CAG to probe propriety of RIL spending on KG-D6

As CAG gets ready to resume audit of Reliance Industries’ spending on KG-D6 gas block, the Oil Ministry has set rules of engagement for the scrutiny saying the auditor will examine propriety of expenses as has been set out in the Production Sharing Contract (PSC).

The Comptroller & Auditor General of India (CAG), which in January-end suspended audit of spending on the flagging KG-D6 block following differences with RIL over scope and extend of scrutiny, is likely to resume the audit next week after contentious issues were resolved.

Official sources said the ministry and CAG are in agreement that the there will be no performance audit of RIL. RIL too had been stressing that the official auditor cannot do a performance audit of a private firm and that the PSC provides for only a financial scrutiny.

The ministry, they said, this week wrote to RIL restating this position and asked the company to cooperate and provide full and complete access to records and documents.

The audit, it wrote, would examine propriety of expenditure vis-a-vis the provision of PSC, with full access to records.

This follows intense negotiations between RIL, CAG and the Oil Ministry over the past two months that finally resulted in an agreement this week. Oil Secretary Vivek Rae had on Wednesday stated that all issues have been resolved and CAG is set to resume audit.

CAG had on March 12 written to Oil Ministry that its “audit (of KG-D6) would be the financial and propriety audit” and that the purpose of its scrutiny was to ensure that “the government’s financial interests have been safeguarded”.

Sources said the ministry wrote to RIL that CAG has confirmed that the audit of KG-D6 for 2008-09 to 2011-12 under Section 20 of the C&AG (DPC) Act, 1971 with the scope, extent and manner as specified in Article 25 and Appendix C of the PSC. These provisions of PSC provide for a government-appointed auditor inspecting and auditing all records and documents supporting costs, expenditures, expenses, receipts and income.

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