The Comptroller and Auditor General of India will audit the expenses of Reliance-operated KG-D6 block between 2008-09 and 2011-12, according to the production sharing contract, the Secretary, Petroleum and Natural Gas Ministry, Vivek Rae, said. To resolve the ongoing tussle between the Government auditor and Reliance on the scope of the audit – whether performance or financial -- the Ministry took on the role of mediator.
The Ministry has informed Reliance that the CAG will take up the audit, a rather relieved Secretary told media-persons on the sidelines of a CII event here.
A production-sharing contract is signed between a contractor and the Government to carry out hydrocarbon exploration and production work.
In a meeting with Ministry officials in February, Reliance had sought legal clarity on the scope of the CAG audit — whether it will be a financial audit or performance audit. The company had asked the Ministry to clarify three things — whether CAG was the auditor and RIL was the auditee and not the Government; whether any questions to the contractor should be restricted to deviations from the production sharing contract; and if CAG was doing the audit purely as a Government representative.
“The CAG can audit any non-tax revenue of the Ministry. It (RIL-audit) is linked to the production-sharing contract, so it has to be done through PSC,” Rae said. He added that the issue had been resolved through discussion.
According to reports, the CAG too has said it is not planning a performance audit but only wants to examine the propriety of expenses made.
Petroleum Minister M. Veerappa Moily, in an interview to Business Line , had said, “The vulnerability in interpretation is killing us. The production sharing contract should be the final ruling. The CAG will also have to go by the contract. It cannot have its own interpretation.”
RIL, which has been in the public glare for its inability to check the drop in output from the country’s largest gas fields from 60 mmscmd in end-2009 to about 16 mmscmd now, says the Government has the right to get the audit done in accordance with the PSC provisions.
Answers to these issues were sought last year also and, only after reaching a truce, in January, did the Government auditor start the second round of audit of the D6 block. But, once the auditing started, the contractor felt the auditor was seeking information that was not required for a financial audit.