Reliance Industries warns it will end CAG audit
2 Feb 2013 5:45 AM IST
Reliance Industries Ltd (RIL) has reportedly threatened to end the entire audit process by the Comptroller & Auditor General of India (CAG) for its KG-D6 gas block off the country’s eastern coast, according to a television channel. RIL wants the CAG to conduct only a financial audit and not a performance-related one. The block is jointly operated by Reliance Industries Ltd, British Petroleum (BP) and Canadian firm Niko.
The TV channel reported that a Reliance Industries Ltd official said, ‘RIL and the government have signed a legally binding contract, which is the production sharing contract (PSC). RIL fully accepts the government’s right to audit in accordance with Section 1.9 of the PSC. RIL has been cooperating and will cooperate with the audit as per the PSC. It has not only given all records necessary for the conduct of such an audit but has also granted CAG team access to its online SAP system to facilitate the process.’
Sources told the TV channel that RIL had told CAG officials at a meeting in the first half of January that it reserved the right to bring the CAG audit to an end and refer any dispute to arbitration in accordance with the PSC ‘in the event that the audit of the contractor by the CAG exceeds the scope of Section 1.9 of the accounting procedure’. At the meeting, RIL reportedly said that the consortium in KG-D6 is required to provide ‘only such records that are required for verifying charges and credit, and not questioning the merit of the decision of the operator’, said the sources cited by the TV channel.
A CAG official told the TV channel that the auditor had assured Reliance Industries Ltd at the meeting that it will be a financial audit only. Also, the CAG told RIL that ‘it would use some aspect of Section 1.9 and that of the other contractor to supplement its performance audit by the Petroleum Ministry ... It is CAG’s obligation to report such performance audit (of ministries and not RIL) to Parliament’.
The TV channel reported that a Reliance Industries Ltd official said, ‘RIL and the government have signed a legally binding contract, which is the production sharing contract (PSC). RIL fully accepts the government’s right to audit in accordance with Section 1.9 of the PSC. RIL has been cooperating and will cooperate with the audit as per the PSC. It has not only given all records necessary for the conduct of such an audit but has also granted CAG team access to its online SAP system to facilitate the process.’
Sources told the TV channel that RIL had told CAG officials at a meeting in the first half of January that it reserved the right to bring the CAG audit to an end and refer any dispute to arbitration in accordance with the PSC ‘in the event that the audit of the contractor by the CAG exceeds the scope of Section 1.9 of the accounting procedure’. At the meeting, RIL reportedly said that the consortium in KG-D6 is required to provide ‘only such records that are required for verifying charges and credit, and not questioning the merit of the decision of the operator’, said the sources cited by the TV channel.
A CAG official told the TV channel that the auditor had assured Reliance Industries Ltd at the meeting that it will be a financial audit only. Also, the CAG told RIL that ‘it would use some aspect of Section 1.9 and that of the other contractor to supplement its performance audit by the Petroleum Ministry ... It is CAG’s obligation to report such performance audit (of ministries and not RIL) to Parliament’.
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