It has been insisting that the audit of KG-DWN-98/3 block not be made public

Emboldened by the stagnation in the arbitration proceedings, the Mukesh Ambani-owned Reliance Industries Limited (RIL) has once again stalled the audit of KG-DWN-98/3 block by Comptroller and Auditor General (CAG) by refusing to furnish records, financial accounts and SAP access for the KG D6 block for the 2008-12 period on various grounds.

It is learnt that RIL has also shot off a letter to the Petroleum and Natural Gas Ministry seeking its intervention in the matter, in a bid to wriggle itself out of the audit. RIL has been insisting that the audit should not be made public and must not be placed before Parliament, a demand that has been outrightly rejected by CAG.

RIL not cooperating

Principal Director of Audit (Economic and Service Ministries) A.M. Bajaj has written to the Joint Secretary (Exploration) A. Giridhar that RIL had not been cooperating in the audit exercise and had withheld records and financial statements sought by the CAG audit team that held a conference with RIL representatives in Navi Mumbai on January 9. “We had intimated to the Petroleum Ministry about the status of the audit of Block KG-DWN-98/3 and the fact that the operator (RIL) had raised certain issues regarding the scope, extent and manner of audit,” the January 28 letter states.

Further, CAG has stated that the office of Principal Director of Audit had clarified these issues to RIL through on January 17 and requested them to provide the audit team with documents. “The operator has, however, stated through another letter on January 24 that they have raised these issues with the Petroleum and Natural Gas Ministry. They also stated that till such issues are resolved, they would hold back on responding to the audit requisitions,” it stated.

At the meeting with RIL representatives on January 9 — minutes of which were accessed by The Hindu — CAG had stated that this audit would not be a performance audit on the contractor (RIL). It, however, pointed out that there is a difference between a performance and a proprietary audit as a proprietary audit was a duty of the auditor. CAG said it understood Section 1.9.3 to involve contracts relating to procurement and the procurement procedures and clarified that it would not be requesting for any decision taken in the technical realm but would be concerned only with the financial parts of such contracts.

“The main aim of the audit is to verify that there has not been any adverse effect on the cost recovery factor and the investment multiple, arising out of any specific non-compliance of PSC. CAG maintains that while it carries out the audit of the contractor under Section 1.9 of the Accounting Procedure, a performance audit of the Ministry of Petroleum will also be conducted simultaneously,’’ the CAG audit team stated.

Similarly, in a separate communication to RIL’s president and COO (Business) B. Ganguly, CAG had stated that as regards the matter relating to CAG being appointed a representative of the Central government under Section 1.9.2 of the Accounting Procedure to the production sharing contract (PSC) and whether CAG would treat RIL as its auditee, it was explained on January 9 and “we reiterate that the audit would be conducted under the PSC provisions, including Section 1.9 of the Accounting Procedures of the PSC.”

“Regarding the reaudit of the previous years, the audit will be only for the years 2008-09 to 2011-12 and the request for the records of previous years will be for reference purpose and will not be meant for reaudit,” the January 17 letter states.

  An e-mail sent to RIL seeking the comments of the company on the issue remained unanswered.

This story has been edited to delete an unattributed description of RIL's objections to the CAG audit as "frivolous."

More In: Companies | Business