CAG blasts government for mishandling gas contract with RIL

Twin reports from the Comptroller & Auditor General of India tabled in Parliament today - the last day of the monsoon sitting - are likely to supply fresh ammunition for the guns of the opposition.

One report accuses the civil aviation ministry of thoroughly mismanaging the affairs of troubled 'national carrier' Air India, (See: CAG blames aviation ministry for Air India mess) while the other indicts the petroleum & natural gas ministry and its regulatory arm, the Directorate General of Hydrocarbons (DGH), for allowing Reliance Industries Ltd to violate the terms of its contract for producing and selling natural gas from the offshore Krishna-Godavari Basin fields. 

The report calls for an immediate review of the production-sharing contract (PSC) and profit-sharing mechanism currently used by the Oil Ministry and private operators.

The CAG in its report has asked the Oil Ministry to review decision to allow Reliance Industries to retain entire KG-D6 block. It has also called for an in-depth review of 10 contracts, including eight awarded to the Aker Group by RIL for developing the KG-D6 finds.

The CAG says the DGH is ill-equipped to oversee production-sharing contracts.

In Reliance's case, the report says that the government and Reliance both ignored the PSC, allowing the company to hoard exploitation acreage. Under the contract, RIL should have surrendered 25 per cent of the total area outside its discovery area. Instead, the entire block was treated by the regulator as a discovery area, so it remained with RIL.