Letter to PM on Cairn-Vedanta deal

Date: 25/5/2011

To

The Prime Minister of India

The Minister of Petroleum and Gas

The Finance Minister

The Minister for Commerce and Industry

The Minister for Law and Justice

The Chief Vigilance Commissioner (Acting)

The Director of Central Bureau of Investigation

Respected Sirs,

Kindly refer to my complaint dated 5/3/11 relating to the government and the ONGC overlooking the clause of the right of first refusal (ROFR) and not exercising the right in order to cause a loss of hundreds of billions of dollars to the people of the country and a corresponding gain to Vedanta and its owner Anil Agrawal.

In this connection my RTI application with the ONGC regarding the details of the agreement on the right of first refusal and the opinion of the Solicitor General was not replied in time and the information arbitrarily refused to enable the corrupt deal to go through.

In my earlier complaint, among other grounds on the value of the deal etc, I had stated the following:

“It also needs to be pointed out that Vedanta is leveraging on the iron ore mineral assets of SESA GOA in which it has a controlling stake to raise loans to finance the Cairn deal. The iron ore reserves of Sesa Goa are worth two lakh crores and  ironically is owned by people of the country.

The company is leveraging on one natural asset, the ownership of which is with the people of the country to buy another asset also owned by the people. Viva la crony capitalism!”

Unfortunately, the warning has not only turned out to be prophetic but much worse: Mr Agrawal of Vedanta is not only leveraging national assets of iron ore leased to Sesa Goa but also stealing national assets to finance the Cairn deal. The newspaper reports in the print media on 22/5/11 attributed to PTI states:

Corporate fraud investigation body, Serious Fraud Investigation Office (SFIO), has recommended prosecution against mines major Sesa Goa on nine grounds, including over and under-invoicing of export/import of over Rs 1,000 crore. After an investigation, which spanned over one-and-a-half years, the SFIO has found that iron-ore exporter has over-invoiced import receipts of coking coal by Rs 14.6 crore and also the sale of iron-ore by Rs 42.51 crore, while under-invoicing exports by Rs 1,002 crore.

Under-invoicing is normally done to avoid paying tax. Under the practice, companies mention in their records an amount less than what was actually delivered and pocket the difference. The SFIO has also recommended prosecution against Sesa Goa’s managing director and the company secretary for the violations under the Companies Act, 1956. Sesa Goa, which is now owned by NRI billionaire, Mr Anil Agarwal, was unavailable for comment.

The SFIO has also alleged that Sesa Goa made excess payment of agency commission to sales agents amounting to Rs 40.6 crore to facilitate its exports of iron-ores to foreign buyers. “Such sales agents included Mitsui & Co (of Japan and Hong Kong), Nissho Iwai Corporation (Japan), Ahmed Jaffer & Co (Pakistan), and Arim Peks (Turkey),” the SFIO report said. The report also accused the company’s independent directors and statutory auditor of non-cooperation with the investigations, and has also recommended prosecution on this basis. In 2009, the SFIO was asked to investigate the affairs of Sesa Goa, following a report of the Registrar of Companies (RoC), which ‘prima facie’ found the company guilty of fudging invoices. Allegations against the company also included diversion of funds, which, the SFIO reports rejected.

The RoC had been looking into Sesa Goa’s case since 2003 when the firm was majority-owned by Mitsui Co. Vedanta Resources acquired 51 per cent stake in Sesa Goa in 2007 from the Japanese firm for $981 million.

It is the allegation of the complainant that Vedanta is being allowed to corner natural resources of the country – the oil and gas fields leased to Cairn India – worth a few hundred billion for a pittance when ONGC has the right of first refusal and should have exercised the option in national interest..

It appears that the new owner of Cairn field is purchasing the consent by the wealth stolen from the iron ore fields of Sesa Goa.

Further if Sesa Goa has been responsible for fraud manifesting in the undervaluing  of natural resources belonging to the people of the country so that it can misappropriate the profit by not paying taxes and pocket the gain to personal accounts, then such fraudulent companies and their owners deserve to be permanently blacklisted. The fact that the same is not being done speaks for itself.

The complainant intends to challenge the deal, if the same is approved, under section 13 (1) (d) (ii) and (iii) of the PCA and hold the decision makers accountable.

As the EGOM is to meet to clear the deal on 27/5/11, the letter is being sent by email to all the parties involved in the decision making process.

Yours faithfully,

A K Agrawal

Cc to Chairman of ONGC for being responsible for facilitating the deal and denial of data on the ROFR with Cairn India so that the deal can go through.

(Arun Agrawal is the author of the book Reliance: The Real Natwar)

One thought on “Letter to PM on Cairn-Vedanta deal

  1. Even PSU like Bhilai Steel Plant are playing in the hands of the corporate looters.
    After getting all the possible permission by black mailing concerned ministries that BSP would shut down if the Raoghat Mines in Bastar are not open soon are now planning to give all the work of Raoghat to private players.
    Raoghat which has the same importance to locals which Niyamgiri had in Orissa will slowly be taken over by Tata’s,Vedanta,Essars’s etc by making Bhilai Steel Plant as their Agent…

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