CAG pulls up Oil Min for favouring Cairn India

The Comptroller and Auditor General of India (CAG) has pulled up Oil Ministry on charges of showing undue favours to Cairn India in going out of its way to grant over 856 sq km of additional area in the oil discovery Rajasthan block.

As per the Production Sharing Contract (PSC), the total contract area of Cairn India-operated RJ-ON-90/1 block in Rajasthan was 11,108 sq km. Oil Ministry agreed to Cairn's request for grant of additional 852.2 sq km in August 2004 and 856 sq km in March 2005.

CAG in its draft performance audit of the Rajasthan block stated that according to PSC, the government can extend the contract area to include a hydrocarbon reservoir that extends beyond the block boundaries.

"In our view, the contract area under the PSC is sacrosanct... It can by no means be argued that already discovered reservoirs extend over the entire extended area of 852.20 sq km and 856 sq km," it said in the draft report sent to the Oil Ministry for comments.

"While there is some scope for consideration of reallocation of the area of 852.20 sq km [stated to have been relinquished from the original contract area], the extension of 856 sq km is in no way covered by the terms of PSC and amount to grant of undue favour to the operator [Cairn]," it said.

CAG said Cairn made fresh discoveries during the appraisal phase and in the development phase in the areas already delineated as development area.

This implied that "a backdoor method for further exploration activities, when the exploration period had concluded".

"Also, the development area was, evidently, irregularly delineated and included excess area beyond that properly associated with the declared commercial discoveries and the associated development plans," CAG added.