In the wake of the performance audit report of the Comptroller and Auditor-General on Hydrocarbon Production Sharing Contracts for on-shore and off-shore blocks, the Communist Party of India (Marxist) on Saturday said the nexus between policy-makers and big businesses was exposed and demanded that action be taken against Reliance Industries Limited.

Besides taking back 95 per cent of exploration area for oil and gas being retained “illegally” by the company in gross violation of the production sharing contract, penalties should be imposed on the company for “gold-plating” contracts and cornering almost the entire share of the profit from petroleum, the party said in a statement. It also wanted a review of the New Exploration Licensing Policy.

The party said the audit of KG-6 deepwater block operated by the Reliance Industries revealed malpractices — including inflation of capital costs to claim higher share of profit for petroleum; awarding procurement contracts to others without competitive bidding; retaining the entire 7,654 exploration area — causing substantial losses to the government.

According to the report, there was a 117 per cent increase in estimated capital expenditure for the block — from $2.4 billion to $5.5 billion — for Phase I itself, where no augmentation of capacity was involved. In huge procurement contracts, awards were made by RIL “on single financial bids, major revision of scope/quantities/specifications, post-price bid opening, substantial variation in order quantities, with consequential adverse implications for cost recovery and GOI's [Government of India's] financial stake.”

In one instance of a single party financial bid, a contract of $1.1 billion was given to the Aker group for a 10-year lease against an estimated original cost of $300 million. RIL gave eight such contracts to the Aker group out of 10 single party bids, on what appeared prima facie to be sweet-heart deals that enabled it to inflate capital expenditure, the statement said.

It demanded the immediate prosecution of the former Director-General of Hydrocarbons, V.K. Sibal, and other officials involved as well as a probe into the role played by the Petroleum Ministry.

The government should bring in major modifications into the hydrocarbon sharing contracts to prevent such misuse, the party said.

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