dna special: RIL stalled CAG audit of KG Basin for a year

For over a year, Reliance Industries Limited managed to stall a CAG audit of the KG basin gas block because any increase in “capital expenditure in these blocks” would have a “significant adverse impact on the government’s financial interests”. More than 100 documents accessed under the RTI Act and made available to dna clearly show how this critical audit was stalled by RIL. The company also insisted that any audit must not be placed in parliament for scrutiny by MPs.

As recently as April this year, senior government auditors were exchanging letters with officials in the ministry of petroleum and natural gas (MoPNG), seeking access to documents being blocked by RIL. On April 4, Prachi Pande, a senior auditor, wrote to A Giridhar, the joint secretary in MoPNG who is in charge of exploration, pointing out that “issues which stalled the audit process still continue to remain unresolved and as such are outstanding”.

Pande made it clear that these issues had “already been resolved between CAG and MoPNG” and also recorded the fact that the ministry had asked RIL to “cooperate with the CAG audit team”. These conditions had to be met, the auditors insisted, when they arrived on April 11 in the RIL headquarters in Navi Mumbai to resume the stalled audit.

Interestingly, MoPNG had taken a decisive stand on the issue and, in a letter addressed to B Ganguly, president and chief operating officer of RIL, pointed out that the conditions laid down by them were clearly unacceptable.

Between May 2012 and April 2013, RIL raised four principal objections to the proposed audit. First, they were clear that the audit must only be restricted to auditing the accounting books and it should not be turned into a “performance audit”. A “performance audit” has a much wider scope and could get into broad policy issue and question their rationale. Second, RIL insisted that under relevant sections of the “accounting procedure” of the Production Sharing Contract (PSC), the audit must be kept confidential and that “it cannot be used for or associated with any other audit” that may be performed by the CAG.

Third, RIL also demanded that they are “not asked or required to provide documents” which “go beyond the scope of the audit”. Fourth, RIL insisted that there were “no exceptional circumstances” within the meaning of the PSC that allowed for an audit by the MoPNG outside a specified time limit.

All these demands were stated in the letters dated November 16 and October 18 by Ganguly to the MoPNG. However, the MoPNG and the CAG consistently rejected these demands over a year through letters that went back and forth between the principal parties. dna sent a detailed questionnaire to the official spokesperson of RIL, Tushar Pania, for their version, but did not get a response for over a week.

For their part, the auditors insisted that their findings must go to parliament. In a letter on December 20 last year, Ajit K Patnaik, deputy CAG and chairman of the audit board, shot off a letter to MoPNG secretary GC Chaturvedi, stating that the “results of the audit would be communicated” to the MoPNG and “would also be used for reporting to Parliament as was done in the previous audit”.

Incidentally, between January 9 and 31, the CAG audit team had made 40 specific requisitions but the majority were ignored by RIL. They provided “only a few records without formal replies stating that they were holding back the replies” till “the points of disagreement” were resolved. But after a determined effort, the auditors managed to have their way and renewed their audit on April 11, more than year after it had been stalled by RIL.

Tomorrow: CAG had pointed out that the special audit was first sought by MoPNG