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UPDATE 1-Delhi chief minister takes on Indian tycoon over gas pricing

Tuesday, 11 Feb 2014 | 5:04 AM ET

* Delhi chief minister takes legal action over gas prices

Accuses Reliance of creating shortage

* Latest attack in anti-corruption campaign

By Nidhi Verma

NEW DELHI, Feb 11 (Reuters) - Delhi's chief minister ordered criminal cases to be filed on Tuesday against India's richest man, Reliance Industries chairman Mukesh Ambani, and government policymakers for conniving to fix higher gas prices to boost profits.

Arvind Kejriwal sent shockwaves through the Indian political system in December when his Aam Aadmi, or Common Man, Party (AAP) won the Delhi state election with promises to fight graft and the vested interests blighting the country.

Kejriwal has long had Ambani in his sights, having accused him of buying government favour.

The case being brought against the tycoon relates to gas produced from the Reliance-operated D6 block on India's east coast. Kejriwal said Ambani's company had created an artificial shortage to "blackmail" the government to set higher prices.

"We believe that high prices are being caused by corruption," Kejriwal told a news conference, speaking in Hindi.

A Reliance spokesman declined to comment on the allegations.

Kejriwal's attack plays into a heated political atmosphere, with a general election due by May.

Leading a party formed just a year earlier, Kejriwal's victory in Delhi had stunned both the ruling Congress Party and opposition Bharatiya Janata Party.

The BJP is ahead in opinion polls as the public grows disillusioned with Congress, leader of the ruling coalition, over a series of corruption scandals and a slowing economy. Although it is unlikely to win, AAP could draw votes away from both parties.

"WELLS BELONG TO US"

Kejriwal said Reliance had agreed in 2005 to supply gas to utility NTPC Ltd at about $2.3 per million British thermal units (mBtu) for about 17 years. But the price of gas from D6 was fixed at $4.2 per mBtu in 2007 when Murli Deora was oil minister, in the Congress-led government.

Last year, after Veerappa Moily took over as oil minister, the federal government agreed to link prices to global indexes, which could double local gas prices from April 1 this year.

Kejriwal said he had acted after receiving four complaints.

"Today we have instructed the anti-corruption branch to file a criminal case against Murli Deora, FIRs (investigations) against Veerappa Moily, V.K. Sibal, the (then) director general of hydrocarbons, Reliance Industries Ltd chairman Mukesh Ambani and others," he told a news conference.

He said he would ask the federal government to suspend any order to raise gas prices until the issue was resolved.

"The wells belong to us. If Reliance and Mukesh are not producing gas in order to create an artificial scarcity, then the government should look at giving these wells to the (state-run exploration company) ONGC and some other entity which can operate them and produce gas," he said.

Ambani is the richest man amongst India's ranks of billionaires, with an empire than ranges from energy to mobile phones and media channels. Last year he was given security cover by the government following threats against his life.

In an open letter in January, Kejriwal lambasted Ambani for his business practices and accused him of intimidating the government.

"You can purchase political parties and political leaders with your money but we will not let India be sold," it said.

The tycoon replied with a string of defamation notices.

WINDFALL FOR RELIANCE

The D6 block was expected to contribute up to 25 percent of the gas supply for Asia's third-largest economy but lower-than-expected output has left the energy-hungry nation more dependent on expensive, imported LNG to fuel power and fertiliser plants.

Kejriwal said that instead of producing 80 million cubic metres a day (mmscmd) of gas, Reliance has produced less that 18 percent of that, leading to shortages. The increase in gas prices would destabilise the whole economy, he said.

The government's decision to raise prices would lead to a benefit of 540 billion rupees ($8.66 billion) per annum to Reliance, he said. Audits revealed that 1.25 trillion rupees worth of windfall accrued to Reliance.

Oil Minister Moily, asked for his reaction, said he had taken a special interest to ensure that gas prices were reduced.

"It is not the question of Mukesh or Deora or anybody," he said, speaking on television.

There was a certain system for fixing prices and nothing was done without expert advice, he said.

"(Kejriwal) thinks that it's just like taking water through a bucket from a well. He cannot take the oil like that."