CAG refuses to keep audit of RIL’s D6 gas block secret

The reason why the scheduled meeting between the Comptroller & Auditor General of India, Reliance Industries Ltd and the petroleum ministry to kick off CAG's audit of the Krishna-Godavari gas fields was put off, was apparently due to sharp differences having re-emerged between the CAG and RIL over the scope of the audit.

According to a report in The Indian Express, RIL had set two conditions: the audit should maintain the confidentiality agreement between it and the government; and the scope of the audit should be restricted to accounting procedures of the production sharing contract with the government.

The CAG has refused to accept these conditions. In a letter to the petroleum ministry, it has pointed out that all its audit reports have to be tabled in Parliament, and hence cannot remain confidential. It has also said that the term 'procedure' is subject to interpretation and will be much wider than envisaged by the company. The Indian Express cited unnamed sources to say that critical issues like capital investments made by RIL could also come under inspection.

This is why the petroleum ministry, under new minister Veerappa Moily, deferred the 'entry conference' which was scheduled for Wednesday. (See: Oil ministry defers CAG audit meet on RIL's KG-D6 block)

Last week, the ministry, under then minister Jaipal Reddy, agreed to allow RIL to invest more in the KG D6 fields to ramp up production which has slumped to around 27 mmscmd from an expected 68 mmscmd. But the permission hinged on RIL accepting the CAG audit of its fields for 2008-09 to 2011-12.

Earlier, the ministry had assured RIL that the audit would not expand into a performance audit, and had also advised the CAG in this regard.

An earlier audit by CAG of the D6 fields in the K-G basin had indicated that RIL had inflated exploration and production costs in order to reduce the government's share of the sales proceeds. This had raised the hackles of RIL, which since then is chary of the CAG.