The national auditor or CAG has objected to the oil ministry for agreeing to Reliance Industries Limited's (RIL) conditions to restrict a scrutiny of its accounts in connection with gas extraction from the Krishna-Godavari D6 basin.
The conditions included the fact that RIL wanted the CAG audit of the KG-D6 basin to be kept within the oil ministry and not made public and tabled in Parliament, as is the procedure. RIL also said that the audit should be carried out in its own premises and that it would give no other documents apart from those prescribed in the KG-D6 contract. The ministry is understood to have told the firm that it must provide full access to its books. RIL had also wanted an assurance from the oil ministry that no "exceptional" procedure be inserted in the CAG audit.
The Comptroller and Auditor General today wrote to the oil ministry asking why it had agreed to RIL's restriction. The CAG also said that it always summon relevant documents and papers from the oil ministry as well as the operator. It also said that the final audit report will be presented to Parliament, which is mandated by law.
A meeting between the CAG and officials of RIL was cancelled yesterday by the oil ministry. The CAG in a note had clarified that it had neither asked for nor cancelled the meeting. The note also said that though the CAG doesn't audit private concerns, it will evaluate the performance of the oil ministry in connection with RIL's contract, which is said automatically comes under review.
"This provision of CAG's (DPC) Act gives CAG the unfettered right of access to all records required for such audit and would override any conditions sought to be imposed on our audit process," the note said.
Reliance and its contractual terms for extracting and selling gas from the KG-D6 to the government were put under public scrutiny earlier this week by activist-politician Arvind Kejriwal, who alleged that both the Congress and BJP had helped RIL make extra money from it. Mr Kejriwal also said that the previous minister, Jaipal Reddy, was removed because he was not allowing RIL to bend the contract to its benefit. RIL denied the allegations.
The D6 block in Andhra Pradesh's Krishna Godavari basin was expected to contribute up to a quarter of the gas supply for Asia's third-largest economy, but its unforeseen decline in output has left India more dependent on expensive liquefied natural gas (LNG) imports. Canadian Niko has a 10 percent stake in the D6 block while Reliance and British Petroleum (BP), the operators, have 60 percent and 30 percent share respectively.
Output at the D1 and D3 fields in the KG D6 block has dropped to 26 million standard cubic metres a day (mscmd) from 60 mmscmd in 2010 and is now projected to fall to 20 mmscmd in 2014/15, never having reached the forecast peak flow of 80 mmscmd.
The CAG had last year criticised the government as well as Reliance over development of the KG gas field, which has been beset by arguments over spending and strategy for its complex geology.
(with Reuters inputs)