With its latest salvo on Mukesh Ambani’s Reliance Industries Ltd, does the government want to send the signal “my way or highway” to the corporate world ? Or is the government merely protecting its revenues?
The events of the last couple of days have revived memories of the time when there was an open war between the government and RIL. But this time there’s a difference. The government has moved a petition in the Delhi High Court seeking to restrain RIL and BG from disposing of their assets. And this also includes RIL’s plan to sell 20 per cent to Saudi Aramco.
This was sought before the High Court during the argument on an application filed in September, where the government had sought curbs, citing the failure of the two companies to honour their payment under a $4.5-billion international arbitral award in the Panna-Mukta and Tapti (PMT) production-sharing contracts.
Not to take it lying down, RIL has come with a strong counter to the government’s petition in the High Court seeking to block its $15-billion deal with Saudi Aramco. RIL said that the Centre’s petition is an abuse of process as till date the quantum of award in the PMT deal has not been decided and this will be done only after issues are settled.
So why would the government do this when it should be promoting foreign direct investment? Is it politics or protecting government revenues? Has the situation not been dealt with tactfully?
Whatever be it, the move seems to have caught everyone by surprise and also sent out a wrong signal to the corporate world, particularly when India wants to project itself as a country which offers “ease of doing business”.
In fact, during Prime Minister Narendra Modi’s visit to Saudi Arabia, it was acknowledged that energy security would be one of the prime areas of India’s engagement with Saudi Arabia, which plays a vital role as a reliable long term energy supplier. “…Saudi Aramco is participating in a major refinery and petrochemical project on India’s west coast. We are also looking forward to the participation of Aramco in India’s Strategic Petroleum Reserves,” the Prime Minister had said.
It appears the concerned departments and ministries of the government merely want to ensure that Saudi Aramco is aware of the PMT issue as the amount involved is not small. The government could be justified here.
But, is the approach of linking two very distinct deals correct? One could argue that it involves the same entity, namely, RIL, and when Aramco comes as a partner, it may have its own approach to the deal. There are lots of knots to be untangled here. The PMT joint venture comprises ONGC, RIL and BG Exploration & Production India Ltd/Shell, with each holding 40 per cent, 30 per cent and 30 per cent participating interest respectively.
The Tapti fields had ceased production in 2016 and the platform facilities were handed over to ONGC (GOI nominee) in the same year. The PMT contract of 1994 came to an end on December 21, 2019. The government has filed an execution petition to enforce a partial award issued by an Arbitral Tribunal in October 2016. The award decided some of the issues between the parties. But a later partial award went against the government. The final phase of the arbitration is in March-April 2020.
The contractors — Shell and RIL — maintain that no amount is payable as claimed by the government, and after the final award it will be known whether any sum is payable at all.
But the government is concerned about its ability to recover the awards as the production-sharing contract has come to an end. The High Court has asked Shell and RIL to file a list of their assets in a format that has been outlined by the court, pursuant to which affidavits were filed.
But the pertinent question remains: What is the government really worried about?