CAG says it wants to check propriety of RIL spending on KG-D6

CAG last month suspended audit of spending on the flagging KG-D6 block

Having suspended audit of Reliance Industries' spending on KG-D6 gas block, the CAG has said that it is not planning to a do a performance audit of the company but wants to examine "propriety" of expenses made.

The Comptroller & Auditor General of India (CAG), which last month suspended audit of spending on the flagging KG-D6 block following differences with RIL over scope and extend of scrutiny, said it is willing to resume the audit.

"While a performance audit is not envisaged, it is important that the audit of Block KG-DWN-98/3 (KG-D6) covers examination of all records and documents supporting costs, expenditures, expenses, receipts and income as mentioned in the PSC, including propriety of these expenditure, expenses, receipts and income," it wrote to Oil Ministry.

CAG wanted the discretion for records to be requisitioned to vest with the government or its auditor (CAG) and wanted the ministry to ensure that RIL provide access to all documents requisitioned.

"The audit would be the financial and propriety audit," it wrote on March 12 adding the purpose of its audit was to ensure that "the government's financial interests have been safeguarded."

This follows Oil Ministry writing to CAG saying the official auditor was being requested to undertake the audit of KG-D6 for 2008-09 to 2011-12 under Section 20 of the C&AG (DPC) Act, 1971.

Stating that such audit should be a financial scrutiny, the Ministry told CAG that the scope, extend and manner of the audit will be as spelt out in Article 25.5 and 25.6, read with Appendix C of the Production Sharing Contract (PSC) RIL had signed with the government for exploring and producing oil and gas from KG-D6 block.

These provisions of PSC provide for a government appointed auditor inspecting and auditing all records and documents supporting costs, expenditures, expenses, receipts and income. It calls for verifying reasonableness of all charges and credits, which constitutes a pure financial audit.

CAG said it was in agreement with this scope of audit provided the ministry agreed with it on the issue of requisition of records and access.

The auditor said that its six member audit team were at premises of RIL in Navi Mumbai from January 9 to January 31 during which they issued 40 requisition calling for information and records.

"However, as of January 31, the contractor (RIL) had provided only a few records without formal replies stating that they were holding back replies till such time as the points of disagreement were resolved," it said.

In subsequent discussions, RIL stated that it was ready with response.