Even as senior executives of Reliance Industries Limited (RIL) complained to the Public Accounts Committee (PAC) that they were not given an opportunity by the Comptroller and Auditor General (CAG) to share their views while the KG-D6 report was prepared, the company has assured parliamentarians it was willing to surrender 25 per cent of the area explored in the block.
RIL executive director P M S Prasad, along with other executives, represented the company in the meeting with PAC members. Members of the PAC have also asked RIL executives to submit the details on profit-sharing and the exchange of letters between the company and the government at the time of the contract.
The CAG, in its report on the functioning of hydrocarbon production-sharing contracts tabled in Parliament in September, had said RIL was allowed to enter the second and third exploration phases without relinquishing 25 per cent each of the total contract area at the end of phases I and II in June 2004 and 2005, respectively, against Articles 4.1 and 4.2 of the production-sharing contract by treating the entire contract area as a discovery area. Subsequently, in February 2009, the government also conveyed its approval to treat the entire contract area of 7,645 sq km as a discovery area, enabling the operator to completely avoid relinquishment of the area.
“PAC will give full opportunity to RIL executives to hear their arguments. It is not that the issue is so technical that we would not understand it. There are former ministers in the committee and some ‘future ministers’ are also part of the PAC. So, it is not that we would not understand this subject,” PAC chairman Murli Manohar Joshi said, while listening to concerns raised by the company’s executives.
At the meeting, RIL members gave a detailed presentation of the project. While raising questions on the escalation in the project’s cost, PAC members asked RIL executives to submit a detailed comparative study on the technology used for exploration, the reasons for the escalation in costs and whether similar escalation was seen in projects around the world in which similar technologies were used for exploration.
“The report that would be submitted by RIL executives would have to be crosschecked with other channels. We would also give the CAG a chance to explain its point of view on the findings. The executives maintained increasing costs didn’t benefit the contract,” said a senior PAC member, on the condition of anonymity.
CAG had charged the petroleum ministry and the country's largest company, RIL, for violations in the production-sharing contract governing Reliance’s crown jewel, the KG-D6 block. The government auditor had recommended revisiting the profit-sharing formula. It accused RIL of hoarding the exploration acreage.
CAG had also said RIL’s opinion that petroleum existed in the entire contract area was baseless, and the Director General of Hydrocarbons should have forced the contractor to relinquish the stipulated area. It had recommended that the petroleum ministry review the determination of the entire contract area of the KG block, while strictly complying with the production-sharing contract. RIL, however, defended itself saying as a contractor, it remained “committed to complying with the provisions and procedures in the production-sharing agreement, including adopting good international petroleum industry practices".
