Reddy meets PM amidst Reliance's KG-D6 controversy

With CAG severely criticising oil ministry's role in approving Reliance Industries' KG-D6 field cost, Petroleum Minister Jaipal Reddy today met Prime Minister Manmohan Singh to probably tell him briefly about his ministry response to the CAG's draft report.

While Reddy refused to comment on his 15 minute meeting with the Prime Minister this morning, sources in his ministry said the meeting was fixed a long time back, much before the CAG submitted in draft audit report on June 8.

The ministry, they said, will take at least 5-6 weeks to reply to points raised by CAG which Reddy may have told the Prime Minister. CAG had asked for comments in two weeks time.

The delay in ministry's reply may mean that the CAG final report would not be tabled in Parliament in the monsoon session of Parliament next month.

Sources said the ministry is taking longer time as it has an entirely new set of officials. The decision on KG-D6 field were taken when Murli Deora was the minister and VK Sibal was the head of ministry's technical arm, Directorate General of Hydrocarbons.

Incidentally, Sibal too was in the ministry today probably to explain to the new Oil Secretary GC Chaturvedi and his team about his role in KG-D6 approvals.

CAG in its draft report had rapped oil ministry and its technical arm DGH for allegedly favouring Reliance by allowing it to double KG-D6 gas field's cost but it stopped short of saying if the Mukesh Ambani firm had overbilled the government and thereby caused loss to the state exchequer.

It also pulled up the ministry for going out of its way to grant over 856 sq km of additional area to Cairn India adjacent to its oil discovery in Rajasthan block.

The CAG in its draft audit report on KG-D6 block said the ministry and DGH also bent the rules to grant "huge benefits" to Reliance when it was allowed to retain the entire block, but said gains cannot be quantified.

"The increase in (Phase-1) cost from ($2.39 billion proposed in the) Initial Development Plan (of May 2004) to ($5.196 billion) in the addendum to the Initial Development Plan is likely to have a significant impact on the government of India's financial take.

"However, at this stage, based on the information provided, we are unable to comment on the reasonableness, or otherwise of the increase in cost, both overall and in respect of individual line items," accounting watchdog CAG said.

Reliance, however, said that "as a responsible operator, it has fully complied with the requirements in the Production Sharing Contract (PSC) at all times in conducting petroleum operations, and refutes any suggestion to the contrary".

"The KG-D6 project has been globally acclaimed for its cost effective, speedy, flawless execution and smooth commissioning," Reliance said in a statement yesterday.