The beginning of 2013 may see a truce between the Comptroller and Auditor General of India (CAG) and Reliance Industries Ltd (RIL).
The Government auditor is expected to begin the audit of the spending in Reliance-operated KG-D6 block for the years 2008-09 to 2011-12 in January, those in know of the matter said.
This will be a financial audit, sources told
RIL had been maintaining that it has no objection to any audit provided it is done according to the production sharing contract (PSC).
During the recently concluded winter session of Parliament, Minister of Petroleum and Natural Gas M. Veerappa Moily had informed the Rajya Sabha that RIL has agreed to an audit by CAG for block KG-DWN-98/3 for the years 2008-09 to 2011-12 without prejudice to the rights and contentions of the contractor under the contractual provisions.
About the CAG letter, the Minister had said that CAG has not asked the Ministry to withhold any approvals to RIL.
CAG has recommended that pending complete submission of all supporting records by the operators of D6 and Panna-Mukta and Tapti fields relating to expenditure for the said years and a detailed scrutiny verifying that Government’s financial interests have not been adversely affected, the Ministry may examine all relevant issues before further approving any capital expenditure, except those of an emergent nature, the Minister informed.
Rangarajan Committee
A committee under C. Rangarajan, Chairman Economic Advisory Council to the Prime Minister, looking into PSC mechanism including suitable Governmental mechanisms to monitor and audit Government’s share of profit petroleum, is believed to have suggested that CAG may carry out audit in accordance with financial materiality – relating to importance of an amount, transaction, or discrepancy.
To undertake this audit the accounts of blocks would be sent to CAG for selection of blocks for auditing, the Committee is understood to have suggested adding that the periodicity of the audit may be decided by the CAG keeping in view the timeline suggested in the PSC.
It also suggested that this should be a regular feature, and therefore there will be no requirement for requesting CAG for a special audit.
Sources said that the Committee also suggested that the CAG audit according to Section 1.9 of the PSC should be prior to the performance audit of the Ministry. This is to enable corrective actions emerging from the Government auditor’s suggestions and help in protecting Government revenues.
The CAG audit is to be carried out according to the PSC norms, it has further said. The performance audit, done by the auditor for the Ministry can look into other issues.
PSC categorisation for audit
The Committee is said to have suggested categorisation of PSC into three to undertake the audit – exploration phase PSC, development phase PSC, and production phase PSC.
In the exploration as well as the production phase audit of selected blocks are to be carried by CAG, with the remaining to be carried out by CAG empanelled auditors.
In the development phase, audit should be conducted by CAG in all important and financially critical blocks, which can be carried out once in two years as suggested.