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CAG to begin KG-D6 audit on January 9

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New Delhi:

After protracted wrangling, the Comptroller and Auditor General (CAG) will on Wednesday begin the second round of audit of Reliance Industries spending on the flagging eastern offshore KG-D6 gas block.

CAG officials are scheduled to reach the Navi Mumbai office of Reliance Industries (RIL) on January 9 to begin the scrutiny, sources privy to the development said.

The audit was initially scheduled to begin on January 2 but was deferred to January 9.

It had agreed in May to do a second round of audit of spending in KG-D6 block for years 2008-09 to 2011-12 but that could not start due to differences over scope with RIL.

RIL had insisted that government can appoint any auditor including CAG to do a financial audit of its spending in KG-DWN-98/3 or KG-D6 block in Bay of Bengal but the Production Sharing Contract (PSC) does not allow a performance audit.

CAG on the other hand believed that its constitutional mandate does not provide for any restrictions on the nature of audit.

Sources said the Oil Ministry had given in writing to RIL that CAG audit will be strictly as per Section 1.9 of the accounting procedure to the production sharing contract (PSC).

Following this, RIL has agreed to cooperate and provide full access of its books of accounts to CAG. It has also dropped its contention that report of CAG be not made public.

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.

CAG has agreed for a financial audit of RIL's KG-D6 expenditure 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), sources said adding RIL will provide any document needed in doing such an audit.

Sources however did not rule out more scrimmages.     

RIL, to 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 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 20 million standard cubic meters per day not matching the projected profile of 80 mmscmd.

CAG had in its first round of KG-D6 audit begun on the premise of doing a financial audit but the report tabled in the Parliament last year stated that the auditor had conducted a performance audit.

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