Reliance Industries agrees to KG-D6 audit by CAG; raises hopes of quicker approvals of more fields
Reliance Industries and the oil ministry have narrowed their differences over auditing of the controversial KG-D6 block and pricing of natural gas.
The company has also agreed to cooperate in the audit even if the exercise is conducted after a lapse of two years. RIL had earlier argued that the contract allows an audit only within two years of the period being scrutinised, sources said.
Government officials said the contract allows audit in exceptional circumstances even if two years have lapsed.
Reliance executives have also told the oil ministry that the company will not pursue the demand to raise natural gas prices before 2014.
RIL READY TO COOPERATE
This, in effect, removes two major hurdles that had soured the relationship between the country's biggest private oil explorer and the petroleum ministry for more than a year, sources said.
Top RIL executives met Oil Minister Veerappa Moily last week to broadly discuss various pending issues. "Things are moving forward cordially. They discussed gas pricing, delay in approvals and the audit by the Comptroller & Auditor General. RIL is willing to cooperate. We expect all issues to be resolved amicably," said an oil ministry official present at the meeting.
Spokesmen of the oil ministry and Reliance did not respond to ET's queries. Auditing of Reliance's KG-D6 block has been under the spotlight since CAG said in a stinging report in September last year that the oil ministry had been lax in enforcing contracts with oil explorers such as RIL, Cairn India and BG India.
Subsequently, Reliance said it did not dispute a CAG audit but the contract with the government provided for only a financial audit, not a performance audit. The company also cited the contract that allowed a second audit only within two years after the closing of any financial year.
RIL argued that it had adopted internationally accepted practices of the oil & gas industry. It had told the ministry that in a financial audit, as per its contract, the company was required to submit the field's accounts to the ministry, not CAG, and the audit report should not be placed in Parliament.
The ministry has now told RIL that the state's share of the gas field's profit was a non-tax revenue of the government and, therefore, subject to CAG scrutiny. "CAG can conduct both financial and performance audits of the oil ministry, which is the owner of the D6 oil & gas fields, and the contractor cannot avoid its scrutiny," an official with direct knowledge of the matter said.
Earlier, the oil ministry had issued a letter to CAG spelling out RIL's conditions for an audit, which was strongly contested by the auditor.
The oil ministry has also closed the chapter of gas price revision before 2014. "Whenever a new minister takes over, all draft notes and pending policy matters are reviewed afresh. All draft Cabinet notes and draft EGoM notes are automatically withdrawn," another oil ministry official said, requesting anonymity.
"The ministry clarified on November 1 through a press note that the government has taken a consistent stand from 2010 onwards that gas price revision can not take place earlier than 2014," the official added.