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'CAG has agreed to confine to financial audit of KG-D6 block'

New Delhi, Dec 11, 2012 (PTI)

The CAG has agreed to restrict its audit of Reliance Industries' KG-D6 block to financial scrutiny of the spendings on the flagging gas fields and a performance audit, if any, would be done of the Oil Ministry, a senior government official said today.

"CAG had a few days back given to us in writing that the audit of Block KG-DWN-98/3 (KG-D6) will be strictly as per Section 1.9 of the Accounting Procedure to the Production Sharing Contract," the official, who wished not to be identified, told reporters here.

The PSC provides for a financial audit -- checking of the contractor's accounts in order to verify the charges and credits, but not a performance audit that scrutinises efficacies of processes or technology used in the complex deep sea operations.


"CAG has agreed for a financial audit (of RIL's KG-D6 spendings) and a performance audit if it has to be conducted, will be done of the Petroleum Ministry and/or the Directorate General of Hydrocarbons (DGH)," the official said.

RIL will provide any documents needed in doing such an audit, he added.
Sources however maintained that the CAG statement did not mean an end to the stalemate between the official auditor and RIL.

The company, to be begin with, may refuse to provide documents related to the tendering process it followed for buying equipments or in selection of service providers, something which is unlikely to be acceptable to CAG, they said.

The auditor may want to examine whether government's profit take from KG-D6 and its subsidy output on power and fertiliser increased on account of use of imported LNG due to KG-D6 output of just 23 million standard cubic meters per day not matching the projected profile of 80 mmscmd.

CAG had in its first round of KG-D6 audit begun on the premise of doing a financial audit but the report tabled in Parliament last year stated that the auditor had conducted a performance audit.

In May, it agreed to do a second round of audit for years 2008-09 to 2011-12 but that hasn't started due to differences over scope.

Sources said CAG may even this time around do a performance audit of KG-D6, where gas output has lagged targets mentioned while getting spending approvals, as it feels its constitutional mandate is bigger than any agreement that the oil ministry may have with a contractor.

Meanwhile, Oil Minister M Veerappa Moily told Rajya Sabha that CAG has stated that since full access to KG-D6 records is pending, the ministry should "examine all relevant issues closely and carefully before considering the desirability of any further approvals of capital expenditure".

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