The Comptroller and Auditor General (CAG) has agreed to resume the audit of Reliance Industries Limited’s (RIL) KG D6 block following assurances given by the Petroleum and Natural Gas Ministry that the audit team will have full access to all records, documents and accounts as provided under Article 25 of the Production Sharing Contract (PSC).

In a letter to the Joint Secretary (Exploration), A. Giridhar, Principal Director of Audit Economic and Services Ministries A.M. Bajaj has conveyed that in view of the Petroleum Ministry’s confirmation regarding full access to all records and also that the audit would examine the propriety of expenditure vis-à-vis the provisions of PSC, it has been decided to resume the audit at the operator’s premises.

“I would, therefore, request that the Ministry may advise the operator appropriately,” Mr. Bajaj said in the note. The audit would be undertaken as per section 20(1) of CAG DPC Act 1971 with the scope, extent and manner as specified in Article 25 and Appendix C of the PSC.

Referring to the issue of propriety audit, Mr. Giridhar, in his communication to the CAG, had stated: “We are in agreement with CAG that the audit will examine the propriety of expenditure vis-à-vis the provisions of PSC, and this has already been conveyed to the contractor very clearly.”

Audit rights

On the issue of enforcement of audit rights of the Government of India in terms of the PSC, Mr. Giridhar said that the that CAG had taken up the audit as a representative of the government to ensure that government revenues were protected. “This position is also evident from the fact that report relating to the findings in the audit is to be submitted to the government for issue of audit exception to the auditee i.e. contractor,” the Joint Secretary (Exploration) added.

“CAG could also be informed that since the request for audit is given by the government, the report need not be submitted by CAG to the contractor, and he is not accountable in any fashion to the contractor,” the note by Mr. Giridhar states.

The audit had hit a roadblock last year after RIL refused to accept the “exceptional circumstances” argument advanced by the Petroleum and Natural Gas Ministry for the performance audit and sought an assurance that it would be kept completely confidential and done under the PSC provisions. It has also sought an assurance that the audit would not adversely affect its economic interests.

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