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Oil Min,DGH bent rules for Reliance Ind: CAG

CAG says Mukesh Ambani's Reliance hiked capex by 117%,hinting at overcharging the govt.

Written by Agencies | New Delhi |
June 13, 2011 12:40:31 pm

The CAG has rapped oil ministry and its technical arm DGH charging it with favouring Reliance Industries,but did not say if the Mukesh Ambani firm overbilled the government when it more than doubled KG-D6 gas field cost and caused loss to state exchequer.

The CAG in its draft audit report of KG-D6 block said the ministry and the Directorate General of Hydrocarbons allowed Reliance to raise cost of developing the nation’s largest gas fields by 117 per cent.

It said rules were also bent to grant “huge benefits” to Reliance when the ministry allowed the company to retain entire block but said gains cannot be quantified.

“The increase in cost from (USD 2.39 billion proposed in the) Initial Development Plan (of May 2004) to (USD 5.196 billion) in the addendum to the Initial Development Plan is likely to have a significant impact on the government of India’s financial take.

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“However,at this stage,based on the information provided,we are unable to comment on the reasonableness,or otherwise,of the increase in cost,both overall and in respect of individual line items,” the CAG said in a draft report sent to the Oil Ministry for comments.

An operator like Reliance is 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 KG-D6 block,levied by the Anil Ambani Group.

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