Petroleum Ministry will take a very serious view of the breach of trust, says an official

The Petroleum and Natural Gas Ministry and Reliance Industries Limited (RIL) are heading for a confrontation over the issue of the Comptroller and Auditor General (CAG) carrying out a performance audit of the KG-D6 gas blocks from 2008-09 to 2011-12. A showdown looms large with RIL objecting to the jurisdiction of CAG and putting up conditions for undertaking such an exercise.

In July this year, senior representatives of RIL and its partner BP met the Petroleum and Natural Gas Minister Jaipal Reddy. Following the meeting, RIL had agreed to allow a CAG audit. The government had warned the RIL-BP combine that if it did not co-operate with the CAG, it could lead to non-approval of its budgets and delay in clearances for its various other oil and gas assets. The warning had come after CAG officially complained to the Petroleum Ministry that RIL was not co-operating in providing its account books and access to SAP system.

The Ministry had recommended withholding of sanction for annual work plans and budgets if access to records was denied to CAG. CAG had submitted its audit report of KG-D6 from 2006-07 to 2008-09 to Parliament in September last year.

RILs denial of access to records was adversely commented upon in the previous audit.

Following this, RIL had relented and agreed to an audit by CAG. It had also agreed to submit all records and provide access to all information.

However, on September 18, RIL again wrote to the Joint Secretary (Exploration) A. Giridhar stating that CAG had no jurisdiction to audit assets. However, it said it was ready to co-operate with the government if the Petroleum Ministry and the CAG confirmed that the audit report would be submitted by CAG to the Petroleum Ministry and not to Parliament; all information submitted by the contractor (RIL-BP) during the course of the audit would be kept and considered confidential and not disclosed to third party; and CAG would be a ‘representative’ of Petroleum Ministry and the contractor would be ‘auditee’ of CAG.

The letter by RIL stated that “as you are aware, we agreed to a CAG audit in 2009 strictly as “one-time exception” despite the fact that the audit exercise proposed by CAG did not comply with the provisions of the CAG Act.”

The U-turn by RIL-BP combine has taken the Petroleum Ministry officials by surprise as it had granted conditional approval for KG-D6 assets for the capital expenditure for three years beginning April 1, 2010, on the condition of CAG being provided full access to all records by the RIL-BP combine.

“We are formulating a response to the issues raised by RIL in its letter, and the Petroleum Ministry will take a very serious view of the breach of trust. RIL will have to provide access to CAG of all its records and SAP system if it wants further approvals for its other projects and budgets in future. We will soon send our response to this matter,” a senior Petroleum Ministry official said.

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