Dutch investigators last week arrested three former employees of a local firm suspected of laundering $1.2 billion through over-invoicing services and works rendered for a gas pipeline built by a unit controlled by billionaire Mukesh Ambani, a charge vehemently denied by Reliance Industries. According to Cobouw , a Dutch publication, the three suspects were released on Friday, after three days.
East West Pipeline Ltd (EWPL), which was previously known as Reliance Gas Transportation Infrastructure Ltd (RGTIL), denied that any money was laundered at any stage during implementation of the project and that higher capital cost of a pipeline would result in higher tariff for users for receiving natural gas through the line.
Ambani’s listed firm Reliance Industries, too, denied any link to the pipeline company saying he neither set up any gas pipeline in 2006 nor did it have contracts with any Netherlands company for any gas line.
Last month, Canadian investor Brookfield-led India Infrastructure Trust agreed to pay ₹13,000 crore to buy the loss-making East-West gas pipeline, which transports RIL’s eastern offshore KG-D6 gas from the east coast to customers in the west.
The Fiscal Intelligence and Investigation Service & Economic Investigation Service arrested the three former employees of Dutch pipeline firm A Hak, NL, alleging that an estimated $1.2 billion in profits earned by the company by over-invoicing services and works rendered to RGTIL were “creamed off” to Singapore-based Biometrix Marketing Ltd, a company they claim is linked to Reliance. An AFP report quoting a statement issued by the public prosecutor’s office said that the company acted as an “invoice duplicator” to enable the Indian firm to claim costs twice from gas customers.
“It is suspected that the Dutch company used to increase the amounts on the invoices for the materials and services supplied,” it said. “The ‘profits’ earned in this way were subsequently creamed off via the Dutch company.”
The gains were then transferred via a complex web of businesses based among others in Dubai, Switzerland and the Caribbean, before eventually ending up at a business owned by the Indian company in Singapore, AFP said, adding the suspects allegedly received payments of up to $10 million for their involvement.
“In this case, Dutch companies are suspected of assisting an Indian client to launder suspected illegal earnings,” AFP quoted the statement as saying.
The real losers “were probably individual citizens in India” as the cost of production of gas is passed on to the consumer, it added.
EWPL, RIL reject charges
Reached for comments, EWPL said the pipeline project was built by a privately owned entity, in which promoters’ private funds were invested. “No public funds were invested and all borrowings from banks, financial institutions and others have been fully repaid by the promoters. We strongly deny any suggestion of any money having been laundered at any stage during the implementation of the project,” EWPL said in a statement.
EWPL said that the suggestion that a higher capital cost would result in higher tariff is “wrong” and “not in line with the applicable tariff regulations in India”.
“According to the tariff regulations, the cost of fixed assets to be reckoned for the purpose of transportation tariff is lower of actual cost or the cost normatively assessed by the statutory authority, Petroleum and Natural Gas Regulatory Board (PNGRB). Tariff has been approved for the East West pipeline on the basis of normative cost determined by PNGRB by employing professional consultants which is evident from the tariff order dated April 19, 2010. Hence, the actual cost of setting up the East West Pipeline is not relevant for fixing the transportation tariff,” EWPL’s statement said.
It, however, did not reply to a PTI query on PNGRB’s March 12, 2019 ruling fixing the tariff of the pipeline based on claims of costs made by the company.
In a statement, RIL said neither it nor any of its subsidiaries set up any gas pipeline in 2006. Also, it said it never had any contracts with any Dutch company for setting up of any gas pipeline and hence the report could not relate to Reliance Industries. “RIL has always complied with all rules, regulations and applicable laws and any suggestion of impropriety by RIL is emphatically denied.”
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