Consulted RIL before finalising report: CAG

The Comptroller and Auditor General (CAG) today said that it had consulted Reliance Industries (RIL) before finalising the draft performance audit report on hydro carbon production sharing contracts at its KG-D6 gas fields.

"At no stage did this office [CAG] refuse any operator an opportunity to respond to observations made by us," the CAG said in a statement while responding to reports that the auditor did not give an opportunity to RIL to present its views.

The auditor said that in the case of performance audit on hydrocarbon production sharing contracts, "interactive meetings were held with two operators, including RIL, prior to the finalisation of the draft performance audit report".

However, in a letter dated June 22, the Petroleum Ministry said the CAG  did not mention its observations or seek comments of the private firms on its audit objections during the  interactive meetings it had with RIL and Cairn days before finalising its draft report.

Such non-disclosure was not not in line with the production sharing contract because of which government will not not be reverse any cost recovery or disallow any expenditure, the government letter said.

The CAG said the performance audit follows a structured, systematic and objective architecture, which involves taking into account all relevant facts furnished by the concerned parties to ensure a balanced and objective reporting.

The government auditor said that as per the audit methodology the draft report was forwarded to Ministry of Petroleum and Natural Gas and 'Entry and Exit conferences' with the Oil Ministry as per the standard practice.

"It is for the ministry to take a view on what operator- specific points it needs to share, at this stage, with the operators," the CAG said.

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).

In the draft report, the CAG said rules were bent, enabling Reliance to retain the entire 7,645 square kilometre KG-DWN-98/3, or KG-D6 block, in the Krishna Godavari Basin off the East Coast.

Also, the development plan Reliance submitted for Dhirubhai-1 and 3, two of the 18 gas discoveries in the KG-D6 block, was not in compliance with the PSC and the ministry and the DGH turned blind eye to the company raising capital expenditure without having begun work on the previous one.