The CAG has asked Oil Ministry not to approve any of Reliance Industries' investment plans for the flagging KG-D6 gas field unless the company gives it unfettered access to audit its spendings.
In a strongly worded letter, Comptroller and Auditor General of India (CAG) referred to media reports about the ministry giving nod to RIL's annual capex for KG-D6 that have been pending for past three years, to advise the ministry not to approve any investment except those of "emergent nature".
"It is well within the knowledge of the Ministry that any increase in capital expenditure is likely to have significant adverse impact on government's financial interests," CAG wrote to Oil Secretary on November 9.
Sources, however, said contrary to reports, the ministry is yet to sign on resolutions approving capital expenditure on the KG-D6 block for 2010-11, 2011-12 and 2012-13 fiscal pending resolution of CAG audit of spending on the block.
The Ministry wants RIL to give CAG "unfettered access to account books" and pending that it has not approved the firm's investment proposals including annual budget for three years.
"We would like to strongly recommend that pending complete submission of all supporting records by the operator relating to expenditure for previous years upto 2011-12 and comprehensive and detailed scrutiny thereof to verify that the government's financial interests have not been adversely affected in any, the Ministry may examine all relevant issues closely and carefully before considering the desirability of any future approvals of capital expenditure through the annual work programme and budget, development plans or otherwise, except those of an emergent nature," CAG wrote.
CAG in its previous letter on October 26 had stated that it not contemplating doing a performance audit of the operator (RIL) but shall not be subjected to RIL's conditions of not placing the report in the Parliament and maintaining confidentiality of the information.
"We would like to state that our audit cannot be restricted to only to the accounting records and books of the operator or to the documents and information provided at the discretion of the audited entity.
"Our audit would extend to verification whether the costs depicted are correctly determined and in particular costs incurred for procurement of goods and services are determined through a transparent and competitive process so as to protect Government's revenue interests, especially as such costs are recovered from profit petroleum," CAG had written.
KG-D6 output has fallen to 25.11 million cubic metres per day (mmcmd) after hitting a peak of about 63 mmcmd in August 2010.
While RIL blames geological complexities for the fall, the drop in production adversely affects government's profit take from the block.