CAG raps ONGC for hiring RIL rig without calling for bids

GAIL pulled up for undue benefit of Rs 246 crore to private firms

The Comptroller and Auditor General (CAG) has pulled up Oil and Natural Gas Corporation (ONGC) for hiring a drilling rig from Reliance Industries (RIL) without calling for competitive bids. It also indicted GAIL (India) for giving over Rs 246 crore of undue benefit to private power companies by selling natural gas at subsidised rates.

In a report tabled in Parliament today, CAG accused ONGC of deviating “from the standard tendering procedure” and hiring a rig from RIL without calling for competitive bids for four years, on untenable grounds.

In May 2009, ONGC had hired the DDKG-1 rig for four years ending July 2013 at operating rates of $495,000 a day for first 180 days, and $510,000 from the 181st day.

According to CAG, in December 2008, ONGC had indicated it would require a rig capable of drilling in ultra-deep water (depth of 10,000 feet) by December 2010 to meet its commitment in the block it had won under the New Exploration Licensing Policy.

“On the plea that no ultra-deep water rig was available with it before December 2010, the company (ONGC) hired the rig from RIL,” it stated in the report for 2010-11.

This rig, CAG stated, was hired by RIL from Deepwater Pacific-1 in October 2007 for five years starting July 2009.

“Upon RIL’s willingness (in March 2009) to share the rig with the company (ONGC), the latter obtained the same rig from RIL under a tripartite assignment agreement on the same rates, terms and conditions applicable to RIL,” it said.

Till December 2010, ONGC had drilled seven ultra-deep wells using the DDKG-1 rig. Of these three were appraisal wells, drilled to confirm previous discoveries.

CAG said the remaining four could have been drilled after December 2010, when another rig (the Platinum Explorer) was scheduled to be mobilised.

“Moreover, the government had already granted an extension to the company under the rig moratorium policy, saying it could drill these wells by March/May 2011,” it added.

THE CAG FILES
The CAG reports tabled in Parliament today rapped several firms on their knuckles

• ONGC pulled up for hiring RIL rig without calling for bids. The rig was earlier hired by RIL 
• GAIL hauled up for giving benefit of Rs 246 crore to private companies in gas sales. Also, rapped for failing to recover Rs 30 crore in penalty from RIL 
• NHAI drew flak for potential loss of Rs 874 crore due to delays in completion of projects for connecting major ports through highways, plus a revenue loss of Rs 127 crore due to a delay in setting up SPVs 
• Air India rapped for ‘wasteful’ expenditure of Rs 1.5 crore which includes failure to surrender unused leased premises at London Heathrow airport for nine years 
• HAL pulled up for excess payment of Rs 43 crore as incentives to its management in 2009-10 by adopting an “illogical” method of calculating the profits of the company 
• Steel makers RINL and SAIL hauled up for deviating from set practice for product sales and unsound investments which led to a loss of Rs 312 crore 
• Coal India pulled up for not saving Rs 20 crore by prudent action against avoidable expenditure

Separately, CAG also pulled up GAIL (India) for failing to recover Rs 29.78 crore of penalties from RIL for over-drawing gas for a month. The gas major was also criticised for failing to check subsidised gas being used by fertiliser companies for manufacturing non-fertiliser products.