Cloud over Panna-Mukta accounts

MUMBAI: The government has raised serious audit objections in the financials of the Panna-Mukta-Tapti (PMT) joint venture. PMT is owned jointly by Oil and Natural Gas Corporation, Reliance Industries and global giant BG.

In a 13-point audit report, the government alleged that the operators have not only failed to maintain proper books of accounts but have also misinterpreted the production sharing contract(PSC) and evaded royalty to the government.


The government has asked the operators to give reasons for charging excess production cost leading to excess cost recovery of $3,346,696 during ’02-03. It has also advised them to reverse the excess amount charged to the cost recovery, recalculate the profit petroleum and pay the government immediately.

Admitting the development, BG’s official spokesperson told ET, “As per government norms, this is a general audit carried out by the petroleum ministry and these are routine audit observations. We are in the process of addressing these as per the normal practice.”

An email sent to RIL and ONGC (other joint partners) remained unanswered till the time of going to the press. The government has asked the operator to provide all relevant documents regarding sales immediately to the Directorate General of Hydrocarbons (DGH) so that the government entitlement of petroleum profit could be ascertained accurately.

According to the government auditors Haribhakti & Co, the books of account include transactions up to delivery point only and transactions beyond delivery point like sales and debtors are maintained by the individual partners of the joint venture and not in the books of the joint venture. The auditors do not have access to the books of the individual partners and were unable to comment.The government has asked the operator to calculate the correct amount of royalty as per the PSC and pay the difference to the government.

According to the government, the operator’s interpretation of the provision of Article 15.6.1 of the PSC is not correct. The participating interest of all JV partners put together is 100% and hence the contractor is liable for payment of royalty on total production without any reference to government share of profit petroleum. The contractor is advised to pay interest on the late payment of royalty.

The government auditors also alleged that the operators have not taken the approval of the management committee for the expenditure in excess of approved budget. They have advised the operators to do the same.