Letter to Home Minister P Chidambaram

Bangalore
October 4, 2011

To
Shri P. Chidambaram
Minister of Home Affairs

Dear Mr Chidambaram,

1. Vedanta buying majority stake in Cairn India, unfit for Security Clearance by Home Ministry.
2. Opportunity to restore the 2G loss to the nation.
3. Deal tainted by corruption. Loss of Rs 2 lakh crore.

Kindly refer to the annexed letters to various authorities relating to loss of around two lakh crore by ONGC not exercising its right to first refusal (ROFR). These letters were not forwarded to you as you were not a part of the EGOM which cleared the deal.

According to The Hindu dated 3/10/11, the Home Ministry has to give security clearance to the deal before it can go through.

The reasons for not giving security clearance to the Vedanta group are as follows:

• The group is reportedly under investigation for paying bribes to Madhu Koda to facilitate mining rights in Jharkhand.

• The group is under investigation by the SFIO for under invoicing of export of iron ore by 1000 crores..

• The group has been accused of illegal mining of iron ore in both group companies Sesa Goa and Dempo without environmental clearances. Eighteen of the 48 violations in Goa relate to these two group companies of Vedanta.

• Vedanta is involved in certain litigation seeking cancellation of permits and environmental approval for the alleged violation of certain air, water and hazardous waste management regulations at its Tuticorin plant. Various writ petitions were filed before the High Court of Madras alleging, inter alia, that sulphur dioxide emissions from the Vedanta Group’s copper smelting operations at Tuticorin are causing air, water and hazardous waste pollution resulting in damage to the marine ecosystem and the lives of people living in and around Tuticorin

• Mining and aluminum factory at Nyamgiri: “The casual approach, the lackadaisical manner and the haste with which the entire issue of forest and environmental clearances for the alumina refinery project has been dealt with smacks of undue favour/leniency and does not inspire confidence with regard to the willingness and resolve of both the state government and the MoEF (Ministry of Environment and Forests) to deal with such matters keeping in view the ultimate goal of national and public interest,” CEG Report 2005 (Refer Saxena Committee Report also).

• The SEBI has brought proceedings alleging that Sterlite has violated regulations prohibiting fraudulent and unfair trading practices.

• Vedanta and its subsidiaries are involved in a number of litigation matters, both civil and criminal in nature, which could together have a material adverse effect on the business, results of operations, financial condition and prospects of Vedanta and/or its subsidiaries.

• Vedanta and its subsidiaries are involved in a variety of litigation matters, including criminal matters, matters relating to alleged property disputes, labour disputes, alleged violations of environmental and tax laws, alleged violation of the provisions of the Indian Takeover Code, and alleged price manipulation of Sterlite’s equity shares on the Indian stock exchanges. The total claims on account of the disputes with sales tax, excise and related tax authorities amounted to US$229.2 million, of which US$5.4 million had been recorded as non-current liabilities, as of 31 March 2010. The claims by third-party claimants amounted to US$151.2 million as of 31 March 2010, of which US$5 million had been recorded as non-current liabilities.

• SOVL has commenced proceedings against the Government of India, which has disputed SOVL’s exercise of the call option to purchase its remaining 29.5 percent ownership interest in HZL.

• The Government of India has disputed Sterlite’s exercise of the call option to purchase its remaining 49 percent ownership interest in BALCO.

Most of the objections are from the disclosure document filed by Vedanta before the UK regulator.

It needs to be appreciated the group has been aggressively appropriating the natural resources belonging to the people for its own profiteering. The perception that these deals are kickbacks based has been confirmed by the spate of mining scams in all the states having mines.

The present deal involves a loot of two lakh crore which is higher than the highest estimated figure of the 2G spectrum scam.

During your entire tenure as finance minister the royalty rate for iron ore was not revised and there was gross under invoicing of exports and domestic sales leading to loss of lacs of crores. The present auction of inferior iron ore at Rs 3400/tonne on orders of the Supreme Court resulting in royalty of Rs 340 (as against Rs 12 during your tenure) and higher income tax has come as a pleasant surprise.

In this case, ONGC had the right of first refusal (ROFR) to the shares being sold by Cairns. Vedanta will acquire 58.5 percent stake in Cairns which has 41 percent stake in the Rajasthan oilfield (ONGC has 30 percent). The present estimated production capacity is over 1.4 billion barrels. So 41 percent represents 575 million barrels. The stake will cost USD $8.86 billion whereas there is a profit of around USD $35 to $40 billion to be made on the deal. This means a loss of around two lakh crore. It is a matter of fact that all the discovered oil fields privatized had far more oil than that estimated at that time (1993-95) and the same is the case with the Rajasthan block.

It is for this reason that the deal should be probed for kickbacks. Even if there is no bribe paid, it amounts to largesse given to third party (Vedanta in this case) without public interest and is covered under section 13 (1) (d) (ii) and (iii) of the Prevention of Corruption Act.

Any attempt to divert the issue to the total royalty (20 percent) and cess being borne by ONGC instead of its proportionate share of 30 percent as being the basis for the deal needs to be ignored because once ONGC had 70 percent stake it would bee in a position to undo the one sided agreement signed earlier.

All those involved in clearing the deal including the ONGC chairman who arbitrarily refused to divulge any information about the deal, the ROFR and the opinion of the Solicitor General on the issue under the RTI, should be investigated. As the crime has taken place in Delhi and the Delhi Police is under your Ministry kindly have the matter investigated.

I sincerely hope that you will uphold the national interest and undo the wrong of the 2G scam and will not be influenced by the fact that you were a member of the Vedanta Board.

Regards,

Yours sincerely,

A K Agrawal

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap)