Will never allow any operator to overbill govt, says oilmin

NEW DELHI: Finding itself amidst a raging controversy over comments against it in a draft Comptroller and Auditor General of India (CAG) report, the oil ministry has said it will never allow Reliance Industries or any other operator to overbill the government and cause loss to the exchequer. The ministry is in the process of preparing a response to the draft report of the CAG, which slammed the oil ministry and its technical arm, Directorate General of Hydrocarbons (DGH), for allegedly showing favours to private operators.

“We have very stringent regulations. A operator, say Reliance, is allowed to recover only that part of the investment which it has spend on ground and which has been established through an audit done by government auditors. So, no matter what an operator may put in his budget for a gas field development cost, only that amount is permissible which is actually spent,” a ministry official said. Operators like Reliance are allowed to recover all capital cost incurred on developing a field from revenues earned from the sale of oil or gas before profits are split between the stakeholders, including the government.

The CAG conducted the audit of the accounts of Reliance after allegations of ‘gold-plating’, or artificially inflating the cost of development of Dhirubhai-1 and 3 gas fields, two of the 18 discoveries in its KG-D6 block, leading to reduction in government take from the eastern offshore block. CAG in its draft report did not say if the increase in development cost of D1 and D3 fields was unjustified. “We will never allow Reliance to dupe the government,” he said. The nation’s top auditor in the draft report stated that it is “unable to comment on the reasonableness, or otherwise of the increase in (Phase-1) cost (from $2.39 billion proposed in May 2004 to $5.196 billion in 2006), both overall and in respect of individual line items”.