CAG to begin KG-D6 audit next month

India planning insurance for refineries using Iran oil
Last Updated 24 March 2013, 17:36 IST

The government will ensure all support to the Comptroller and Auditor General of India, who is likely to begin afresh the audit of Reliance Industries’ spending on KG-D6 gas block early next month.

The CAG had suspended the audit last month after differences with RIL came to the fore on the issue of performance audit by the government auditor on RIL-operated KD-D6 block.

 RIL maintains that the CAG cannot go in for a performance audit as the Production Sharing Contract only provides for a government appointed auditor to verify reasonableness of all charges and credits.

A performance audit includes all the technical aspects, reservoir management and also procurement.

 "We are making all efforts to see that CAG is able to do its duty... there have been some differences but they are being resolved and I am hopeful CAG will be able to resume audit by early next month," Petroleum Secretary Vivek Rae said.

 He, however, said that the CAG has stated that it will not resort to any performance audit by the company and will only restrict itself to examining propriety of spendings to ensure that government’s financial interests have been safeguarded. 

Rae said that he has had two rounds of meetings with CAG to resolve the issues involving audit of the flagging KG-D6 block.

“CAG has to audit KG-D6 spendings and whatever records are sought will have to made available.” Rae also informed that India is planning to set up a special fund to provide insurance to oil refineries after European Union’s sanctions blocked European re-insurers to cover refineries that process oil imported from Iran.

 The insurance cover of many of the refineries which import oil from Iran, is coming to an end in the next few months. For example, the Mangalore Refinery & Petrochemicals Ltd’s insurance cover will lapse in May.

At present, Indian general insurers provide cover to oil refiners and then re-insure the risk with global re-insurers. But under US and EU sanctions, the global insurers provide re-insurance with "sanction clause", which limit the amount to be paid in case a claim arises.

But, Petroleum Minister Veerappa Moily said he was hopeful that there would be no stoppage of oil supply to India until it finds a solution. India is expected to reduce Iranian crude purchase to less than 13 million tonne this year from a little over 18 million tonne now.

(Published 24 March 2013, 17:36 IST)

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