DGH defends RIL gas plan

The Directorate General of Hydrocarbons,the regulator for oil and gas fields,rejected Reliance Natural Resources Ltd....

The Directorate General of Hydrocarbons,the regulator for oil and gas fields,rejected Reliance Natural Resources Ltd RNRL chairman Anil Ambanis charges that it had approved Reliance Industries Rs 45,000-crore exorbitant capital expenditure plan for gas fields,saying the actual expenditure is subject to three audits including one by the Comptroller and Auditor General of India CAG. It further said the gas development plan is highly cost effective and fast track.

Simultaneously,expressing surprise over the DGHs comments that inflating the capex on KG-D6 does not benefit RIL,a Reliance Natural spokesperson said,In the interests of transparency,and to set the matter at rest,DGH should publicly disclose the full reports of CAG,Indian experts,international engineering consultants,and independent auditors,referred to in the statement,including their identity and process of their selection,the terms of reference,etc.

The production sharing contract PSC requires auditing of the exploration and development expenditure by internal as well as government-appointed auditors. Even the whole process of expenditure starting from management committee review/approval of work programme and budget to purchase and procurement of materials amp; equipment are amenable to CAG audit, DGH director general VK Sibal said in a statement on its website.

In the opinion of the experts,the development plan is highly cost effective and fast track. A CAG audit has recently been completed, Sibal said. But the RNRL spokesperson said one of the experts appointed by DGH,Dr P Gopalakrishnan,by his own admission in his report,has not even studied the PSC between the government and the contractor. The idea of gold plating betrays a lack of knowledge of business economics. Inflating the expenditure does not benefit any stakeholder neither the contractor nor the government. No company would like to increase its investment unproductively. Every additional dollar of wasteful investment dents the profit of the contractor, DGH said.

According to the RNRL spokesperson,DGHs confirmation that current production is only 31 mmscmd against the maximum production capacity of KG Basin at 80 mmscmd,owing to the absence of a further market for gas,vindicates our stance that RIL is curbing production to artificially justify its exorbitant prices,and there is no further demand at such high prices. Anil Ambani had on Monday demanded an independent and objective re-examination by public accountability bodies like the CAG and the CVC of the apparently exorbitant capital expenditure of Rs 45,000 crore8230; in order that such capex recovery is brought down to realistic levels.