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We could not audit
August, 12th 2009

In what could turn out to be an embarrassment for the Petroleum Ministry, the office of the Comptroller and Auditor-General has stated that the recent claim of the Director-General of Hydrocarbons (DGH) that Rs. 45,000-crore capex of Reliance Industries Limited (RIL) on the KG DWN 98/3 had undergone three audits, including that of the CAG, was not true to facts.

In a letter written to the DGH, V.K. Sibal, A.K. Chirvi, Deputy Director in the office of the Principal Director of Audit Economic and Service Ministries, has stated: This is with reference to your message on the DGH website relating to the D6 gas field in the KG Basin wherein it has been stated that The PSC [production sharing contract] also requires auditing of the exploration and development expenditure by internal as well as government appointed auditors. Even the whole process of expenditure starting from Management Committee review/approval of work programme and budget to purchase and procurement of materials and equipments are amenable to CAG audit.

The CAG team has carried out the audit work and also that in the opinion of the experts, the development plan is highly cost effective and fast track. A CAG audit has been recently completed. We have also seen some newspaper reports wherein it has been stated that the Rs. 45,000-crore capex by RIl on the KG DWN 98/3 field has undergone three audits including one by the CAG.

Further, Mr. Chirvi has written: That while we unable to ascertain the veracity of the newspaper reports, I am also directed to state that any claim that such capital expenditure has been audited by CAG would not be true to facts. While we have, indeed, scrutinised records in the Ministry of Petroleum and Natural Gas as well as your office relating to the right blocks (including KG DWN 98/3) for which a special was requested by the Ministry in November 2007, we have been unable to get access to the records of the private operators.

This problem originally arose in the case of audit of the Panna Mukta and Tapti blocks. Such access is necessary in order to ascertain the extent of compliance by contractors with terms and conditions of the PSCs and also for audit assurance regarding royalty and profit petroleum, which involve substantial government stake. Since the Ministry made the request for special audit, it is its responsibility to ensure free and unfettered access by audit to all documents.

Further, he has written that the issue of lack of access to private operators records was first taken up by us with the Petroleum Secretary in September 2008, followed by repeated reminders and personal interaction at various levels, as well as a meeting on April 24, 209 with representatives of the operators.

The Petroleum Ministry has called for another meeting with the operators of Panna, Mukta and Tapti on August 17 on the issue of our access to private operators records and the CAG office has also been asked to attend the meeting. Till access to these records is available, our audit of these eight blocks (including not just Panna Mukta and Tapti, but also MG DWN 98/3) will remain incomplete, the letter concludes.

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