People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 25

June 19, 2011




Govt Patronises Crony Capitalism Again


YET another scam appears to be waiting to unfold. In a 200-page report dated June 7, 2011, the Comptroller & Auditor General of India (CAG) has found serious irregularities that have aided private firms in the petroleum sector, specifically in the gas exploration field. Some details of this report have been reported through the media. To set the record straight, this is a draft CAG report that is sent to the ministry for its comments. On the basis of the reply, the final version will be placed in the parliament like the CAG report on the 2G spectrum sale by the Telecom Ministry was placed. 


However, the media reports on the contents of the CAG findings confirm the apprehensions raised by the Left MPs over the last four years. On December 12, 2006, in answer to an unstarred question by CPI(M) MPs, late Chittabrata Majumdar and Tapan Kumar Sen, the then minister of state for petroleum and natural gas let the cat out of the bag by indicating how the government was likely to heavily lose revenues. In response to this reply, CPI(M) MP Tapan Sen wrote to the then cabinet minister on December 21, 2006 explaining how the government was likely to lose huge revenues:


In part (c) and (d) of the aforesaid reply, it has been stated that consortium of Reliance Industries Ltd (RIL) and Niko has submitted addendum to the development plan which envisages increase in production of gas from 40 to 80 MMSCMD (unit of measurement) and increase in capital expenditure from 2.47 billion to 8.84 billion US dollars. It is quite surprising that expenditure per unit of production, which should normally come down with the increase in production, due to economy of scale, has gone up considerably in this case. The block, as you are aware, has been awarded to the consortium on the basis of profit sharing with government of India (GOI). Hence there is a strong possibility of “gold-plating” i.e., inflating the capital expenditure which would be recovered by the consortium before sharing the profit with GOI. In case of gold-plating of capital cost the government’s profit share is likely to come down considerably. It is, therefore, imperative that proposed capital investment should be immediately re-examined vis-à-vis profit sharing of GoI in the light of current landfall gas prices.


“I request you to order for transparent assessment of the cost immediately to prohibit additional benefit/profit at the cost of GOI, i.e., people of this country, who actually own the country’s natural resource like gas.”


As has been our country’s fate, there had been no tangible reply to these observations or any enquiry conducted by the government.  In all, the CPI(M) MPs had written seven letters to the petroleum and oil minister and three to the prime minister exposing the fraud being committed on the nation. The CAG has now confirmed, through its preliminary findings, that such a fraud has indeed been committed. 


Clearly, this is yet another case of windfall superprofits being made by private companies at the expense of governmental revenues. The CAG has questioned the role of the Director General of Hydrocarbons (DGH) in supervising or approving key aspects of the contract administration. This is nothing else but yet another exposure of `crony capitalism.’ We had earlier pointed out in these columns that the neo-liberal economic reforms have opened up hitherto unknown avenues for corruption through the flourishing of crony capitalism. India has no dearth of resources to provide education, health and better quality of life to all its people.  Corruption, however, loots these resources depriving the aam admi of a better life. In the process, such corruption is actually depriving India to realise its immense potential.


The raison d’etre of capitalism is profit maximisation. In order to achieve this, it can go to any extent and will for ever continuously violate all laws, break all regulations and subvert the system. A government, that, instead of checking this predatory tendency of capitalism, encourages it by promoting its cronies, is one that patronises crony capitalism. The new avenues for corruption, opened up by neo-liberalism combined with such crony capitalism, is wreaking havoc on our country. 


Through these columns, we have repeatedly drawn attention to the fact that such expressions of crony capitalism must be eliminated by taking deterrent action against those who are involved in such dubious deals. Already by now, the series of such scams have siphoned off humongous amount of our resources. If these were instead utilised for improving the welfare of our people, India  would, surely, have been one of the global leaders with vastly improved levels of its people’s livelihood. The current battle against corruption, apart from its all important moral component, is vital for the creation of a materially better India.