Reliance Industries invalidates CAG allegation on KG D6 gas field

FOR IMMEDIATE RELEASE
Mumbai, Maharashtra, India, Republic of (Free-Press-Release.com) July 13, 2011 -- Mukesh Ambani led Reliance Industries Limited (RIL), after being hectored by Comptroller and Audit General (CAG) body over gold plating of capital expenditure of RIL’s prolific Krishna - Godavari (KG D6) gas basin, has refuted all such allegation mentioned in CAG audit report.

In its reply to the audit draft, RIL has stated that the CAG has overlooked the process of cost-recovery and production sharing provisions of the production sharing contract (PSC). CAG had pointed that RIL has inflated the capital expenditure of KG D6 gas field from $ 2.4 to $ 8.5 billion, although it could not rationalize its claim substantially. Reliance Industries, in its reply, has stated, “CAG appears to believe that under the PSC where the contract costs are greater, rather than lower, such an increase in costs benefits the contractor.” It also expressed that CAG had neglected the sharp increase in cost of deep sea exploration costs across the world, which had considerably affected RIL’s procurement process of contractors and equipments.

Reliance Industries has evinced that CAG should restrict its function to audit of financial documents and ensuring an operator’s adherence to government and management committee mandate and not question ‘the technical and operational judgments of the operators that were in effect the best possible judgments at the time, based on the best information available’, as put forth by RIL representatives. There was also the speculation that some corporate entities were involved in generating negative press about Reliance Industries work and efforts, and that had insinuated CAG to dig into KG D6 basin cost estimates.
Oil ministry too was put under CAG scanner for supposedly offering undue benefits to private players, rendering huge loses to the government. Oil ministry refuted this claim and made clear that any irregularities in PSC will not be neglected by it and it will take necessary actions against any unwarranted cost that may surface on account of an operator.

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