. immediately is beneficiary of 4.7 Rs.

profits due to increase in the tax and E&P contractors who manages the

national resources at the behest of Govt. and develop the field will makeprofit of Rs. 5.30 without spending a single rupee and this increased

amount will be appropriated to him as increase in the cost of

development towards escalation i.e. the money borrowed by E&P

contractor from the nationalized bank wherein the Govt. is guarantor for

repayment so contractor enjoys the raise in price of national reservoir and

benefit is passed on to the contractor indirectly for the work which isalready completed long back by utilizing common mans funds through

the banker. It is similar to the payment of revise salaries which has

retrospective effect like revise payment to the Govt. servants in case of

6th Pay Commission.

In Coal Scam Hon. Supreme Court has set an example that nations

commercial assets need not be auctioned and Govt. has prerogative of

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utilizing the same as they feel fit, the judgment was delivered none by the

CJ of India just before he retired. By doing do he has paid back all the

obligation of Govt. and also secured proper future for him.

In simple terms Govt. can get indirectly what they cannot get directly

subject to the overlooking or objecting agencies like Court, Vigilance

Commission etc.

It is something like laughing Budha

who is smiling at the masses for their

misery but bringing good luck to the

babus / politicians for every hike in

prices.

In the case of forest, almost all forests are State Governments property.

They are auctioned for economic reason or higher profit. We are all

aware how forests are misused. In the event of coal which is also a

national property is reserved for big industries only by allocation of

blocks in favor of few. The policy of coal is changed by Govt. in favor of

big industries at the whims of Coal Ministry and PMO hand in glove.

Even though about 135 million tons of coal is imported every year from

Australia, Indonesia and some of the African countries, contrary to the

fact India is largest reservoir of coal and lignite which is untapped less

than 2%. It is time that Govt. should clarify to the nation about the fuel

policy of the country for a common man and over the national assets.

..o

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SUBSIDY ON KEROSENE OR PANDORA OF CORRUPTION:

The subsidy on Kerosene is brain child of politicians, bureaucrats and

Oil Company executives, so that competition in this field of petroleum

section shall never take place and they will continue to enjoy unfair

means by allowing hydrocarbon reservoir / blocks, dealership etc. to

their kith and kin and continue with practice to promote the corruption

for personal gain in perpetuity. This practice must stop at least after 65

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years of independence when 1/3rd of our total foreign earning is drained

only for purchasing crude. The Govt. themselves admit that 42 crores of

people in India live below poverty line as certified income by the

government is Rs 19 per day in rural area and below Rs. 26 or 1/3rd of the

US dollar in urban area. There is no way that subsidy and corruption can

be avoided unless government decides to give up providing unfair benefit

to their own pupil for vote bank politics. In democracy they have three

wheels of holy chariot over which 3 Charioteers namely politicians,

bureaucrats and executives are managing the chariot and unless they work

united and manage the chariot to drive in one direction the chariot will

not move.

The present practice of fuel monopoly more particularly petroleum

monopoly by the politicians and bureaucrats leads ultimately to

Switzerland and tax heavens. The chariot is pulled by the common man in

the name of nations energy requirement, how is it possible wheelmoving forward if the three charioteer are running the chariot in three

different direction at the same time, since the whole chariot is managed

by the Jr. Executives, Govt. servants and they keep beating common man

for pulling the holy chariot without knowing the direction.

The simplest way is that Govt. should come out with a white paper as towhy 42 crores of Indias population as claimed by the Dept. of

Population Control lives on an earning of meager income below Rs. 19

per day after 65 years of independence and the accountability of Govt. It

is published in Times magazine that only in 2G telecom scam the nation

lost 1,85,000 lacs crores of rupees, the role of this government itself was

sinister and corruption in the ministry was exposed only when the

difference between the government and its own party were surface, the

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sum of 2G losses alone to the nation are more than subsidy amount to 42

crores BPL card holders who live below poverty line.

If we revert back 25 years old practice, when there was acute shortage of

milk, Govt. introduced milk @ Rs. 2 to Rs 6 in the packets through the

Govt. Milk dairies, why the Govt. cannot give 3 to 4 liters of Kerosene

per family unit per month in the packet / bottles through Ration shop to

each persons who claim to be BPL card holder, rather than allocating

quota based system and then blaming falsely to public for the

irregularities.

Attention of public is further drawn that in China which is having almost

equal population and scare of fuel resources the domestic fuel is supplied

after spending about 5 billion dollar through CNG piping for the

nationwide network for the domestic gas. The entire China, more

particularly cities are supplied with natural gas through pipeline fordomestic use. The price for natural gas even by European standard and

market rates are much lesser than subsidized CNG and Kerosene in India.

India which is short of both funds and resources for purchase of

petroleum product, had to keep gold reserve of RBI mortgaged with

Swiss Bank, when Mrs. Indira Gandhi was Prime Minister for paying

petroleum import as such no country was willing to extend credit for fewmonths. Despite such bitter and shameful experience same Govt. continue

to pay approx. 2 lac crores per annum in favor of subsidy for almost 25

years, presuming subsidy of 5 billion dollar for 15 years, Govt. lost 75

billion dollars, only on subsidy since last 15 years. Less than 1/3 rd of

amount could have been sufficient for laying the pipeline in most of the

Indian cities for supply of natural gas for domestic use. The motto is

unambiguously clear the entire subsidy is linked to vote bank politics and

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not for any relief to BPL people. This state that governments planning

body, more particularly, Petroleum Ministry has not given any attention

intentionally. Recently state Government in Gujarat has earmarked

approx. 30,000 crores or approx. 0.60 billion dollars with the object of

providing natural gas for domestic use through pipeline to avoid subsidy

and corruption in this field and has laid approximately 22500 km of pipe

line for transportation of CNG for domestic and industrial purpose.

However, the policy of supplying natural gas by the Govt. to power

plants which is exclusively used for burning can be substituted by coal by

giving preference to domestic solid fuel like coal, lignite etc. rather than

CNG. It is a political decision rather than pollution control as such

pollution after consuming natural gas is almost same to coal except the

emission of carbon dye oxide is slightly more. It is only to facilitate

power house which are now licensed to powerful lobbies to burn our

natural resources with throw away price or free of cost. Similarly,

fertilizer is available in international market for th of production cost inIndia but almost all the fertilizer plants are owned by the politician or

ultra rich. They are enjoying subsidized petroleum quota of naphtha and

CNG by forming co-operative societies to manufacture fertilizer. So they

continued to enjoy the preferential treatment in the name of poor and

farmers.

In the past Govt. has advanced several hundred crores of rupees to a

Turkish firm in advance for purchase of urea without even shipping a

single bag. This state petroleum policy and import policy pertaining to

petroleum product and subsidizing the same is purely a political decision

to fool the millions of people and encourage systematic corruption.

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Recently the erstwhile Petroleum Minister involved in corruption scandal

both in allocation of additional fields to 2 firms namely RIL and Cairn

without bidding was revealed, he was further involved with active co-

operation of Ministry of Petroleum for awarding contract worth 200 crore

rupees for unproven marker test @ Rs 5,61,000 per liter against market

rate of Rs 800 per liter to his close relative M/s. SGS Pvt. Ltd. without

process of law, though he has opted to resign, however, his request was

synchronized with condition of appointment of his son who is also MP to

be inducted as Minister. This prove that country is heading for dynasty

democracy and transparency is no where visible.

The PSU Oil Companies all over the country have lube plants owned by

PSU Oil Marketing companies. They have facility to pack lubricant in 1,

2, 3 and 5 liters capacity on its highly priced imported packing plant

despite their plant operate at only 10% of capacity for filling pouch

required for mixing lube in petrol or diesel in 20 or 30 ml pouch 90% ofplants capacity is ideal. The lube sale in Nagpur is few hundred KL per

month whereas capacity of Khapri plant to pack the pouch near Nagpur

alone is several millions pouch per day sufficient to cater whole of

Vidarbha Region without even spending one paisa, but the plant is

totally unutilized and can be converted for packing 3 liters of subsidized

Kerosene which can be sold through Collector to BPL card holder withexisting ration shops. It is only 1 packet per family unit per month and

volume will be extremely small without any overhead. Such practice will

not be implemented by the Oil Companies, though it is fully transparent.

But ministry by giving some excuse or other will never implement such

practice, alternatively manual packing machine for packing kerosene in

pouch, cost only Rs. 10,000 to 15,000 can be supplied to SKO dealers by

PSU Oil companies for better accounting system under the supervision

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of Food & Civil Supplies. When the HSD and Petrol dealer can be

supplied with dispensing unit why not supply SKO Dealer with pouch

making machine so that Kerosene leak if any is curbed.

We now see Government has paid in one year and 5 months amount of

Rs. 200 crores to SGS Pvt. Ltd. fortotally unproven test claiming to be

test adulterant. In fact the same very Govt. and the same very Ministry

knew that said test is unreliable since 1939. Despite several requests BIS

authorities have never added any such test in their Specification. In order

to make fast bucks Govt. first published in Gazette Notification claiming

the test comply IS specification which turned up to be blatant lie to fool

millions of people that this test is incorporated with IS specification and

thereafter after swallowing 200 crores withdraw the test and again

published GR claiming the said test to be unreliable. In process 113

dealers lost their dealership due to failure of test which tern out to be

simple color / die test. Another millions were spent on court litigation,harassing to public was different and loss to the employees working in

small units of R/O lost their livelihood for good. In Minutes of Meeting

held on 25th September, 2008 with Principal Secretary an unqualified

bureaucrat holding the charge of allocation of contract of unproven test

through MnO & PG kept on stressing the reliability of Marker Test till

five days before the test was withdrawn to ensure that the firm should bereallocated with contract, which was introduced by Ministry and causing

loss of Rs. 200 crores this amount was in fact siphoned off systematically

by single bid process without advertisement. Despite objection from all

quality control technicians / officers he kept on stressing the test is double

the reliable vis--vis the IS Test. What was more surprising that the

Ministry did not have know-how how to check this test as such

manufacturer M/s. Authentix, UK has not supplied test procedure, same

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being confidential trade secret was not known to anyone not even to R &

D Lab of any PSU Oil Marketing Company. It was a Principal Secretary

alone who kept on convincing about reliability whereas the QQ Manager

kept was objecting to the reliability. It is only after matter was forwarded

to CBI through CVC the test was deleted all together. This very incident

demonstrates why a pay or empowered the servant of Govt. who were

expected to protect the interest of Govt. but stealing the revenue

generated from the common man by justifying in favor of dubious

manufacturer that without even knowing the head and tail of what they

were doing. It is only after 5 days the test was declared unreliable and

removed from the test procedure from the date this minute of meeting

took place but only after 200 crores of tax payers amount was pocketed

by Minister, Secretary and PSU Oil company executives.

In another incident the Principal Secretary of the Ministry was involved

in hiding the facts by not allotting similar tenders to other two Spanishand Italian Companies. Even though the contract awarded to British

Company through its Indian sponserer who was relative of Minister was

extremely faulty. The contract was awarded to British firm but amount

was paid to the Indian counterpart who was relative of Minister. All these

facts of concealing single tender contract awarded to M/s. Authentix, UK

is well documented in CAG report but the CVC was shy to utter a singleword about irregularity. Though no action was taken either by CVC nor

by CBI, despite clear provision in the law and CVC has also never

bothered to verify the authenticity of test or revealed the outcome of

investigation and courts have dismissed several such cases only on verbal

deposition of PSU Oil Companies that test is reliable. In fact it was false

affidavit and purported to mislead the court for justifying concealment of

gratification by the higher authorities i.e. Petroleum Minister and

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principal Secretary, and Oil Executives were amongst the beneficiary of

huge bribe and the matter was kept secret stating that it involved national

security risk. If the said amount of Rs. 200 crores would have spent for

providing pouching machine to the Kerosene dealers, it would have cost

only few crore rupees for filling Kerosene with appropriate printing on

each pouch for systematic distribution of product to the end user i.e. BPL

cardholder. This justify as to how bureaucrats, executives and politicians

involved are benefited in such illegal practice and has cause great loss to

the country and if the system is corrected when the matter was agitated it

was justified that the marker test and its reliability is unproven but

effects of implementation is prospective. In simple words if any wrong

doing is done by the government servant till such time the irregularities

are notice it is valid and after it is prove that it was faulty and omitted

then only it is irregular but prospectively. In simple word, if you are

stealing Govt. money and caught and reprimanded only after next theft it

is a crime but earlier irregularities carried out by babus are lawful, if notcaught.

The Government has already started filling 5 Kg. LPG Gas and despite

all 3 PSU oil companies with huge ideal infrastructure, there are at least

2500 gas plants in the private sector which are totally closed and can be

outsourced for filling this facility. What is required is will that thereshould not be any difference between margin of subsidy and non-

subsidized gas so there cannot be any theft from the gas cylinder. The

theft from cylinder is very common as such consumer does not take any

precaution of weighing before taking delivery. Alternatively, the gas

dealers were also found the filling water in the gas cylinder and this is the

major case of frequent bursting of cylinders because hydrostatic test on

year on year basis is not carried out by the contractor though contacted, it

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is only on paper. Furthermore, the Govt. has kept practically LPG/CNG

i.e. rate of methane and propane at par to justify subsidy, rather than

allowing importing condenser which cost 50% cheaper than refineries

LPG output, the very intention is to keep the private players out of

petroleum business. In Nagpur and surrounding area alone there are 10

private refilling plants which are shut down due to subsidy of PSU Oil

companies on LPG. This can eliminate Kerosene subsidy all together

from the market if Government so desires. There are as many as 300

plants all over the country manufacturing gas cylinders but Govt. has not

opted to place the order for the 5 Kg Cylinders, fearing if this practice is

implemented PSU Oil Companies will be out of business.

It is pertinent that even for the hydrocarbon sector there are ways to avoid

malpractice of subsidized product for BPL card holder. The Govt. is so

afraid of introducing this practice. Say for example in State Excise

department the alcohol tanker carrying rectified spirit or extra neutralalcohol while on transshipment from distillation plant to packing plant is

accompanied by State Excise Officer, who is responsible for transport of

product in tanker from distillation point to destination point. Any

manipulation enroute he loses his job. He is entrusted with the police

powers to protect the product. The PSU Oil companies with surplus of

36000 employees can depute their surplus officers to accompany withkerosene tanker till destination point rather than sitting in the air

conditioned office and watching films on internet. Otherwise PSU Oil

companies can hire the services of police or state reserved police for the

similar job, with the current rate of Rs. 300/- per person per day,

presuming 25 lac population of Nagpur the supply of 25 tankers per day

will cost only Rs. 7500/- per day and monthly cost will be Rs. 1,87,500/-

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per month ( for 25 days ) or yearly Rs. 22.50 lacs which is half the salary

of Class IV employees of oil companies.

This provision is known to all PSU oil companies and there are

competent people who are sitting in Ministry, Bureaucracy and Oil

Companies. They fully understand how to avoid unfair practice but what

return other than salary they will be entitled to except displeasing their

superior, even otherwise they have secured job, the problem is of WILL

& HONESTY

This country has been involved in nationalization of practically every

asset. When cement industry was monopolized by issuing licenses to 2

companies i.e. ACC & Birla till 1982 and the country was importing

cement from South Korea. It is only when govt. could not cope up with

the import and allegation of bribe were surfaced on the then Chief

Minister of Maharashtra A.R. Antuley the Govt. rushed for cementmanufacturing in country through the Private entrepreneur. In one year

alone the cement industry was deregulated, the country became exporting

nation. Even today the Govt. owned CCI i.e. Cement Corporation of India

is only Cement Company which is sick unit all other are exporting and

profit making companies adding billions of dollars to national exchequer.

Similarly, when ISSCO Director wanted to modernize steel plant to

compete with Mitsubishi of Japan, Congress Party in power demanded

one crore bribe in favor of party fund, which is well documented in

minutes of meeting held before winding up of ISSCO. The Govt. instead

of granting loan nationalized the ISSCO but could not manage the ISSCO

and passed on to State Govt. For 40 long years the factory remained

closed and Govt. kept on paying salaries and wages, without any work till

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it was transferred to SAIL. Mitsubishi of Japan which was lesser known

than ISSCO earlier to nationalization, when the modernization was

proposed has became multibillion dollar company, whereas ISSCO is in

shamble, it is only when the Mitsubishi talk with Govt. for takeover of

ISSCO failed, the unit was handed over to the Sail.

Same is the case of Scooter India Ltd and hundreds of Cotton Mills

which are now sold by Govt. to builders and developers after their palms

are greased. A live example is Air India which was nationalized by

taking control from TATAs and today 60 aircrafts are lying idle for

want of fuel as PSU Oil companies refused to extend credit facility. Most

of the infrastructure of airline remains idle due to frequent strikes mostly

for non-payment of wages. The wages and salaries of employees are paid

from the dole of Govt. coffer despite knowing the Maharaja is dying,

however, the Minister kept ordering new aircrafts and sick Corporation is

paying interest on 10 billion worth of order waiting to be executed. Sameis the case with TATRA when the Army General made a complaint for

bribe against the Tatras agent. The Defence Minister did not reveal or

took any action. Rather than taking action govt. ensured that matter

should be suppressed. The TATRA which cost in open market for 40 lakh

rupees was sold to army for 1 crore with outdated technology. The recent

probe of CBI reveals that BEML has not even developed basicinfrastructure for TATRA to be manufactured at BEML plant as per

contractual clause ensuring import to continue in perpetuity. There are

number of examples but not even tip of iceberg is known to public. The

public spending by the Govt. bureaucrats and politicians alone cost Govt.

approx. 5000 crores per annum. The President of India alone has spent

300 crores on world tour and Prime Minister has spent 1000 crores for

non-productive foreign traveling during his tenure with zero result. This

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is a unique case of the country where Finance Minister justify on one

hand the plea of 42 crores people living below poverty line but spending

on himself almost 10 times more than most developed country despite

knowing there exists 5.6% of deficit and it is growing up due to

extravagant spending of government servant and politician. If this is

called development what should be the definition of corruption.

The above deposition and facts are in public domain, systematic bribe

and corruption is so rampant especially in Government PSUs that not a

tip of iceberg is known to the public. It is important that some

independent agencies should go to the merit and demerit periodically to

expenditure and income of politicians, bureaucrats and PSU Oil

marketing executives so that government should be accountable to the

common man.

o..

BLACK GOLD GLITTERS IN UV LIGHT

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It is very important that public at large should be acquainted with the

policy of subsidizing petroleum product, more particularly, Kerosene and

Diesel. The Kerosene is claimed to have been used as adulterant and

cause of many court litigations.

The Ministry as well as Oil Companies relies on assumption that the

R/Os are involved in adulteration. In fact, the truth is other way around.

There are approximately 30 and odd agencies who keep vigil on retail

outlet (Petrol Pump) only.

Out of every 100 liters of subsidized Kerosene, 35% of total Kerosene

is purchased by the industries directly and in bulk right from the depot,

under nose of PSU Oil Companies with active co-operation of Food &

Civil Supplies. The SKO dealers directly sale to the industries as such

concealment of income derived out of sale without bill is normally

verified by the tax department from the electricity bill and the simplesource to compensate or conceal the income specially Excise and VAT is

by using diesel generator where BPL Kerosene can be used instead of

diesel without any bill / invoice. The cost of electricity though claimed by

the board is only 7.40 per unit but it you take the entire computation in to

account the actual bill including taxes and other overhead cost of

electricity through the board comes to plus Rs 9 to 11 per unit, whereasgenerating cost of electricity by using BPL Kerosene is not more than

Rs 3.50 per unit and that too without any overhead risk. Since no set-

off is allowed on taxes paid either to the boards electricity or diesel,

purchasing Kerosene hardly makes any difference to the industries.

Most of the steel industries in non-coal belt rely on BPL Kerosene only

for generation of electricity for their factories. This gives double benefit

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to the industries first the black money is generated since the excise and

tax is stolen in the first place, secondly the income derived from the sale

does not attract income tax, this is synchronized with low cost of

production if the subsidies BPL kerosene to be used in generators and

there is no risk to factory owner or SKO dealer only two authorities have

to be taken in to account first is excise and second the police, SKO Dealer

take care of the company official who are on his regular roll as

beneficiary and for regular income they are always willing party, hence

there is only win-win situation. The acts can be verified from the market

where entire steel trade is carried out on cash and carry basis without bill.

This practice gave double benefit to the manufacturer. As and when the

Excise & Income Tax authorities take a surprise inspection the first

verification carried out is from the electricity reading from the electric

meter. Adopting policy to manufactured steel or any other product by

using generator give advantage to the manufacturer to revert back

generator meters which normally indicate number of hours and can beturned zero as and when the handler want. No one verify the how the

product is manufactured whether it is by using Diesel or Kerosene or

anything else Secondly, the dealer can show frequent replacement of

generator and claim depreciation and sale old generator as and when he

wants.

It is pertinent to note that Kerosene can be purchased directly from the

Kerosene dealer which is more systematically controlled by the State

agency and supplied by the IOCL. It is matter of common sense, why the

truck or a transport vehicle should take recourses of R/O where they will

have to pay 50% of the excess amount for the same quantum of product

whereas same kerosene is available in Govt. Ration Shop or kerosene

dealer directly by paying 50% less than the diesel cost. It is observed that

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20% of the entire BPL product is directly sold to the transporter by the

Kerosene dealers which go totally unchecked. It is further stated if the

allegation of adulteration is made against the R/o dealer, the strict onus

lies on the Company to demonstrate the point of supply as such only

source of supply is depot only which is controlled by the PUS Oil

Company i.e. IOCL and supplied through its Kerosene Dealer who are

inspected periodically by the IOCLs staff only.

It is only the remaining Kerosene is sold to persons who are categorized

under BPL cadre. It is justified by the Govt. that BPL person is a person

whose daily income is below Rs. 24/- per day in rural area he is entitled

for only 4 liters of Kerosene per month per unit of 4 persons. The

quantum is totally inadequate for cooking. He therefore has to purchase

some other product almost by paying 4 times more or he has to resort to

some other alternate source of energy. Presuming there are 42 crores of

person who are categories as BPL as stated by the Govt. record the totalquantum comes to 42 Crores Liters Per month i.e. 16800000 Kl or

112700000 barrel and if kerosene is directly imported at base rate of

90 / 100 dollars per Barrel; which is freely available in international

market the total cost to company comes to only 112700,00,000 US

dollars i.e. Rs. 58,604, 00,00,000 crores that too without any subsidy

and can be sold at Rs 34.89 or 35 per liters in open market and notcausing loss of 1,80 / 2.05 lac crores as claimed and recovered by PSU

oil companies from the government, only as subsidy amount, the amount

so claimed by PSU Oil Companies is increases 4 times the quantum of

loss, this state the PSU Oil companies are inflating their losses to the

extent of three to four times, so that the practice of subsidy in Oil

companies should continue and to justify the losses rather than

controlling their own expenses, lowing their salaries, curtailing their staff,

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and increasing their efficiency rather then begging subsidy every year

from finance ministry. The fact is other way Govt. does not want that

subsidy should go. Even at the international market rate the subsidy on

Kerosene to BPL category + food subsidy which is introduced recently

amounting to Rs. 72,000 Crores in the name of right to food is additional

subsidy burden every year on Govt. coffer recovered from tax payers

money in addition to hundreds and thousands of litigations which are

piled up in the court due to rampant corruption / mismanagement,

encouraging the wrong doing by the oil companies and its officials.

It is exactly the same reason that Ministry of Petroleum has not

implemented TCS Report which is set up by the Govt. itself, Parikh

Committees Report and refused to disclose Chaturvedi Committees

Report and practically setting up ministerial commission every year by

the Parliamentary Committee diverting the attention of public to fool 121

crore Indians with the fear of losing their vote bank, except when theGovt. want to justify increase they hastily bring Kelkar committees

report yes man of the Govt. However, when we compare this to the

corruption in the Ministry like 2G Spectrum allocation for irregularities

and losses of about 1,76,000 Crores. The coal allocation corruption is

almost 1.86 lac crores, aircraft purchase losses is about 67,000 crores,

allocation of block by the Petroleum Ministry and over charging byinflating petroleum blocks development with 40,000 crores and

introduction of SGS marker tests 200 crores, SWG Sub-Marine contract

is approx. 67 crores and 2000 crores net loss for importing rotten wheat

by the agriculture ministry and increase of refitting charges for the

dilapidated Russian Aircraft Carrier from free to 3.6 billion dollars,

allocation of Airport Authoritys land for through away prices, irrigation

scam of Rs 72,000 Crores Proportion of corruption in the Ministry

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alone contribute almost 20-25% of total quantum of tax payers money

robbed by the politicians, bureaucrats and oil executives put together.

What is left goes for foreign tour of our politicians, bureaucrats and

executives some of them goes for the treatment and other for education

trip with their family as seen in Karnataka despite knowing that their state

is suffering with acute drought? President of India has confirmed to have

visited good will visit to several countries costing 250 crores alone on

Air Force Aircraft Expenses and Prime Minister of India claim to spent

1080 crores on his visit to foreign tour during his 5 years tenure. Such

unproductive expenses are unheard even in very advanced countries, how

the planning commission justify such expenses, bribe, extravagant of

public funds without verifying the tax payers money utilization that

average men can comfortably survive on Rs 19 per day and 42 crores of

population live below poverty line after 65 years of independence.

Approximately 10 yrs back ITC has developed a stove called urja

which cost only Rs. 800/- for the burner and its consumable are openly

available for Rs. 4/- per Kg. that is equivalent to 1 liter of kerosene. The

Govt. not only levied excise duty on it but also Sales Tax and other taxes

and hence alternative energy have become dearer and remain out of reach

of BPL and such project remains only research oriented. The intention

of government is clear they do not want private sector to compete andonly excuse they have is interest of poor to the extent of vote bank. They

rely on Kerosene and subsidizing the same at least for election manifesto

and PSU Oil Companies for their extra income employing bunch of

inefficient and corrupt employees.

Same was the case of Bio Diesel which was imported for Rs 24/- perliters and sold to common man for Rs. 32 Per Liters but import from

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Malaysia was halted after all the three PSU Oil companies objected to it,

claiming it affect their profitability. On one hand the PSU Oil Companies

are claiming losses of Rs. 10.30 per liter on sale of diesel which

constitute 60% of the total hydrocarbon used, even after subsidizing Rs.

2/- per liter by the Govt. why the company should object to the import of

Bio-diesel or the sale of bio-diesel by the private entrepreneur, though

both are imported and required foreign exchange to purchase it.

It is known to all the entrepreneur that amount of Rs. 1200 crores has

been spent for setting bio-diesel infrastructure and government is giving

additional amount of Rs. 500 crores to various companies like TCS etc.

for alternate energy development. Beside HPCL a PSU oil company is

building a huge plant at Sitamadi, Bihar for alternate energy and Himani

has spent Rs 150 crors near Calcutta for huge infrastructure but due to

Govt. Policy nothing is moving forward. The question is - why not import

alternate energy when the crude is also imported against hard cash andsave billions of dollars. Even otherwise Govt. has already approved

blending of Diesel with Bio-Diesel, surprisingly Govt. on the one hand is

allowing blending Diesel with Bio-diesel on the other hand is banning

import of cheap bio-diesel because it affects the profitability of PSU Oil

companies. This is a matter of common sense and does not required any

further interpretation to understand that Govt. only want monopoly in abusiness with no competitor.

It is pertinent to note that Govt. spent 1.80 to 2.00 lakh Crores of rupees

per year for subsidizing Kerosene since last 15 years, whereas a person

below BPL takes only 3 to 5 liters of kerosene p.m. for 2 units of

kerosene consisting of 5 persons. Whereas the entire food subsidy to

BPL is 60,000 to 75,000 crores during the year 2010-11 this is despite 4

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to 6 lacks tons of food grain which is left behind to rot due to inadequate

storage is added or sold to eastern European counties as feed stock for

animals lower than BPL rates though STC. It is surprising that fuel

subsidy is almost 3 times more than the food subsidy. The question is it is

for helping the BPL or to help survival of PSU Oil companies?

There are only 3 countries in the world who offer petroleum subsidy for

their masses namely Venezuela, Iran and India. In the first two countries

there is abundant of oil reserves and hence they offer subsidy out of their

own surplus resources but in India the subsidy is given in spite demand is

more than 70% of actual production which is imported. Indian which

import and depend on 70% on import costing 60 to 70 billion dollars and

spend only 9% of this quantum i.e. 4 / 5 billion to subside petroleum

product, which is less than the total quantum of spending on education

and medical care put together by Govt. Though it is not known to

common man that compare to 9% subsidy Govt. collect approximately45% of Tax from the common man on actual sale of hydrocarbon. This

is not called subsidy but price manipulation or differential price policy

and competition commissioner is well aware of this irregularities.

The food grains supplied to BPL category is normally meant for food

grain exported for animals in the east European countries because there isno storage facility and due to shortage of storage space 20% of grain is

lost and disposed off at throw away price part of which goes to BPL. The

cost of loading and shipping is more the price of export at one estimate

approximately 2.5 billion dollars of grain is lost due to storage

inadequacy if the similar amount is spent for proper storage formers can

get at least 15% extra income and periodical food gain import can be

alimented altogether.

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Similarly in India normally 45% of the price of petroleum product goes

to Govt. in the form of tax. The pricing is not transparent. Several myths

in the petroleum product need to be broken. Kerosene is subsidized

almost to 1/3rd of its original price. However, other petroleum product

costs 3 times more than the actual cost they are expected to sale. This is

called differential price strategy or price manipulation but never a

subsidy. In petroleum product there is no subsidy because of overall

profit. Government does not give anything freely. The standing

committee on petroleum product clearly state:

we have to take care of the

recovery of subsidy so that there is

no impact on the budget and there

is no drawal from exchequer

The language is used to hide meaning. You must have heard that ONGC

pays out subsidy. In fact, this amount is paid out of profit by robbing the

share of share holder, which in fact should go to the exploration and

production, if not disbursed to the shareholders. Here, ONGC being Govt.

PSU has been forced to pay less than the market value of mixed crude

first i.e. almost half the international price. Thereafter, out of net profit

proximately 8,000 to 10,000 crores have to be passed on to the PSU Oil

marketing companies to compensate the subsidized amount claim to havebeen lost by the marketing company. That means the total production of

ONGC and ONGC Videsh is first sold to PSU Oil Companies for much

cheaper rate than the international price and then out of profit of ONGC /

OIL / Cairn the 50% of the profit which otherwise should have been

disbursed to the shareholders is passed on to the oil marketing companies

in addition to cash / bond issued by Ministry of Finance for the survival

of inefficient PSU marketing companies. So for the PSU oil marketing

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companies it is only win-win situation. Furthermore, the Oil Marketing

companies also charge rent out of commission of dealer which is Rs. 13

for 1000 liters and Rs. 11 for 1000 liters of equipment they have installed

at the cost of oil marketing company. So a unit consisting of 1 petrol

pump and 1 tank which cost approx. Rs. 2 lakhs and sell about 1 lakh

liters p.m. the oil companies deduct approx. 1% of rent from the

commission of dealer, in addition to oil companies further enjoy 25% of

tax rebate on depreciated value on its infrastructure which is installed on

the dealers premises. But does not state single paisa rent received from

the dealer in their balance sheet thereby concealing the income which is

offence under Income Tax Act.

Let us now compare that the expenses incurred by the Oil Company

officials, leave aside irregularities which are rampant in PSU Oil

Companies. The average salary of a person is 24 lakhs p.a. + benefits

with Zero productivity. Let us now compare a dealers commission whois selling about 100 KL per month. His total commission comes to about

Rs.72,000 i.e. approximately 1.5% of the sale price. Out of which about

1.25% is straight away passed on to the banks by way of interest. In

addition to that he has to pay all taxes i.e. income tax, turnover tax, VAT

on lubricant separately, Land revenue tax, NA Tax, Grampanchayat tax,

labor salary, electrical charges etc. Practically, everything has to be spentout of 0.25% of income. That is also robbed either by PSU official or in

transit by the transporter by stealing the petroleum product plus

evaporation losses which are given to Company owned R/O but denied

to private R/O. Thus the inference has to be drawn that PSU Oil

marketing companies are selling impure product to the dealer which does

not evaporate.

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It may be noted that PSU Oil Companies at the Depot as well as their

own ROs give evaporation losses roughly 7 liters per KL but to dealers it

is denied. In addition to that IOCL is stealing octroi in addition to

invoicing less than the cost of same product while dispatching same

product from depot, which is under investigation. Recently, after

investigation it is detected that IOCL is stealing Octroi by under

invoicing its product to IOCL owned outlets in city and has to pay about

2.57 crores of rupees by way of penalty to Nagpur Municipal

Corporation, similarly in Aurangabad depot two of the senior most

officials were kept in police remand, when they were found selling BPL

kerosene on Sunday by tanker load when the depot was closed. Recently

PSU officials at Chandrapur were caught taking bribe. At Aurangabad,

IOCL rushed with a special aircraft with team of highly paid lawyers to

ensure the welfare of their official, till now there is not a single case

where any IOCL official has been subject to any disciplinary action. In

contrast to R/O dealers who are not even involved in contamination ispunished and based on false test unconnected with the agreement which

turned up to be unproven and involved bribe of 200 crore rupees. The

question is from where contamination comes from since source of BPL

product is only OIL PSU companies and there are no alternate agencies

involved in distribution and supply of BPL product except IOCL or other

PSU Companies through their dealer and under their supervision.

In recent fire at Jaipur 6 people died. The GICs surveyor was shocked to

see the petroleum product mostly diesel was loaded in a tanker from the

underground pipeline hidden illegally inside depot and permanently

attached to primary tank of IOCL with its unauthorized outlet outside

the 12 ft high compound wall after digging and permanently laying

unauthorized pipe line not visible to common man, by the company itself

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and the product was regularly stolen with concurrent knowledge of IOCL

staff. Now the question arises if the product is stolen with the consent of

Depot Management either by laying underground pipeline or by tanker

regularly. How, the loss is compensated by the PSU Oil Company? The

answer is simple. It is by stealing the product of dealer. The simple way

to over come this difficulty is to adulterate diesel with Kerosene in the

depot itself before selling to dealer through bypass line of Kerosene tank,

alternatively by supplying short product to dealer at the distribution point.

All these activities and access to the restricted areas are properly fenced

and can be approached by the depot staff and none else. This

demonstrates illegality, contamination, theft and all other irregularities

are initiated at the depot only. The shortage of Kerosene meant for BPL

and can be managed by issuing invoice in favor of SKO dealer without

actually selling the product to avoid detection. Hence, the allegation that

dealers are involved in any illegal activity is not only erroneous but also

planned to protect PSU Oil Company officials who are in habit ofrobbing petroleum product in the name of BPL.

It is further emphasized that IOCL and all PSU Oil company supply BPL

product to Kerosene dealers which are in no way related to petrol and

diesel related activities. Almost all the kerosene dealers are close relative

of Ministry and Oil Companies officials. In last 30 years there is not asingle person who owe BPL agencies of SKO has been terminated for

indulging in any unfair practice by IOCL. Furthermore, the BPL product

is quota based system which is prerogative of IOCL Officers. It is well

known to Kerosene agencies who sell Kerosene in crores of rupees, if one

wants to transfer its license or any SKO dealer wants to enhance the

quota of kerosene he has to pay for allocating BPL kerosene to theconcerned oil companys officer and to the Food & Civil supplies and

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IOCL depot staff. Under the circumstances if there is leakage in the

system then how both oil companies as well as Food & Civil Supplies can

be ignorant about it. It is something you are first supplying the low

quality product and then testing the end product and rejecting the same

claiming to be below standard.

Now we should compare IOCLs financial status of its employee. A

casual labor who joined 15 years ago was paid Rs. 8,39,957/- p.a. in

2007-08. A Driver with M.Com degree is paid Rs. 22 lacs p.a. A 5 th std.

care taker was paid 8,56,731 p.a. A Jr. Officer earns minimum 24 lacs

p.a. An 8th std. 56 year old Sr. Attendant who joined corporation in 1976

gets Rs. 45,99,234 p.a. compared to President of India or the Chief

Justice of Hon. Supreme Court who gets 30 lakhs p.a. Some of the

Depots with only one tanker owned by IOCL hardly makes 15 trips p.m.

on an average of 50 KM per day to transport the companys product. The

expense per tanker per IOCL transport is about Rs 1.5 per liter comparedto contractor who is paid less than 20 paise per liter. A dealer who

spends 25 to 50 lakhs out of his pocket for the dealership hardly gets

equivalent to 1/3 rd of Class IV employee on its investment as income

after working 365 days a year 24 x 7. There is hardly any one among the

PSU Oil company officials is having courage to tell IV employee or SC

category why he / she is not performing his duty in IOCL but to thedealer the company deal as such he / she is slave.

This is how a huge profit making PSU OIL Co. is managed out of

common mens misery. In addition to this, Sr. most Oil Company

Executives are beneficiary of proportionate share from international

purchase of crude oil which is between 3-4 dollars above international

market rates and divided among the top management. The Oil Ministry is

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also beneficiary at the time of allocation of dealership through their

agents. The said deposition is confirmed by the Apex Court wherein the

Ministers are involved passing the right of dealership for favor and CAG

has confirmed that the DHC have been involved in over invoicing RIL

expenses on recoverable exploration cost, by increasing cost of

development from 2.8 billion to 8.6 billion US dollars. Recently the

minister who refused to enhance the gas price of private player was

shown the door as such he also imposed huge fine for non-performance of

his contractual obligation to the private contractor who run the country.

All this comes at the cost of common man and recovered through taxes

and higher prices by Govt. in monopoly business. This culture is passed

on to the junior level in hierarchy and ultimately they have only one

source that is common man through the dealer who has no alternative

except the monopoly of PSU Oil company nor there is any choice to

change over from one PSU Oil company to another since all the three

companies work in cartel. If Govt. wants to practice such unhealthycompetition for stealing crores of rupees which belongs to common man,

if govt. desires to continue this practice, what is the need of competition

commission or Transparency Commission?

The above practiced by IOCL / PSU Oil marketing company prove that

there is systematic bribing and harassment by the Jr. most officers to thedealer if he does not bow to the impugned demand of PSU oil companys

appointed sales officer and blaming the dealer with false allegation who

does not co-operate as seen in SGS Marker Test allocation contract to

the close relative of petroleum Minister. The test turned up to unproven

after swallowing approx. 200 crores and terminating 113 outlets almost

all of them except 28 outlets are belonging to IOCL alone which is least

selling petroleum marketing companies of 3 PSUs.

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The policy of Govt. pertaining to pricing vis-a-vis subsidy starting with

sudden raise in crude synchronized with weakening of Indian rupee

several fold. The Govt. further add customs duty @ Rs. 2500/- PMT,

Sales tax ranging from 28 to 32%, excise, education cess, port charges

and service charges on refined petroleum attract sales tax @ 30%, 7.5%

customs duty, central excise, Central Sales tax, Education cess and other.

These cesses collected since 1991-92 out of which Rs. 84,337 crores was

meant for Oil Industry Development Board OIDB, though only Rs 902

crores have been given to OIDB which is not even sufficient for

administrative purpose for paying the wages, forget about development.

This show that the deregulation will push price down as it can impact on

the part of cost. It is the only oil companies that luxuriate on high

petroleum cost. IOCLs net profit is Rs. 10,220 crores i.e. (4.11% on Rs.

2,49,271 crores), HPCL 1301 Crores ( 1.2% on Rs. 1,07,637 crores)

and BPCL 1837 crores ( 1.5% on Rs. 1,22,275 crores). Their totalprofit being recovered about Rs. 32,735 crores in 2009-10 including

profit of upstream oil companies like ONGC, OIL and 30% of crude from

Cairns Rajasthan oil field even after subsiding crores of rupees to OMC

i.e. approximately 50%, in favor of down steam Oil companies, which in

fact should have gone for exploration and production if not paid to the

shareholders and not to the inefficient PSU Oil employees. It is clearfrom the sale volume that IOCL could have made at least 5 times more

profit but have not because they spent on themselves lavishly. Their

salaries are scandalous. This demonstrates how the huge profit of your

money is spent or robbed by PSU Oil Companies.

Another myth is a concept of under recovery. The cost of domestic crude

is equated to imported crude when this is not fully recovered from the

consumer due to administered price. The difference between cost of

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Indian production from oil field sold in subsidized rate and the cost of

imported is called under recovery. This applies to refinery cost (outdated

Russian Refinery) freight and delivery charges. The refinery cost of

IOCL is based on 90 dollars per barrel with return of only 3 dollars on

refining of product compared to the profit of 14 dollars by Reliance

Petroleum and 12.9 dollars by Essar Oil. Both are private companies.

This is totally notional and unreal amount shown as loss. Further the

charges are increased when the finish product is transported from one

state of another by charging entry tax by state, octroi by the local bodies

and sales tax on finish product by state, under the circumstances why

local depot should not wash their hand in flowing Ganges, though how

dirty it may be, the depot charges approximately 1.50 Rs per liters for

storage facility compared to only 020 per liters for transport charges,

under this circumstances how the lowly paid driver or contractor will

survive except sealing the product. This is why the PSU Oil Companies

and Ministry have not made Chaturvedi Committee public.

There is another dark area. While drilling oil and gas springs out freely.

The crude refinery produces LPG (except condensate which is also

known as LPG and derived from Christmas tree i.e. heavy condenser

through surge vessels), petrol, diesel, naphtha, kerosene and aviation fuel

and low diesel oil. Then finally the furnace oil, lubricant oil, bitumen,petroleum coke, paraffin wax and other waxes. The total refinery cost

added to each petroleum product arbitrarily or its proportionate profit to

each derivative has never been explored. What is needed is total non-

governmental controlled committees like TCS, Parikh committees

together with technical persons not involved with PSU Oil companies to

analyze thoroughly and come with honest and transparent policy rather

than stealing the national resources in the name of BPL subsidy and

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harassing the dealer for pity bribe and passing miseries to the common

man.

The Govt. of India at the time of nationalization of oil industries have

assured in parliament to be fully transparent and beneficial to common

man. In fact only few neo-rich have become multi billionaires out of

Govt. policies. Our confirmed reserve of petroleum products like KG

Basin, Mahanadi basin and Barmed fields are sold first by declaring the

area as non productive by the ministry and resold to private players by

attaching arbitrary conditions like in case of Cairn India where entire

royalty was to be paid by ONGC and subsequent governments backed out

its written agreement lying before the Apex Court that it was cost

recoverable. The question arose how it is possible that essential

expenditure which is paid to the Govt. in the form of royalty on movable

goods (viz. petroleum products) sold can be justified as cost recoverable.

When it comes to Govt. unless their hands are greased a small lacuna inthe procedure, the Govt. makes all its efforts to demonstrate entire wrong

doing in their favor, taking shelter of court knowing well most of

judges sitting on dais are nothing but the de-facto agent of the Govt. In

similar case in one of the oil company in KG Basin the cost of

development which is recoverable has been increased from 2.8 billion

dollars to 8.6 billion dollars i.e. approximately 4 times. This moneyultimately has to be recovered by Govt. through the consumer and passed

on to the private players. Such thing would not be possible without the

help of bureaucrats, oil executives and ministers. In another instance a

well head refinery in Barmer field suggested by ONGC has been denied

when the price of petroleum was touching 142 dollars per barrel, the

Cairn India was directed to slow down their exploration and

production. This shows malafide intention on the part of Government.

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The Cairn India was further forced to lay costly pipeline to transport the

crude to Jamnagar to help private players at discounted rate of 50%

thereby creating a multinational a conducive atmosphere to sale most

profitable field to the private players and say good bye to India for ever

after 32 yrs of hard work. The entire exercise by the Govt. was pre-

meditated to help the private player. The Petroleum Minister came under

scam when the matter was raised by the opposition. He was substituted

with another Petroleum Minister who first ordered CAG to re-audit the

expenses of business house. The audit of account by CAG was strongly

opposed by the business house claiming that private player do not fall

under purview of CAG and Govt. agreed to the auditing by the business

house himself. The minister refused to approve further development cost

and for not performing contractual obligation the Petroleum Minister

fined the business house amounting to Rs. 7000 crores and further did not

allow parting his shareholding with the British Petroleum Company. At

this juncture, the Prime Minister Pyare Mohan was summoned by thehigh command and he has ordered to shunt the petroleum minister. It

seems the Govt. is running this country through the business houses and

not by the elected members. All this prove that Ministry and PSU Oil

Companies are Pandora of corruption and OMC deserved to be de-

regularized. This type of policy also demonstrates that on one hand the

Govt. is begging Foreign Investor to invest in India but on the other handthey are least interested in the development, unless bureaucrats are first

greased, re-greased again and again - nothing moved forward.

.o.

Gas Necessity, Politics and Corruption:

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Few years back Iran offered India via Pakistan CNG @ $ 3.25 mmc3. At

one stage India was to pay only price of Gas. The route was through

Baluchistan but after exhausting the sea route survey for lying under sea

pipes line direct from Iran to India, which turn up to be not viable, India

rejected the offer on the ground of instability in Pakistan. The Pakistan

despite the Yes man of USA and restriction on several compressors to

be supplied for use for pumping the CNG to Iran decided to go ahead

with the project in the interest of fuel necessity. The Ministry of

Petroleum was not interested in the deal. The reason was very simple. It

was to protect the interest of 2 private players and one PSU Oil

exploration Company, which was supplying the same very gas @ $ 4.35

to 5.6 mmc3 i.e. 1.10 to 2.5 dollar more than Iranian gas through GSPL /

Gail pipeline. The monetary loss to the exploration company means

marketing losses to Ministry and loss of tax revenue + restricting

foreigner even though you pay 2 fold to the domestic player. The

equation was simple, protection policy of some business houses and PSUwas only to protect the interest of few at the cost of many. It is revealed

that govt. has now agreed to enhance the price of CNG to 8.5 M3/ dollars.

Furthermore, India has agreed to purchase gas from Turkmenistan from

its TAPI reservoir it will be supplied through Kandahar and Quetta which

is strong hold of Taliban. The pipeline will pass through Multan, thestrong hold of LeT and will end at Fazilka in Punjab (India) and India

will pay amount of US $ 13 mmc3. The expected cost likely to be 13 $

mm-btu that include transportation, transit etc. which is about 3 times the

4.20 mm-btu paid to ONGC and RIL. We should compare the risk factor.

The 56 dia pipeline passing through most volatile region of Afghanistan

and Pakistan is likely to help only Pakistan as such Gas supplies to India

will be frequently halted at the whims of terrorists by blowing up the pipe

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line thereby blackmailing India as and when they demand big sum or

some captured terrorist to be returned.

In recent incident Reliance Industries was allowed to increase the natural

gas price to 4.2 $ mmc3 from 1.65 $ mmc3 which was quoted by the

international tender being lowest bidder several years back after dispute

between both the brothers. We should now go through the merit and

demerit of the case which is decided by the Apex Court justifying

enhancement as the field belongs to Govt. The private players in this case

hand in glove with bureaucrats increased price of development by almost

4 times and Govt. has further increase the price almost by 3 times. The

contract clause clearly state the amount so spent is cost recoverable. That

means by increasing the cost, the contractor which has inflated the cost

artificially i.e. the cost of development by 4 times has been compensated

by the Govt. by allowing increase in the cost of CNG to be recovered

from consumers though the spending is artificially increased many foldand then recovering of this cost through the consumers, with consent and

cooperation of Oil Ministry. The intention is simple, for the Govt. the

consumer is only source the Govt. can blackmail at whims with the

support of our judiciary. In simple term by increasing hike of gas the

contractor is compensated its artificial hike, govt. has been justified hike

in the royalty and overall more revenue to the govt. both due to hike inroyalty, proportional increase in the tax and all this is justified by our

Hon. Court without going to merit of international tender on the basis of

which the private contractor was awarded E &P Contract AND who will

pay for hike the common man.

Several years back India allowed international company to build LNG

facility and same is practically lying idle because the cost of imported

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LNG has escalated to 10.50 mm-btu. The said gas is available in plenty

and can be supplied through the same pipeline of GAIL to any part of

Punjab and Kashmir by extending few KM pipeline with the domestic

resources. The cost at Fazilka for same LNG in most purified form will

be about $ 11.5 mm-btu which include transit charges etc saving amount

of US $ 2 dollars per unit with assured supply within 2 years. However if

TAPI proposal of pipe line through Pakistan is accepted the flow of gas

will not start before 2018 but the Govt. mostly Ministry of Petroleum will

go ahead with the risk of much costly proposal by the Americans to

please Pakistan at the cost of India.

In similar way, the LPG used for domestic purpose and industrial purpose

had 2 tier pricing system. The price for BPL and domestic gas has been

almost half vis--vis commercial / industrial gas cylinders. It is very

simple for LPG dealer to casket the domestic gas into industrial cylinders.

The quantum of domestic gas consumed is 70% of the total consumptioncompared to only 30% LPG for the industrial / commercial purpose. If

the Govt. would have standardized both domestic and industrial gas with

flat rate probably the Govt. would have earned with the much better

revenue without giving any subsidy. This demonstrates motive of

Government, in fact the MnoPG has always kept 2 tier system be it Oil

or Gas to ensure the one out of two is benefitted and the one whobenefitted at the cost of many due to the government policy is always

close to the system.

Few years back Govt. invited international bids for LNG / CNG. The

LNG is liquefied Natural Gas which is compressed under extreme low

temperature. The object of inviting international tender was that till such

time the contractors RIL exploit proven gas field of KG and Mahanadi

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where the national reserves confirmed to have been existed alternate

arrangement will help the energy need of fertilizer plant and NTPC and

reduce the quantum of Naphtha which cost many fold to be used by these

companies and it was heavily subsidized. The Government will sale the

gas to fertilizer units and NTPC at a fixed rate for 30 years. The contract

was valid for 30 years. Out of 3 players, one of local contractor RIL was

allocated the contract because it was fixed @ 1.65 $ mmc3. The 2nd

contractor was Ras Oil Co. of Qatar who quoted 2.60 $ mmc3 and 3rd was

Iranian Oil Company which quoted 3.20 $ mmc3.. However, part of the

contract was awarded by late Shri Raha, the then ONGC Chairman to

Ras Gas, justifying that private contractor RIL will take several more

years to supply natural gas from its field since they have not even

started exploration of field allotted to them and since the gas was

urgently required by fertilizer plant and NTPC under contract and

because RIL has not even started E & P activities the part contract was

agreed to be awarded to the Ras Gas of Qatar. The said contract is stillvalid and M/s. Ras Gas is supplying even today contractual quantity of

LNG at losses though the international price of LNG has increased to

above 10.5 $ mmc3, but the contract is still honored with the old rates but

the local player is allowed to increasing the cost of CNG which is cheaper

by 3 times to 4.2 dollars per mmc3 and it is likely to be increased further

to 8.5 dollar in order to compensate losses of the business houses andthis is up held by both the Ministry as well as Hon. Apex Court without

foregoing the contractual obligation, wherein price was contracted for

1.65 $ mmc3 and based on this price NTPC, opted for RAS gas and

Reliance Power have been allocated land in UP, for setting up gas based

power plant though there was neither a cost escalation of gas, since CNG

was produced from national reservoir and meant for the national cause

but ministry was more generous to help the private player. The object of

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supplying cheap energy has been set aside in favor of RIL justifying the

increase in price in international market and UP plant has been cancelled.

All this demonstrate that entire exercise was for giving special benefit to

the private players, more particularly to one business house who is main

source of funding to the party in power.

The attention of readers is invited as to why LNG cost more than CNG?

because unless CNG is compressed below (-) 161 Fahrenheit and low

temperature is maintained after separating H2S and SO2 plus water

residues it costs at least 1 US dollar more in compare to CNG. The CNG

cannot be kept in liquefied form and that is why it is called LNG. LNG

stands for liquefied Natural Gas compressing CNG and converting to

LNG is very complex and hazardous operation and cost at least 1 dollar

per mmc3 more than the CNG. Whereas in natural gas i.e. CNG the flow

of gas from X-mass tree through surge vessels is kept at its own pressure

and it does not require even compressor / pump to be used for pumpingthe gas to delivery point up to certain distance. The only process required

is reduction in pressure, draining residual water, releasing contaminated

gases like So2 and H2S and the gas is released without any compression

at a very high pressure through high pressure pipes. This states that Govt.

more particularly, the Ministry of Petroleum is willing to justify all

wrong doing for their convenience and not for the national cause whenthe special favor is to be given to business houses. Recently both private

players i.e. RIL and Cairn have been awarded extended area for drilling

without following due process of law or without any international bid and

DHC has been arrested based on the CAGs audit report for approving

very high inflated cost for RIL KG-6 field development, how about the

ministrys involvement they were not estopped form the re-auditing

through private agencies before approving cost escalation ultimately

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they will have to approve the report of DHC it is only after

reconfirmation from independent auditors recommendation they were

within their right not to approve the escalation and this was the job of

Ministry. The cost escalation of Rs 40,000 crores to RIL to be recovered

from common man would not have been free of cost.

o..

LPG MOCKERY OF GOVT. POLICY FOR DOMESTIC LPG

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The Govt. has recently announced subsidized 14.6 Kg LPG Cylinders for

425 & odd rupees for the common man but limiting number of refills to

6. Rest has to be purchased with non-subsidized rate of Rs. 950 + rupees.Simultaneously, with recent elevation of Prime Minister in waiting Shri

Rahul Gandhi to Vice President of Congress Party, the Govt. has given

ex-gratia on tax payers money by increasing a quota of LPG domestic

gas refills on subsidized rate from 6 to 9 numbers.

This is pre-meditated plan, after cash for subsidy through Aadhar Cardand usual announcement of each ruling party either in power or set to be

in power. The number of LPG Refills before election for domestic use on

subsidized rate will further increase to 12 by 2014.The first

announcement to this effect has been announced by Congress lead Delhi

Government.

Basically it is the similar election manifesto earlier practiced by the

Govt. on Kerosene subsidy and usual formula as used by the parties

wanting to be in power. More such incentives are likely to be followed

based on similar subsidy in the name of poor before the general election

by increasing price of other commodities like rail fare, electricity tariff,

coal and Petroleum product etc. The impact of railway fare has already

started. The result will be more inflation and weakening of rupee vis--vis

hard currency. In simple word, half the bread earned by a common man

will be reduced to quarter or probably even less. The direct impact will be

on middle class.

Similar story is likely to be repeated with the diesel. The prices for bulk

consumer have already raised to Rs. 11 i.e hike of straightway 20%.

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Though for retailers price will continue to be on increased in phased

manner with 50 paise or so per liter, the ultimate sufferer will be common

men or middle class society and Govt. will keep on playing vote bank

politics. Neither a common man nor a country can be benefited in any

way.

x

SHALE GAS:

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The shale gas is pocket of Mineral Gas (CNG) under the deep surface of

the earth, it is not in a huge field and contain lesser quantity than the

natural gas field. In simple term you may call it pocket gas in several

pockets of the earth, which require frequent drilling or continuous drilling

and located in specific topographical area. The USA which was suffering

with shortage of gas has been very successful in shale gas exploration and

production, as many as 16-17 companies are involved in exploration and

marketing of shale gas, the major beneficiaries are small and medium

power plants. The Indian Company RIL has spent approx. 1 billion dollar

for exploration for several assets in USA in partnership with US based

company knowing well that there are 20 and add confirmed blocks in

India itself which are capable of catering the need of power plants to

substitute shortage of CNG. This demonstrate how the Indian

multinational with active co-operation of Ministry of Petroleum can

divert the fund which are derived from the (public) Indian shareholder

hand in gloves with the Govt. officials and ignore the need of energy inIndia.

Presently shell gas in India is drilled only in one place by ONGC i.e. in

Icchapur, West Bengal. ONGC has created a exploration landmark when

the gas flew out from the barren measure shale at the depth of around

1700 meters in its first R&D well RN SG-1 near Durgapur at Icchapur,West Bengal on 25th January, 2011. It was drilled down the depth of

2000 meters. The barren measure Shale which is main target was

encountered from 895 to 1849 meters for presence of gas traces.

The Shale gas is one of the pre-dominant unconventional natural gas and

major source of on-land gas. In USA Shale gas contribute 17% of total

gas production and will contribute 49% of the energy need by 2020. In

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India, as per the initial studies many shale sequences in well explored

basins are found to be promising like Damodar, Combay, Krishna

Godavari and Kaveri basin. Potentially, these basins are also vetted by

international experts. In Damodar valley where ONGC already has its

presence for CBM was prioritized for R & D exploration in Shale Gas in

view of shallow nature of Shale formation and abundant water

availability which is pre-requisite for doing massive hydro fracturing.

Similarly, there are shell gas blocks in Himachal, Uttarakhand, Madhya

Pradesh and Vindhyachal plain, despite most of the blocks are sold to the

private players by the ministry of P&NG except the ONGC non has

started any drilling activities but Govt. is least bothered to explore the

same through private players by giving any special package. There are

some small villages in MP where the entire villages cook food from the

cracking zone which is burning for years together. They are such a vast

field either consisting of shale gas or reservoir of CNG but not a single

person from Ministry of Petroleum has visited or did anything to explorethe same. The Vindyachal belt is known to have huge gas reserves which

are yet to be surveyed.

The R & D project which involve drilling of 4 R&D wells in Damodar

basin, 2 wells in Raniganj sub-basin in West Bengal and 2 wells in North

Karanpura sub-basin in Jharkhand was contracted to Schlumberger whowere given a integrated contract for drilling , assigning and carrying out

the drilling operation including hydro fracturing in view of their expertise

in US.

The successful R&D Pilot testing of first ever Shale Gas on the surface

will put India on Shale Gas map of the world. It has opened up new hopes

for meeting our energy needs and energy to venture in many Shale

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sequences in well explored, Combay, KG, Kaveri and Assam Arakan

basin for exploration of Shale Gas in Indian sub-continent.

India as per the recent estimate have confirmed reserves of 527 trillion

cubic ft of shale gas of which 50% or 260 TCF are recoverable. The

amount of fuel could last for 200 years and would potentially be the 5th

largest reservoir shale gas in the world, the 1 st being US followed by

Argentina. With Govt. policy work on shale gas exploration expected in

next 24 months and even industrys keenness to get exploration of clean

non-conventional energy that seems to be less expensive further no

processing is necessary-

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Fuel Policy