CAG refuses to hear RIL on KG-D6 field audit

In a startling development, the CAG has refused to give Reliance Industries an opportunity to comment on its draft audit report that indicts the Mukesh Ambani-run firm for allegedly receiving undue favours from the Oil Ministry.

The nation's top auditor turned down a request of the Oil Ministry to allow private firms like Reliance and Cairn India, against whom the draft report has passed strictures, an opportunity to present their views on the audit objections.

Sources privy to the development said the ministry had on June 22 written to the CAG saying the audit observations were never discussed with either Reliance or Cairn and they did not get an opportunity to respond to the strictures.

The CAG on the same day replied back saying its "audit mandate, scope and coverage" did not provide for seeking a response on its draft observations and the government can raise audit objections after it has finalised its report and it is tabled in Parliament, they said.

The CAG, during the audit of Reliance's eastern offshore KG-D6 gas fields and Cairn's Rajasthan oilfields last year, never gave the private operators a chance to explain the complex nature of their business, which the nation's top auditor had hitherto never scrutinised.

Instead, the CAG wrote audit memos and requisitioned accounts, with which the private operator fully complied.

Sources said the CAG had a 90-minute session, lunch included, with the operators in the first week of June this year with no pre-set agenda and no audit observations were discussed.

Within days of this meeting, the auditor sent its draft report without including any inputs from the private firms, to the Oil Ministry for comments.

The CAG, in its June 8 draft report, stated that the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), favoured Reliance and Cairn by allowing them to retain their entire exploration acreage, turning a blind eye to increases in capital expenditure and giving additional area in violation of the Production Sharing Contracts (PSCs).

"The contractors have seen and replied to the audit requisitions and memos only. They have not been given the draft report, which has the response to audit queries and observations of CAG," the Oil Ministry wrote to the CAG on June 22.

"In the interactive meeting (held in first week of June), one of the operators gave a presentation on how the project was executed and no audit observation were discussed. In the other meeting, only one observation was discussed with the operator," it wrote.

"The operators were not given any draft report before this meeting so that they could have come prepared with some reply," it added.