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Why was Jaipal Reddy moved out of the Petroleum Ministry?


The Congress' political opponents insist that Jaipal Reddy lost his job as Oil Minister at the behest of a corporate lobby or even one corporate house. The government stoutly denies it capitulated to any corporate pressure. Mr Reddy has refused to comment on his aborted stint as Petroleum Minster.
So is the corporate lobby so strong in India that it can have a minister replaced? An executive in a big corporate house, on condition of anonymity, argued against that possibility saying that if Mukesh Ambani’s “Reliance Industries (RIL) is behind all this, then how did RIL let Murli Deora lose the portfolio in January 2011 when Mr Reddy took charge?”
Mr Deora, whom Mr Reddy had replaced as petroleum minister last year, was often accused of being an “RIL appointee” in the Petroleum Ministry, with rival corporate houses alleging that he favoured the company. The executive's argument is that if RIL was indeed powerful enough to ensure Mr Reddy's ouster, it could have prevented his coming into the ministry in the first place. The same Manmohan Singh government effected the reshuffle that saw Mr Deora lose his ministry then. So, says the executive, has RIL become more powerful now?
Quite to the contrary, say some experts, who believe that RIL’s clout - both politically and financially - could actually have weakened in the last 22 months. The company's market share and stock performance, they say, bear testimony to this. The stock has eroded 20 per cent since 2011 (compared to a 10 per cent erosion in the BSE Sensex, which would have performed better had the RIL stock performed well). RIL has lost close to Rs. 90,000 crore in market capitalization.
Well-placed government sources insist that the removal of Mr Reddy as Oil Minister was purely based on performance, particularly decision making. A $7 billion deal between RIL and British energy major BP Plc was delayed by about six months. The delay is believed to have dented investor sentiment, already low thanks to the overall economic gloom. Mr Reddy sought Cabinet approval though, with 100 per cent foreign direct investment allowed in the petroleum exploration and production sector, it was not needed. All that was required was a security nod from the Home Ministry, but Mr Reddy said he wanted to be “doubly sure and not take any chances”.
This was not the only deal that was delayed. The purchase of Cairn India by UK-based Vedanta,  a $9 billion deal, took months to get and approval and through much back and forth, Mr Reddy was resolute that he would rather be safe than sorry
The international bidding round for oil and gas block (New Exploration Licensing Policy or NELP) that took place during Mr Reddy's tenure got the worst response in the NELP’s history, his detractors point out.
Ministry sources say there was also some discontentment because senior officials were shunted out and they have claimed they were not given valid reasons. A senior IAS official said, “as soon as he took full charge of the ministry, he threw S. Sundareshan, the then secretary, out of the ministry without giving any valid reason”. The bureaucrat also said, “Generally, a change of ministers does not mean a change of bureaucrats.” Apart from the secretary, some other senior officials were also moved out -- one of them being Apurva Chandra, who handled gas marketing and pricing.
When it came to the appointment of joint secretary (exploration), Directorate General of Hydrocarbon (DGH), ministry sources say Mr Reddy brought his “own men”.
But what would have weighed most heavily against Mr Reddy, sources say, was that he was seen as a reluctant party to fuel reforms. He has been accused of failing to implement policy decisions already taken – the most significant being the one on market-linked prices of petrol. Although a decision was taken in 2010, Mr Reddy during his tenure did not allow petroleum PSUs – IndianOil, Bharat Petroleum Corp and Hindustan Petroleum Corp – to hike prices. This action just led to more pressure on oil blue chips, which are not compensated for subsidies.
Although Mr Reddy and his ministry maintained that oil firms were free to revise prices of petrol since it was deregulated, Mr Reddy was reportedly clear that the oil firms must keep in mind the common man's good.
M Veerappa Moily, who took over from Mr Reddy as Petroleum Minister on Sunday, said he did a wonderful job and “maintained highest standards and probity in the administration”. He added that a change in portfolio did not mean a downgrade. “Portfolios do change and when a government functions, we do not work with any vested interests, it is not to benefit one or two companies or one or two individuals.”
The new minister said his focus would be on quick decision making and building investor confidence.

“We have to keep our doors and windows open for whosoever wants to invest here. We have to create a level of confidence among investors. The emphasis will be on quick decisions as delayed decisions cost the nation,” Mr Moily said.

Story first published on: October 29, 2012 18:19 (IST)

Tags: Jaipal Reddy, Veerappa Moily, Petroleum Ministry

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