Elections are round the corner. Babus are petrified of taking decisions. But the government is burning the midnight oil to grant “relief”, under the guise of “protecting consumer interest”, to Reliance, Tata and Adani to compensate for the poor planning and foresight of these companies.

The central electricity regulatory commission (CERC) decided in April 2013 that the coal-based mega power plants of Tata and Adani in Gujarat should be permitted to rupture their agreement with Gujarat and Haryana to supply electric power. The reasoning was that the cost of imported Indonesian coal had increased more than what could have been foreseen. A dissenting order by a member, S Jayaraman, points out that nothing in the bidding document compelled these companies to bid a fixed tariff. They could have opted to bid a variable tariff, which would have “passed through” the changes in fuel cost; both increase and decrease. They chose not to do so and hence forfeited their commercial rights to come back for a tariff revision. Other bidders whom they outbid did opt for variable costs and possibly were outbid on these grounds. We will never know for sure since bid details are not publicly shared on the net which incidentally is bad procurement practice.

The argument of acting in consumer interest is even more farcical. It states that since the bid tariff is no longer commercially viable, sticking to it would force the developers to abandon the project. No mention here of the penalty the developers would have to pay if they were to quit. No mention either that NTPC could happily buy the projects, just as it bought the Enron project or Delhi Metro took over the Reliance Delhi Airport Metro line when it did not make expected profits or that the National Highway Authority of India may have to take over the Gurgaon Expressway. The CERC argument is that the new developer would in any case have to charge more to consumers so why not just do a deal with the existing developers, since the poor consumer would have to pay more in any case. That sounds familiar to us aam admis and aurats (AAA), a circular argument which suits everyone except us. If a ‘deal’ is to be done non-competitively then let us do it with the public sector. At least the resultant earnings will accrue indirectly to the finance ministry.

Allowing such retrospective tariff revisions in competitive bidding not only knocks the concept out of the window, it is rich future pickings for CAG, CVC and CBI. To dilute this possibility the favourite ploy of babus is to kick the problem over to an irreproachable, external entity; in this case Deepak Parekh of HDFC, who is in danger of fast becoming the MMS of India’s gas and power sector. Parekh apparently has headed a committee (we don’t really know since the website of neither the Gujarat government nor the Haryana government tell us about this), mutually agreed upon between the developers and the procuring state governments, to work out what should be done. Its report was submitted to the CERC in mid-September, but is not on the website of CERC and even worse has not been made available to Prayas, an NGO specialising in energy and water, which is on the advisory board of the CERC. (Read about its plaintive cry for information: http://www.livemint.com/Industry/9NOJM6JwuwPwAw2i2l0DFP/CERC-suggested-to-hold-public-hearing-on-tariff-issues.html).

The implication we the AAAs will draw from all this is that had Jayaraman not dissented, the CERC would have meekly passed the additional cost to consumers. Jayaraman, then – while not a whistleblower since there is no allegation of graft – is certainly a rudder for the rule of law prevailing over egregious commercial considerations. In September, the power ministry amended its tariff guidelines by making fuel cost a pass through. The term ‘pass through’ is intriguing because it seems to undercut the powers of the CERC to determine tariff in a holistic manner. The new guidelines only require the power developer to be prudent while purchasing fuel. Fuel cost can constitute 50-70% of the tariff. Well known transfer pricing tricks, especially in imported fuel, militate against relying on a broad test of ‘prudence’, to protect consumer interest sufficiently.

A similar tactic has been adopted in gas production, where the price at which Reliance will sell its gas has been doubled (by the cabinet this time) on the argument that the government administered price is far lower than the prevailing international price for gas. This is true but it does not explain why Reliance has failed to meet its investment commitments which are the prime reason for a decrease in gas production way below the optimum levels. Even worse, the petroleum ministry’s view is falling on deaf ears that retro advantage of gas price increase should not be given to Reliance on prior production commitments. All this again in the interest of consumers, of course, who in the absence of a deal with Reliance would have to pay import prices for gas! Admittedly, Reliance (like Enron) has the disadvantage of its public image working against it. Any babu ruling in Reliance’s favour is automatically suspect in the eyes of us AAAs though, mysteriously, very few babus who have the guts to do so live to regret their decisions.

As in the case of power, a committee headed by Vijay Kelkar, aided by the hapless and overworked Parekh, is meanwhile looking at the gas pricing regime. Oddly, as in power, the entire exercise is being conducted in the cosy confines of the government, CII, an NGO which ostensibly works on fuel studies and research (but for which not a single paper comes up in a Google search) and the Boston Consulting Group (BCG), a consultancy. Presumably BCG was appointed after a competitive bid. We will never know because such trivia is never shared with us AAAs. The entire oil exploration and production process is kept tightly under wraps. Exploration, development and production contracts are never made available on the internet and ‘commercial confidentiality’ conditions of the developer are routinely cited as a reason.

The international literature on natural resource management underlines the need to introduce transparency and citizen participation in this sector. The reason is obvious. Oil and gas contracts involve huge sums paid and received by private developers and the government. If AAAs are not kept informed of what were the obligations of the developer versus actual delivery and what was owed to the government and what was actually received, the instant apprehension is potential leakage of government revenue or of motivated bias in favour of the developer. Compare our non-transparent and secret regime for the oil and gas production sector with what even Ghana puts on the web: http://www.gnpcghana.com/_upload/general/saltpondfield_sopcl.pdf. Key details of the contracts and delivery on commitments, including penalties levied for shortfalls in developer obligations, are available to all. In 2012 the EU made it compulsory for all extractive industries (including oil and gas firms) to share data publicly on revenue and payments to governments (see http://europa.eu/rapid/press-release_MEMO-13-541_en.htm).

The governments of India, Gujarat and Haryana all profess a commitment to good governance. The essence of good governance is to expand access to information for the public and to encourage their direct participation in decision making. True AAAs, like me, are clueless on technicalities like a gas production sharing contract but we sure like to be kept informed and we have technical experts who can work in our interest, independent of governments. Democracy is all about giving people a choice. Give us the information and let us use it the way we want to. Please don’t hide behind the shield of the RTI (which allows notional access to information) and force us AAAs to seek hard copies of information from the relevant ministries. If the websites of governments have the space to trumpet their many achievements, surely they can also instantly share with us information on what contracts have been signed, with whom and the key obligations therein?

When you light a lamp, it illuminates everything around it. Please light a lamp in Indian power and gas deals.

This article originally appeared at http://ahlu-india.com/2013/10/05/gas-and-power-shine-a-light-please-on-deals/