'CAG will confine to financial audit of KG-D6 block'

The CAG has agreed to restrict its audit of Reliance Industries' (RIL) KG-D6 block to financial scrutiny of the spendings on the flagging output of gas fields and a performance audit, if any, would be done by the oil ministry, a senior government official said on Tuesday.

"The CAG had, a few days ago, given to us in writing that the audit of Block KG-DWN-98/3 (KG-D6) will be strictly as per Section 1.9 of the Accounting Procedure to the Production Sharing Contract (PSC)," the official, who wished not to be identified, told mediapersons in New Delhi.

The PSC provides for a financial audit - checking of the contractor's accounts in order to verify the charges and credits, but not a performance audit that scrutinises efficacies of processes or technology used in the complex deep-sea operations.

"The CAG has agreed for a financial audit (of RIL's KG-D6 spendings) and a performance audit if it has to be conducted, will be done of the petroleum ministry and/or the directorate general of hydrocarbons (DGH)," the official said. RIL will provide any documents needed in doing such an audit, he added.

Sources, however, maintained that the CAG statement did not mean an end to the stalemate between the official auditor and RIL. The company, to be begin with, may refuse to provide documents related to the tendering process it followed for buying equipment or in selection of service-providers, something which is unlikely to be acceptable to the CAG, they said.

The auditor may want to examine whether government's profit take from KG-D6 and its subsidy output on power and fertiliser increased on account of use of imported LNG due to KG-D6 output of just 23 million standard cubic metres per day not matching the projected profile of 80 mmscmd.

The CAG had in its first round of KG-D6 audit begun on the premise of  conducting a financial audit but the report tabled in Parliament in 2011 stated that the auditor had conducted a performance audit. In May, it agreed to conduct a second round of audit for years 2008-09 to 2011-12 but that hasn't started due to differences over scope.

Sources said CAG may, even this time around, conduct a performance audit of KG-D6, where gas output has lagged targets mentioned while getting spending approvals, as it feels its constitutional mandate is bigger than any agreement that the oil ministry may have with a contractor.

Meanwhile, oil minister M Veerappa Moily told Rajya Sabha that the CAG has stated that since full access to KG-D6 records is pending, the ministry should "examine all relevant issues closely and carefully before considering the desirability of any further approvals of capital expenditure".