one more anonymous missile .....

Yet another anonymous missile:
We received this four page pamphlet detailing how the Carbon Credit Scam, the GSPC-Swan Energy’s so called unholy alliance was shaped up. Don’t miss out the Babu log references.

Here are the details, without any editing ):


On January 22, 2010, the GSPC Pipavav Power Company Limited (GPPC-a subsidiary of the Gujrat State Petroleum Corporation , under the control of the Energy and Petrochemicals Department of the Government of Gujrat-) issued a press release notifying what it called the “First Carbon Credits’ Linked equity investment finalized in a unique public –private partnership for power projects in Gujrat.

The brief particulars provided in the press note confirmed that a company by the name Swan Energy Limited (SEL) would get 49% equity and become the single biggest shareholder in the GSPC Pipavav Power Project (GPPC) while the current owner of the project , GSPC-GUJRAT STATE PETROLEUM CO- would reduce its holding to 34% and GPCL would hold 17% of the equity. SEL would pay Rs 381 crores for acquiring the 49% equity. In addition SEL would get 70% of the carbon credits expected to accrue to the project.

The 702mw gas based Pipavav power project of GPPC is under execution and is to be commissioned in December 2010 and has approvals to expand its capacity to 1050 Mw. The project is likely to receive carbon credits to the tune of 1.2 million units annually for its capacity currently under execution.

A simultaneous press note issued by the company –SEL – runs along the same lines but adds that the company is in the process of developing a floating Lng terminal at Pipavav and that the state government have given approval to GPPC to convert three existing coal and FO based plants to gas based power plants and that these would generate about 10 million units of carbon credits per year when implemented.

The press notes attempt to create the impression that a great strategic alliance is being formed between two great industrial giants taking Gujrat to unexplored new heights in some unique financing of public sector projects. Among the high sounding words what lies buried is the avarice and the most brazen, unthinkable and wicked conspiracy hatched at the highest levels of the Gujrat state government to defraud the state and the public of Gujrat , with brow beating, compromising and subversion of the state’s bureaucracy and the ingenious way of executing it so that it cannot be detected but with great effort.

To begin with Swan energy is not a company involved in the energy sector but has a nominal presence in the textile business and land deals.

A look at the annul results of this company (SEL) available on the net shows that it has suffered operating losses from 2005 to 2008, has no material consumption in 2008 and 2007 and has material consumption of less than an average of Rs 1 crore in 2005, 2006 and 2005, reports no payment of salaries and wages in the years 2005, 2006, 2007 and 2008 while has a modest out go of Rs 12 lakhs in 2009, has not paid any excise duties from 2005 onwards but has huge ‘other expenses’. All these indicate that the financial records of the company are nothing but forgeries and made up.

The company has only a capital base of Rs.19 crores and calims only a cash balance of Rs.57 crores at the end of the last financial year.

In effect,it does not have the capacity to pay for the 49% equity of the GPPC and need to raise funds purely on the basis of the windfall it expects form the largesse the Government of Gujrat has now bestowed on it through the virtual grant of free equity in one of its blue chip companies and the huge recurring and undeserved income it gets through the unwarranted grant of 70% of the carbon credits accruing to GPPC.

SEL has no back ground in engineering, much less in power generation or project planning and execution or its profitable management. The key functionaries of the company are Dalals and deal fixers and their only claim to any distinction is the proximity to the most important state functionary of Gujrat today which they have used to intimidate, cajole and induce the lower functionaries, on the verge of retirement and others to participate in this dastardly and heinous ,rapacious loot of public wealth. Their credentials to be given such a huge chunk of the equity of GPPC is no better than that of any fixers who throng the corridors of the Gandhinagr Sachivalaya or of any Pan Galla operator or vegetable vendor of Gandhinagr who do a much better management of legitimate business.

The power project of GPPC is nearing completion and according to the claim made in the press note it is to be commissioned in Dec 2010. This means the technology was finalized long ago, loans tied up, financial closure achieved, environmental clearance obtained, fuel linkage established and long term power sale agreement executed with buyers.. There is nothing regarding the project to which SEL would provide any inputs, even assuming it had the expertise for it. Even the entitlement for carbon credits it intrinsic to the technology and the fuel used and is not dependant on the participation or contribution of SEL. Hence inviting SEL to the equity of GPPC is simply a devious and dastardly and most dishonest means of transferring public wealth for private benefit, this being the latest of a series of such measures which the energy department under the control of the chief minister has perfected into a consummate art form, in the last five years or so with the help of a set of pliant and dishonest officials..

There are three major factors which go to establish that the introduction of SEL as an equity holder of GPPC is a scam of unprecedented proportions.. They are the departure from established procedures for divestment of equity in undertakings of the Government, the abnormally low price at which equity is being transferred and the transfer of other monetary benefits without any consideration through assignment of 70% of carbon credits accruing to the project to SEL.

A number of companies in the process of establishing power projects have gone for diluting their equity in the recent past. Reliance power offered their 10 rupee share at a premium of more than 250 rupees( after the issue of bonus shares) KSK
energy ventures sold their 10 rupees shares at a premium of 240 rupees. Those who entered the capital market, when the economic scene was the grimmest, namely ADANI POWER AND Jindal power sold their 10 rupee share at a premium of Rs 100 each or thereabouts.
As on 04-02-2010 a ten rupee share of Tata power was trading at about 1290 rupees, while the Reliance and KSK shares were trading at respectively Rupees 146 and Rs.177. The erstwhile owner of GPPC, GSPC offloaded 5% of its equity through private placement each Rs 10 share being sold at Rs 800.

If the public issue or the private placement route was adapted in the case of GPPC, its’ 10 rupee share could have been sold at a premium of at least Rs 250. The press note issued by GPPC and SEL does not mention the premium at which shares were sold to SEL . But having regard to the total amount to be paid for the 49% equity and the total equity of GPPC it appears that only a insignificant premium of 27 rupees were charged and the shortfall is Rs. 223 per 10 rupee share and the total shortfall is RS 2296.29 Crores.

At 49% SEL would be the single largest share holder of GPPC The 17% share holder, GPCL(Gujrat State Power Corporation ) is to be wound up and in that eventuality it will be a cake walk for SEL to gain majority stake in the company by another sleigh of hand and devious transaction similar to the one through which it has now gained entry into GPPC .
The loss of 2296.29 crores to the government company is the gain to SEL, which it has obtained at the cost of pandering to the pecuniary interest of the politicians and bureaucracy who took the decision in favour of the deal.


The loss above calculated does not take into account the potential premium the company could have charged for the virtual management control being handed over to SEL in terms of the huge holding of 49% equity in the company.

According to the press note issued by SEL the three projects for the conversion of the thermal power stations to gas based power stations would generate 10 million units of carbon credits. According to the press note of GPPC and SEL the Pipavav project at its currently planned capacity will generate 1.2 million units of carbon credits. When the capacity is enhanced form 702 MW to 1050MW the entitlement of carbon credit from the Pipavav project would increase proportionately to 2.3 million units. The total units of carbon credit available to GPPC would be 13.2 million units. CERs, like shares and derivatives are tradable and have a ready market in the exchanges specially dealing in these like stock markets.

In this curious and atrocious deal SEL has been given the rights for 70% of the CERs ie the rights for 9.24 million CERS . Each CER has a current value of some 20 EUROS. The current conversion rate between EURO and Rupee is 1:65. The economic value of the ECR entitlements signed away to SEL by this unique deal is 9.24 multiplied by 20 multiplied by 65 million rupees. It comes to a staggering Rs. 1200 crores per year and for the ten year period for which according to the press notes, ECRs would be available to the project, a whopping Rs 12000 Crores, all for an investment of 381 crores. To get an income of Rs 1200 crores per year , SEL should have , at the current bank rates invested at least 12 times that amount, namely Rs 14400 Crores.
It means SEL got 49% of GPP not only free of cost but has been blessed with a huge annual pay out. The total loss to the state exchequer is thus is about Rs 14300 crores. (1200*10)+2296 crores .What can be more vibrant than this in Vibrant Gujrat.

Only a fool will think that this was given free of cost or for a senior functionary of SEL suffering a long flight to Moscow on a winter night in the company of Narendra Modi or for suffering the inconvenience of attending the marriage of the daughter of a just retired bureaucrat in far away Chennai with the unavoidable difficulty of accommodating his copious frame in an impossibly narrow single aircraft seat.. It is more likely that the Modis , Saurabh Dalals, Kailasnathans, Rajgopalans, Jagatheesa Pandians ,Jagadeesans , Tapan Rays,Jyothis and Srivastavas and their ilk have more than elementary education and the ability to have understood these numbers and would not have done this huge atrocity without some stake in the deal.

It is precisely the huge benefits that the deal makers wanted to bestow on SEL that the divestment of equity in GPPL was done as a hush hush affair against established practices applicable to public sector undertakings. If the government wanted to do any such thing it should have been done in a transparent manner and at a price at which the market would pay for the acquisition of the equity.

The energy department and GSPC in particular just like it’s more celebrated sister concern GUVNL, has a long history of picking up dubious characters and making them billionaires overnight. All deals are kept under wraps. No information is provided even under the rights of information act. Chosen officers who are plaint and capable of complicity are kept in strategic positions for inordinately long periods, threatened, cajoled and induced by various methods to commit illegal acts and then to defend.

Only few know that a sizeable portion of the profits accruing to the state and GSPC form its gas fields in the KG basin has been signed away to a foreigner, a once low paid employee of a company called Niko resources and another company of which no one had heard till then. More on these later when full details are available.

If there is any thing unique about this deal, it is the speed, brazenness and magnitude of the loot of public money involved in this.

Unfortunately this state has no mechanism to deal with misdeeds of the political executive and the vigilance commission itself is interested only in catching the small fish and shy away from looking at such monstrous deeds as is evidenced by the levity with which it ignored another serious complaint about a mega scam in the GUVNL on the specious plea that the matter is before the courts when in fact it was the court which exposed the staggering loss to the exchequer and nothing further was pending in the court.

May be it is high time for the highest judicial forum judiciary to order an inquiry under its supervision through the CBI, into this deal and equally notorious and suspicious deals in the various entities under the control of the energy department of Gujrat during the last 5 years at least.