Mandating the Comptroller and Auditor General (CAG) to carry out audit of Mukesh Ambani owned Reliance Industries Limited (RIL) KG-D6, Anil Aggarwal-owned Cairn India Rajasthan block and Panna-Mukta-Tapti (PMT) block from 2009-10 to 2011-12; the Petroleum Ministry has rejected objections by RIL that CAG had no powers to carry out such an exercise.

The Principal Director of Audit, Economic and Service Ministries (PDA, ESM) will carry out the audit to cover the financial years 2009-10 and 2011-12 along with financial years 2006-07 and 2008-09 in respect of PMT production sharing contracts (PSCs) and 2008-09 relating to KG-DWN-98/3 and RJ-On-90/1 PSCs.

Following this, the Petroleum Ministry and the Directorate General of Hydrocarbons (DGH) have advised the operators concerned regarding the present audit and asked them to provide CAG with documents requisitioned by them and also allow access to CAG to their SAP system. The DGH has also nominated some nodal officers who would be coordinating the entire exercise with the CAG team. The CAG has already held an entry conference for audit of the four blocks – KG-DWN-98/3 and RJ-On-90/1 for 2008-09 and PMT for 2006-07 to 2008-09 on May 11 this year. The CAG team has asked the Petroleum Ministry that as the audit of KG D6 would be taken up initially and in this connection, the records pertaining to this block be kept ready for examination of the audit party.

Further, the Petroleum Ministry has rejected the contention by RIL that as per section 1.9 of the accounting procedure, the Government was not entitled to conduct audit of the contractor’s accounts and records for the 2008-09 and 2009-10, either through CAG as its representative or a firm of chartered accountants.

However, the Government has stated that as per 25.5 of the PSC and as per section 1.9 of accounting procedure of the PSC, the government has the right to audit records of the contractors in relation of petroleum operations. Further, as per section 1.9.1 of accounting procedures of PSC, the government has the right to inspect an audit of all records and documents supporting costs, expenditures, expenses, receipts and income, such as the contractor’s accounts, books, records, invoices, cash vouchers, debit notes, price lists or similar documentation with respect to petroleum operations conducted hereunder in each year, with two years (or such longer period as may be required in exceptional circumstances) from the end of such financial year.