Beware: CAG to audit all development blocks

Vol 16, PW 3 (23 Aug 12) People & Policy

If you have nothing to hide, don’t worry; but if you do, start shredding those incriminating documents now! Oil ministry officials want the country’s audit watchdog to scrutinise the accounts of all pre-NELP and NELP blocks under development.

Exploration division officials are preparing a proposal under which the Comptroller and Auditor General of India (CAG) will be tasked to carry out a mandatory audit of expenditure and income at all oil and gas blocks under development. CAG’s role will be to ensure the government is receiving its fair share of revenues and that all PSC procurement procedures are followed to the letter.

Production, sales and revenue figures will be inspected for all 222 live PSCs in the country, encompassing all NELP rounds so far. Operators have announced 108 discoveries across the active PSCs.

Of these, only six are producing. “But gradually all will be brought on-stream,” says an official.

Under NELP operators can claim exploration costs against production revenue, often leading to allegations of ‘gold-plating’ or companies fraudulently showing higher expenditure. At present, CAG only carries out an audit if the ministry tells it to.

This is likely to change. “CAG audits will become a regular feature,” adds a source.

“They will take place in addition to the regular Management Committee audits that happen now.” CBM operators have nothing to fear.

‘Cost recovery’ is not applicable at CBM licenses so the ministry will exempt CBM blocks from regular CAG checks. Since May this year CAG has been examining the accounts of Reliance’s offshore KG-D6 block; Cairn India’s Rajasthan onland block RJ-ON-90/1; and the PMT fields, jointly operated by BG, ONGC, and Reliance.

CAG is also investigating whether the DGH has bent the rules to favour Reliance, Cairn India, and PMT partners.

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