RIL set to seek more K-G gas as government limits CAG role

Reliance Industries Ltd may finally begin further exploration in its flagging Krishna-Godavari D6 gas field, as the government has eventually given in to its condition that the Comptroller & Auditor General of India cannot do a performance audit of the company, but only a financial audit.

The petroleum & natural gas ministry on Wednesday wrote to RIL saying that all the government nominees on the KG-D6 block oversight committee have "already approved" all the development proposals made by RIL.

It also agreed to the RIL stand that an audit by the CAG of its spending on KG-D6 block has to be a financial audit and not a performance audit. "The proposed audit would be under Section 1.9 of the accounting procedure of the production sharing contract(PSC), and not a performance audit of the operator (RIL)," the ministry wrote.

At the same time, the ministry also wrote to the principal director of audit (economic and service ministries) of the CAG stating that "subject to certain conditions, RIL has agreed for an audit under Sector 1.9 of the accounting procedure to the PSC by CAG and to cooperate with such audit without prejudice to any of their rights and contentions".

The petroleum ministry had been withholding approval of RIL's investment plans, saying the company must first agree to the CAG doing a second round of audit of KG-D6 field for the 2008-09-2011-12 period.

Reliance, hurt by the CAG's first audit wherein it indicated that the company had inflated exploration and production costs in order to reduce the government's share of sales profits, was adamant that the government auditor was not the right person to check the books of a private company.