r Jagannathan Blog Comments

8/12/2019 r Jagannathan Blog Comments

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Avatarneeraj 2 days ago

Leave aside the technicalities of profit sharing. Did govt. recover the USD 1 Bn. penalty imposed on Reliance for under-production? When a contract was signed for 17 years, why was the govt. keen on letting Reliance violate the same with the cries over tha international gas prices? Was Reliance not supposed to do all sort of cost-benefit and technical feasibility analysis before signing a 17 yearcontract?Doubling of gas price this way in rtetrospective manner would encourage business groups in future to threaten and bargain and not being liable for the signed legal contracts.What is the benchmark we are trying to set here? That if my company is poor in its analysis, my future risk would be taken care by the other party which is govt. and the end consumers???

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Avatar jopiniona neeraj 2 days ago

I think there is confusion on the contracts themselves. The production sharing contract is with Indian Government.

There was a separate ONGC contract that was bid on, but the final contract was never signed. That is the 17 year contract that people refer to - which is different from the production sharing agreement.

The dispute in that 17 year contract is that Reliance won the bid but refused to sign the contract. It had submitted $4 million as bid guarantee that it iswilling to forego. But ONGC is insisting that Reliance honor it's bid. It is an

active court case. So contracts are not being violated because a contract was never signed in the first place.

The production sharing contract is different and that involves market baseddiscovering mechanisms. Rangarajan formula is supposed to simplify and standardize those discovery mechanism to avoid abuse. But since the last price was in 2008 and this new formula is in 2014, the prices have jumped. The two topics are different. 8 Reply Share

Avatar neeraj jopiniona a day ago

Firstly its not ONGC but NTPC which had issued Letter of Intent to Reliance to supply gas for 17 years at a price of $2.3 which is still sub-judice. But what happened in between made the case of NTPC weak. Govt. itself recommended a price revision to $4.2 which was later agreed upon by Apex court and this is what Reliance grabbed as opportunity. 2


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Does not matter what you believe. Reliance never signed the contract! NTPC is free to take away the bid guarantee and go for the next lowest bid.

The price revision was for gas that Reliance was selling to other entities. So that price has no bearing on the NTPC case.

If the court thinks that NTPC is entitled to force Reliance to signthe contract, the court will find that in its ruling when it delivers a judgement in that case.

Here is the problem. The NTPC contract requires Reliance to guarantee alternate sources. When the original bid was made, the international prices were low and there was talk of gas pipelines being built between Iran and India and also between Oman and India. However, NTPC delayed signing the contract for 2years. By this time, Reliance was in no position to find an alternate source that could be economically provided because global prices had risen so much.

So it is not all one way traffic. NTPC is also at fault. And the cou

rt will decide on the case and either dismiss NTPC's case or force penalties onReliance for backing out of the bid. Reply Share Avatar varun shakya neeraj 2 days ago

Nice argument...i was about to share the article on FB...but you got him. 1 Reply

Share Avatar Govinda neeraj a day ago

You are assuming the gas pricing is done only for Reliance. There are otherplayers in this field other than Reliance. Penalty for underproduction is in arbitration. Reply Share

Avatarakumar 2 days ago

Question Reliance, but also question ONGC on why their production fell far short of targets from their ambitious fields in Sakhalin and Imperial Energy. They also gave the reason of technical difficulties. Are they also corrupt?Also question ONGC on why they say that producing gas from new fields is not viable at less than $7/mmbtu.

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AvatarKhillerB a day ago

kerjriwal is a bafoon. He has no knowledge of the PSA. the longer reliance takes to make their profit gas the lower their returnsThe only way reliance can gain from this gas business is by padding costs and receiving kickbacks from contractors for inflated bills which no one really alleges anyways. And if they did do that, given the quantum on investment into the gas fields this delay in attaining estimated gas production has largely nullified any windfall profits to begin withits been 12 years since the money was invested given current interest rates he really doesnt stand to gain much on a net basis it only increases the speed withwhich his money comes back to him.Given the problems in the gas field, the constant harassment and delays caused by the government he deserves a quicker return on his investment

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Avatar neeraj KhillerB a day ago

With due respect, I am not sure about AK's expertise on the subject but Prashant Bhushan is advocating a related case in the apex court. SO questioning their knowledge just like that is not justified. Reply Share

AvatarArvind Chitra Katha a day ago

When Kejriwal came onto the national scene declaring himself the messiah of common man and a honesty certifying authority, Inflation & real scams - Adarsh,CWG,2G, Coal gate, Agusta Westland,etc were enemies of Indian citizens. They were the main issues of thiselection. Now, the so called corruption crusader says M.Ambani is thereal enemy. I am aghast at which Arvind Kejriwal is trying to shift thefocus of this elections from Congress scams to one individual - who ishe working for?He is a trojan horse set by Congress. And his recent comment about communalism m

ore important than corruption really proves who is setting the agenda.Wake up AAPTard

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Abhishek a day ago

Mr. Jagan, you are really working for Reliance now. There's clear difference between the articles you have written before and now. The recent ownership from Reliance is very much visible here.

Now, the reason:While quoting Swaminathan, you have deceitfully removed the most important linefrom his logic- "Caveat: this assumes no fraud in billing." and i'm sure most of us believe that billing fraud in not a big thing for Reliance. When we say gold-plating of investment, we do not say that reliance is investing more money, wesimply mean that reliance is not investing more but showing more investment.

About gas hoarding charges, i don't know how does the committee thinks that hoarding hurts the operator, if the gas price is going to be doubled in one or two years, and if you are not using some unrealistic discounting rate, the NPV is going get better by hoarding. Either your maths is weak or you are using very highand unrealistic discount rate.Global prices of gas should not matter to reliance because its not a private gas field, this gas belong to people of india and reliance is only digging out thegas. It's totally upto the govt to decide the price of the gas in India for it's people.Finally, the most important point is that there was a competitive bidding and acontract was signed with price of around $2, so if reliance is making losses/pro

fit then this then it's just facing business risk and may be at that time some other company would have agreed for a price of $3 and would still stick to it even now. Initially when reliance was making profit out of these wells did they offered the govt a part of extra profit? so why do they want to share the losses with the govt?

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Raja Abhishek a day ago Look at your first line... and this is the problem. The moment somebody says something against you (s)he becomes Ambani's agent and what not. You guys are so arrogant and intolerant ... You don''t understand even if it is true (as per you) you cant jut go on alleging and abusing without proof.

Actually, you have some points in your reasoning that needs to be rebutted.But I don''t feel like engaging into any civil argument with you guys.

4 Reply Share Avatar Abhishek Raja a day ago

I've given the reasons for my first line but in your whole comment i can't see any reason.


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I dare you to prove me wrong, i know you can't because i'm sure you don't completely understand the article. Btw, what do you mean by you guys, i'm talking about reliance and indiahere... 2 Reply Share Avatar Nidhish Shah Abhishek a day ago

Hi Abhishek. I agree with some of your points and don't really wishto defend reliance. But let's look at some other facts too.

1. ONGC and GSPC also demanded gas price of 7$ to 14$. Why? Did they also wanted to gain windfall profits?

2. The biggest beneficiary is ONGC and not Reliance which produces only 15% of our gas requirement.

3. Higher the gas price, higher the royalty, taxes to government.

4. This is not a normal product where we know all the specification

etc and start punishing the producer if they breach the contract. Estimates in this sector does frequently go wrong. Situations differ all over the world and geographical changes may change company's estimates. I think there are many examples world over, where production could not be extracted as per the estimates or cost increases than estimates.

5. Import price of gas is around 12$. Economics does not work like take your 10% to 15% profit and go away, like Mr. Kejriwal suggested. If investment comes due to higher profits (gas prices), it will benefit immensely to India, with increased gas production and lower imports. 4 Reply

Share Avatar Abhishek Nidhish Shah a day ago

1. ONGC and GSPL are obviously demanding it for profit, so that they will be able to pay for subsidies in products and don t have to wait for govt subsidy payments (for long time)

2. I agree but still, is this correct?

3. The govt can increase the taxes and earn more

with the same gas pricing

4. If you are in business you must understand the business. If your estimate go wrong you should be ready to suffer loss. Has any company ever offered a part of profit to govt due to windfall gain?

5. Again, it s about contract. If the terms were different and linked to market price, many other companies might have been interested.


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The point is, govt should come up with a proper and stable policy to encourage investment but should not just change the terms so that a private company can make money. 1 Reply Share Avatar Mr. Blonde Abhishek a day ago

I agree with you 2 Reply Share Avatar Govinda Abhishek a day ago

Check the price of Reliance stock. It is still range bound and not raising as one would expect from a company which is going to make windfall profit. Check

their balance sheet. It is tough to hide profit for long. Shareholders come to know about it. Reply Share

Avatarsana 2 days ago

if rj wants us to believe that the owner of antila is most honest in his dealings and has the country's best interests at heart well he certainly underestimates the common indian and thinks we are the biggest fools. so before educating ak h

e might need to educate himself on honesty and fairness! - that is the issue atstake here and its much larger than oil prices. he is also conveniently forgetting other questions in the letter..........expect better from you rj

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Avatar Karthik Kumar sana 2 days ago

"he certainly underestimates the common indian and thinks we are the biggest fools. "

You certainly seem to be upholding the "biggest fools" tag pretty cozily byblindly trusting Arvind Kejriwal and dismissing everything else without a second glance. M Katju would be laughing away somewhere in private.. 8 Reply


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Share Avatar sana Karthik Kumar a day ago

no i am not but neither am i upholding a modi tag blindly.......we needto know how a chai wala can fly on private choppers daily - many of my friends who are chai walas would love to do the same. problem is they have not even seena chopper yet............some questions need answering 2 Reply Share Avatar Nidhish Shah sana a day ago

Sana, NM was a chaiwala, and not a chaiwala. Right now he is a CM of a prosperous state and PM candidate from a 30 year old party who receives donations much more than a year old AAP (Ashutosh flied to Gujarat and flied back toDelhi. I guess he flies by a flight and does not have wings). They can afford Chopper. He has to travel around the country and that if you know cannot be done by cars...... with all that security covers and all..... And if you want to knowabout campaign funds, tell me Ford foundation. Why an NGO from US is so much interested in AAP, India? He does not answer these questions but ask other to provi

de all details. 6 Reply Share Avatar Karthik Kumar sana a day ago

"How a Chaiwala can fly on private choppers daily"

Now THAT is one gem of a reply. While i'm very much tempted to use the well established "AAPTard" tag here, i'll refrain; given that it might get my

reply blocked. He's a thrice elected Chief Minister of a state (they go get security and travel benefits more than a common man, you know) One who's managed to make his state a economic dynamo, reduce malnutrition in ABSOLUTE and Percentage terms (look it up, am sure you can Google. Or maybe you don't trust Google and would take AK's word for it instead), AND make sure there hasn't been a singleinstance of communal riot in more than a decade since 2002.

But all that doesn't count at the altar of Mr. Kejriwal. One who managed to 'effectively' (please note the word) HIKE electricity rates for all legitimate users, stayed in power for a glorious 49 days before throwing in the towel, and gets funding from Ford Foundation. Oh, and if you're not really aware, practices 'politics' as if it's the 1970s and he's the male carnate of Indira Gandhi. Oh wait, Kejriwal used to ride around in a WagonR and no "overt" security. S

o Cute! But the sly security ahead and behind him shown in wide angle shots is not exactly "security", is it??

Like you yourself said - Some questions need answering. But as is used in tech parlance a term - GIGO (Garbage In Garbage Out), just make sure yourquestions are in anyway logically valid. Noise doesn't equal Intelligence, muchless incorruptible honesty! 3 Reply


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Share Avatar jopiniona sana 2 days ago

Ambani is a fat cat - Agreed. But that does not mean that any logical argument defending him is rubbish. 6 Reply Share Avatar sana jopiniona a day ago

did not say that its rubbish - but it needs to be balanced. you cannot leave out part of the letter that asks who is paying for modi's chopper rides - they certainly dont come free!...and a fat cat needs to be questioned....he cannot be allowed to get away with being a fat cat by all parties who are being paidby him.............so while AK might be off the mark on one issue maybe, the others are equally important and a writer cannot pretend that he did not read thatpart.........thats all i'm trying to say Reply

Share Avatar jopiniona sana a day ago

The problem is that the point he left out... needed to be left out.There are very few companies that offer charter helicopter services. Adani's happens to be one of them. And BJP has a significant budget. So it can pay for renting or chartering it - just as Congress and SP and BSP and TMC and BJD and AAIDMK and all the other parties can afford to pay for their rallies and transportation.

AK engages in a lot of useless mudslinging. Not everything merits me

ntion. 1 Reply Share

AvatarPankaj 2 days ago

I am not a fan of AKs shooting star strategy, but here is a article from the past how reliance has been doing business

Let people draw there own conclusion.

http://www.india-seminar.com/2...

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AvatarMr. Blonde a day ago

I liked Jaggi's last article on the subject but this is lifted from Swami's article in ET which itself is based on the Kelkar committee's findings-that both ofthe columnists chose not play the devils advocate with the reasoning of this committee is cause for concern especially as they are arguing in favor of "RIL-isnt-hoarding & isnt-goldplating-costs"

On major issues like fuel pricing - firstpost and Jaggi should either take a stand and run with it (say argue for market pricing ) or publish reports and refrain from armchair editorials based on articles in other newspapers.

Also what's up with these contradictory views on gas pricing (in firstpost) every 2 weeks , boss make up ur mind!!

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Avatar Govinda Mr. Blonde a day ago

They are not political parties to take a stand. They tell their views on Policy. It is upto the reader to make judgement. Reply Share

Avataraap worker a day ago

oh lord khujli stands exposed!but i will still continue defending him with my moronic statements,hail lord kejri

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AvatarSphinx a day ago

AAP has transformed from anti-corruption platform to typical hardcore politicalparty.

It is targeting Ambani as that carries more vote getting abilities rather than targeting say Jindal or Mallaya.

It has also realized that it can't fight corruption, so now it is saying that "Communalism is greater evil than Corruption".

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AvatarGuest 2 days ago

You assume that the promoters of Reliance are acting in the interests of the Reliance company. The Ambanis could gold-plate the investments but take the money in a foreign account in their personal name. So they do personally benefit. BTW,I am not a supporter of Kachrawala, he's probably a C[I]A mole.

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Avatarprashant dubey 2 days ago

Pankaj,

I do not think the article you attached has any relevance to issue.

For me - worst could be possibility that reserves are much less than initially e

stimated. Hence Reliance could be trying to recover the investment as fast as they can - but this is just a guess.

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AvatarInder Chadha a day ago

Good article. Ab tera kya Hoga kejri ? even rahul bajaj has blasted him. Wonder

how this character worked as a top official in the Government. Bureaucrats are supposed to have some basic intelligence and also some know how as to how the Government works? This guy doesnt have even basic intelligence. Something sinisterhere with his b team, C team what ever else you may call

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AvatarGuest 2 days ago

Yes

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r Jagannathan Blog Comments