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CAG wants govt to force
January, 21st 2010

The Comptroller & Auditor General of India, countrys statutory auditor, has sought government intervention to access financial records of Cairn India-operated Rajasthan oil fields. It has not yet received records of Cairns Barmer oil fields (RJ-ON-90 /1) for auditing, a senior CAG official said.

The government had asked CAG to look into accounts of all energy firms producing oil and gas in the country last year after Anil Ambani-led RNRLalleged that Reliance Industries (RIL) was inflating capital expenditure on KG-D 6 to make unjustified profits.

Cairn India has contested that such an audit by CAG.

Under the production-sharing contract (PSC), audits of expenditure on the Rajasthan block RJ-ON-90 /1 are already undertaken by the government of India and the director general hydrocarbons (DGH).

Audit by the CAG is not within the purview of the PSC, a official of the company said. Replying to Cairns contention, a CAG official said that it was unfortunate that oil companies were treating the office of CAG as a "toothless" body.

It is true that the CAG doesnt have powers to take action against these companies (for not providing their books and records). But, as a constitutional functionary, it is empowered to prepare a report and table the same in Parliament, he added, requesting anonymity.

DGH director general SK Srivastava didnt respond to an email query ET sent to his office. DGH, a technical arm of the oil ministry, is the custodian of countrys oil and gas assets and is responsible for providing records to CAG. DGH has also failed in providing full records of Reliance Industriesoperated KG-D 6 block and Panna-Mukta-Tapti (PMT) fields operated by a consortium of BG, ONGC and RIL.

Genuine and independent audit of expenditures is important as operators could inflate capex to maximise gains. Under the new exploration licensing policy, the production-sharing contract signed between the government and the operator of the field allows the latter to first recover its capital investments of developing a field by selling oil and gas produced from it. After the entire cost is recovered, balance produce of the field is shared between the government and the contractor in an agreed ratio.

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