CAG lambasts Oil Min for allowing RIL to retain entire D6 area

New Delhi, Sept 8 (PTI) National auditor CAG (Comptroller
and Auditor General of India) on Thursday castigated the Oil
Ministry for allowing Reliance Industries to retain its entire
eastern offshore KG-D6 block in contravention of the
Production Sharing Contract, but did not comment on more than
tripling of the field development cost.
The CAG, in its much-awaited report tabled in Parliament
on Thursday, did not say if the capital expenditure for KG-D6
being raised from USD 2.4 billion proposed in 2004 to USD 8.8
billion in 2006 was unjustified or inflated.
It faulted the Oil Ministry and its technical arm, the
Directorate General of Hydrocarbons (DGH), for allowing
Reliance to retain the entire 7,645 sq km KG-DWN-98/3 (KG-D6)
block in the Bay of Bengal after the giant Dhirubhai-1 and 3
gas finds were made in 2001.
As per the PSC, Reliance should have relinquished 25 per
cent of the total area outside the discoveries in June, 2004,
and 2005, but the entire block was declared as a discovery
area and the company was allowed to retain it.
"We recommend that the Ministry of Petroleum and Natural
Gas should review the determination of the entire contract
area as 'discovery area' strictly in terms of the PSC
provisions," the CAG said, asking for delineation of the
discovery area and relinquishment of the rest.
The CAG was critical of government oversight,
particularly on high value procurement decisions, and sought
an "in-depth review" of 10 contracts, including eight awarded
to Aker Group by Reliance on a single-bid basis.
Giving Reliance a breather on charges of 'gold-plating'
its KG-D6 expenses, the CAG said "approval of estimates (first
USD 2.4 billion and then USD 8.8 billion in 2006) does not
constitute acceptance of the cost projects", which can be done
only through an audit of the actual cost incurred.