Oil Ministry for CAG doing financial audit of RIL's KG-D6: report

The Oil Ministry seems to have suggested to the Conptroller and Auditor General of India (CAG) that its audit of Reliance Industries (RIL) spending on the flagging KG-D6 gas block should be a financial scrutiny and not a performance audit.

With CAG suspending KG-D6 audit following differences with RIL over the audit scope and extent, the Oil Ministry is believed to have this week written to the official auditor explaining the scope, extent and manner of audit it wants.

Sources said the Ministry wrote that the CAG was being requested to undertake the audit of KG-D6 block of RIL for 2008-09 to 2011-12 under Section 20 of the C&AG (DPC) Act, 1971.

According to the Ministry, the scope, extend and manner of the audit will be as spelt out in Article 25.5 and 25.6, read with Appendix C of the production sharing contract (PSC) that RIL had signed with the government for exploring and producing oil and gas from KG-D6 block.

These provisions of the PSC provide for a government appointed auditor inspecting and auditing all records and documents supporting costs, expenditures, expenses, receipts and income.

It calls for verifying reasonableness of all charges and credits, which constitutes a pure financial audit.

The CAG, on the other hand, is seeking to carry out a performance audit that allows the examination of the economy, efficiency and effectiveness achieved in the use of government resources.

Reliance has been insisting that the CAG can only do a financial audit and not a performance audit and had refused to share some documents sought by the auditor to begin the scrutiny in January, following which the CAG suspended the audit, sources said.

The Ministry, which had given written commitment to RIL that the audit will strictly be in accordance with the contractual provisions, is now sorting out the matter, they said.

Sources said the Ministry did not explain the significance of it quoting Section 20 of the C&AG (DPC) Act of 1971 as well as Article 25.5 and Article 25.6 and the Appendix C of the PSC.

Section 20 deals with audit of accounts of entities that have not been entrusted to CAG by the law. The terms and conditions of audit of such entities are to be settled between the government and the CAG, the Section states.

RIL too had been stating in its submissions that a private company like it can be audited by the CAG only under Section 20 and the Ministry can make the CAG its nominee to carry out audit the contractor's accounts in order to verify the charges and credits.

Sources said the Ministry has asked the CAG to revert back if its proposition was acceptable to it so as to enable the audit process to move forward.