KG-D6: RIL challenges CAG’s powers to audit

Contesting CAG’s powers to audit a private company, Reliance Industries has said it is ready for an audit of its flagging KG—D6 gas field by any government— appointed auditor subject of the scrutiny being carried out as prescribed under the signed contract or PSC.

Just as the Comptroller and Auditor General of India (CAG) prepared to begin audit of KG—D6 field spending in 2008—09 to 2011—12, RIL wrote to the Oil Ministry saying under the CAG Act, the official auditor was “entitled to carry out an audit of central government, the state government or government body or bodies” only.

The CAG in the first round conducted a ‘performance’ audit which is contrary to the provisions of the Production Sharing Contract (PSC), it wrote on September 18.

RIL said it was open to financial audit of its spending on the field, which has seen production drop by over 55 per cent to 27.5 million cubic metres per day instead of rising to planned 80 mmcmd.

It was opposed CAG doing a ‘performance’ audit wherein efficacies of process or technology used in the complex deepsea operations are called in for questioning by a non—technical authority.

Stating that it had as a one—time exception agreed to a CAG audit in 2009, RIL said in case the government insists on CAG doing further audit, the same should be done with an assurance that the report will be given only to the ministry (and not to the Parliament as is required under the CAG Act).

Also, “all information submitted by contractor (RIL) during the course of the audit be kept and considered confidential and not disclosed to any third party,” it added.

The company said CAG can audit ‘performance’ of DGH or the petroleum ministry, but not a private sector company like RIL which was functioning as a contractor.

The PSC provides for the Oil ministry appointing a representative to carry audit the contractor’s accounts in order to verify the charges and credits.

If the CAG is to be that ‘representative’, “it would be incumbent upon the ministry to invoke the process stipulated in Section 20 of the CAG Act relating to entrusting the CAG with the audit of an entity, the audit of which is not entrusted to the CAG by or under any law made by the Parliament and provided that the provisions of Section 20 of the CAG Act can be made applicable to the contractor operating under the PSC,” it wrote.

As an alternative, RIL suggested appointment of any auditor other than CAG as the government’s representative to conduct an audit.

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