RIL agrees to financial audit by CAG

However, the company has questioned a 'performance audit' as there is no scope of such a scrutiny as per the contract

Reliance Industries has agreed to the Comptroller and Auditor General of India (CAG) doing a 'financial audit' of its spending on the flagging KG-D6 gas block and is ready to provide all supporting documents.

But the company has questioned the official auditor CAG conducting a 'performance audit' as there is no scope of such a scrutiny under the Production Sharing Contract (PSC) it had signed with the government for the eastern offshore KG-D6 block, sources privy to the development said.

In response to a CAG notice for a entry or kick-off conference to begin performance audit for 2009-10 to 2011-12, RIL last month wrote to the Oil Ministry saying it would welcome CAG doing the financial audit which otherwise was done by private chartered accountants appointed by the government.Q

However, there is no scope for a performance audit as per PSC, it told the government.

Sources said RIL stated that it would provide any document required to support a CAG's performance audit of the ministry.

While a regular or financial audit scrutinises spendings and reports on usage of funds, a performance audit examines the economy, efficiency and effectiveness of fund usage.

The Oil Ministry last month stated that it had not approved RIL's operating and other investment in KG-D6 block for past two years because the Mumbai Ambani-run firm had denied CAG access to its books.

CAG, which is carrying out audit of spending on KG-D6 block from 2009-10 to 2011-12, had "recommended withholding of sanction for annual work plans and budgets if access to records is denied to CAG," the ministry had said in a statement on July 17.

CAG had submitted audit of KG-D6 for 2006-07 to 2008-09 to the Parliament in September last year but it not say if it had found evidence of KG-D6 field cost being artificially inflated or any dishonesty in developing the country's largest gas fields.

Against the backdrop of oil ministry stand on CAG audit, the KG-D6 block Management Committee (MC), headed by the Directorate General of Hydrocarbons (DGH), is to meet tomorrow to consider clearing annual investment plans for KG-D6 block of RIL that have been pending for past two years.

The MC is also to consider declaring three significant gas finds commercially viable, sources said.

RIL has been for some months now pressing for convening a meeting of the MC, where the oil ministry has significant presence, to get clearance for several pending investments that can help reverse the declining gas production at KG-D6.