Oil Ministry Postpones CAG

The Oil Ministry has postponed a kick-off meeting scheduled for CAG to begin audit of Reliance Industries' KG-D6 spending, even as it continues to withhold approvals to the company's investment proposals.

The Comptroller and Auditor General of India (CAG) had called an Entry Conference with RIL and the Oil Ministry on Tuesday to begin its second round of audit that is to cover RIL's spending on KG-D6 gas fields during 2008-09 to 2011-12.

But the ministry on October 29 wrote letters calling off the October 31 meeting, sources privy to the development said.

The meeting, they said, was called-off due to differences over the nature and scope of audit to be conducted by CAG. 

RIL has sought written assurance that CAG scrutiny would be an "audit of accounting books and records" as provided under the Production Sharing Contract (PSC) and that the company would not be "required to provide documents, information or any clarification of matters which go beyond scope of audit under Section 1.9 of the Accounting Procedure of the PSC."

Also, it wants the audit to be carried at its premises and audit report be submitted to the Oil Ministry, as provided under PSC, and not to the Parliament.

The Ministry, however, wants RIL to give CAG "unfettered access to account books" and pending that it has not approved the company's investment proposals including annual budget for past three years.

Sources said the kick-off meeting was postponed so as to resolve these differences.

The Ministry had on October 23 written to RIL saying CAG would not do a performance audit of the company and that "all the government nominees" on the KG-D6 block oversight panel have "already approved" to all the development proposals made by RIL.

Sources, however, said the resolution approving annual capital expenditure on the KG-D6 block for 2010-11, 2011-12 and 2012-13 fiscal have not been signed yet.

While the Management Committee of KG-D6 block on August 7 approved annual plans pending for past three years, the resolution had not been signed. These capex included those on well interventions to reverse the trend of falling gas output.

Pending signing is the MC approved revised field development plan for MA oil and gas field in the same block. All these investments, RIL says, are necessary to reverse drop in output at the fields.

Also, at least three discoveries RIL has made in the block had not been declared commercial, a step necessary to begin production from them.