Rs 9,000 crore is a lot of money. But that is the cost that the denizens of Gujarat will have to bear for the adventures of their Hriday Samrat Narendra Modi. Not for all his adventures, but one particular adventure, or rather misadventure. Surprised? Read on.

About eight years ago in mid-2005, Mr Narendra Modi, who many ill-informed souls think is a shining example of good governance and epitome of brilliant economic administration, called for a sudden press conference on a Sunday evening in Apnu Amdavad. Over chai and pakoras, Modi made a momentous announcement. He said that the Gujarat State Petroleum Corporation (GSPC), an arm of his government, had literally struck gold. Exploring 1,700km way in the Krishna Godavari (KG) Basin – off the coast of Andhra Pradesh – the GSPC had made a significant find of gas. The gas was to the tune of 20 trillion cubic feet (tcf), an astounding find valued at $50 billion. Modi’s men, used to exaggerating the prowess of their boss, told newspersons on the sidelines of the conference that CM sahib was being conservative and that the find could be much more! Anyway everybody was excited. If this was not Gujarat’s gaurav, what else was? So far from Gujarat, the brilliant men of Modi had conquered even the east coast and the Bay of Bengal! And what was the Andhra Pradesh government doing off whose coast Modi men had struck gas? Nothing really. When the block (size: 1,850 square km) was offered under the third round of New Exploration Licensing Policy (NELP) in 2003, the AP government headed by Chandrababu Naidu had not bothered to put in a bid. And yet, everybody called Naidu a great liberalizer.

Buoyed by the find, Modi and his men went hyper. If they could discover gas off the east coast of India, they could find it elsewhere too. So began the big exploration rush. Egypt, Australia, Yemen, Indonesia, wherever oil blocks were being offered Modi’s men rushed to take them on (either on their own or through joint ventures). Money was no consideration and if it was, then nobody seemed to care.

But where would the money for all the exploration come from? Modi men decided they would borrow from the market. What after all were the markets there for? Of course, the interest they would pay on the borrowings did not bother them. After all the gas they would find would make the GSPC enormously rich and not only be enough to pay back the interest and the principal but also make huge profits.

But the bubble has burst now. The whole gas exploration affair in the KG Basin in the Bay of Bengal turned out to be a damn squib. The gas find in the KG Basin in the block (called the Deen Dayal west field after former Jana Sangh president Deen Dayal Upadhyaya) being explored by the GSPC is merely 2 trillion cubic feet – that is one tenth of that claimed in 2005 originally. What is worse, nobody is sure whether this gas is recoverable and experts say that the cost of recovery is going to be very high and would require a very high level of technical expertise. Meanwhile GSPC has run debts of over Rs 9,000 crore, possibly closer to Rs 10,000 crore. GSPC on its site has not posted its annual report for 2011-12 though we are coming close to the end of financial year 2012-13. The latest report on GSPC’s site is that of 2010-11, a financial year that ended two years ago in March 2011. As per this report, GSPC had loans amounting to Rs 7,126.68 crore on March 31, 2011. A significant part of the loan – Rs 2,980.32 crore was unsecured (that is loan not backed by any collaterals). The total loan was somewhat lower in the previous year: on March 31, 2010 it amounted to Rs 6,383.83 crore. Probably Modi is scared in putting up the report for 2011-12 because that will expose him and show how incompetent his own men are making projections of the future. Of course, there has been no press conference to announce how Modi’s oil exploration adventure has gone phut! All that the section of management discussion and analysis in the annual report of GSPC for 2010-11 says is: “KG block in Deen Dayal Field is a high temperature, high pressure, tight and deep gas field with a complex structural/stratigraphic trap involving separate fault blocks associated with rift geology…” In other words, getting gas out of the field is no easy proposition.

In the meanwhile GSPC has gone into allied businesses and set up subsidiaries for gas trading, gas transmission and city gas distribution among other things. This is to buoy the overall performance of the company and allow it to earn some money to pay for the loans. But if la affaire GSPC is not a good example of the poor managerial prowess of Narendrabhai Modi, what else is?

PS: I know this blogpost will draw abusive and vile remarks from certain quarters. I know what these remarks will be. So I appeal to those who post these remarks to desist because I know what they are going to be. Moreover I really don’t care about them!