Reliance Penalised Again for KG Gas Underproduction ~ Pyrrhic Government Victory

At the outset let me state I’m neither a hater nor baiter of Reliance Industries and it’s Ambani Family Promoters…on the contrary   had applauded the late Founder Dhirubhai Ambani for his guts and gumption to create the Reliance Group in adverse,hostile and a monopolistic scenario where he broke down several barriers of entry to  enrich millions of shareholders along with him right from 1970s and arguably making him the Father of the Equity Cult in India  ….even today Reliance Industries has nearly Three Million Shareholders who keep the faith

However the debate is yet out whether Means justify the End or the End justifies the Means !

The near Three Million Shareholders must be aware of the Risks associated with a Reliance Investment….look at it as an opportunity cost for better  returns in equity elsewhere

Sadly I had to remove Reliance Industries in 2012/13  as a Core Recommendation because of such Risks involved and Corporate Governance Issues as below….Though I do not hold any shares,many of my clients continue to do so and are part of the three million shareholders…I hold no emotional grievance or grudge for this continued holding but refrain from advising them on the Earnings Performance & Growth Plans and the possible impact on the Share Price and whether they should Buy or Hold or Sell…left it to them to decide

Reliance Penalised Again for KG Gas Underproduction ~ Pyrrhic Government Victory

Reliance KG Penalties for Gas underproduction

Thus far the Penalties aggregate US $ 2.376 billion =>Rs 14256 crs at Rs 60=US$

Has Reliance got to actually pay these in Cash !?….. No

Reliance has gone in for arbitration for this

These are simply disallowed expenses and deducted from the Capex Expenditure & Investment Shown by Reliance and which has been cleared by the Directorate General of Hydrocarbons....the Director General from November 2004 to October 2009 was ex UPA & Congress Minister Mr Kapil Sibal’s Brother Mr VK Sibal….and it is interesting to note that when the Ambani Brothers were at each others throats in 2009 and 2010 after the Group was split, the younger Anil Ambani had openly accused his elder brother Mukesh Ambani’s Reliance Industries for hugely padding and gold-plating the Capex Spend for Clearance….he is known to have stated that the actual expenditure was just Rs 15000 crs but was shown as Rs 45000 crs and cleared in 2006 and the government stood to lose Rs 30000 crs in Gas Revenues !

….so these penalties simply reduce the Expenditure allowed to @ Rs 25000 crs…..the Directorate General began these penalties only last year in 2013 after gas production dropped below 30 mscmpd (equivalent to 180000 barrels of Oil per day)….the total investment is US $ 8.8 billion read more