Gas price: CAG says Mukesh Ambani's Reliance Industries overcharged customers

May 29 2014, 18:15 IST
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Reliance Industries spokesperson did not immediately offer any comments. (Picture of Mukesh Ambani and Amit Shah by AP) Reliance Industries spokesperson did not immediately offer any comments. (Picture of Mukesh Ambani and Amit Shah by AP)
SummaryCAG pulls up Reliance Industries for charging rate in excess of approved price.

The Comptroller and Auditor General of India (CAG) has pulled up Reliance Industries for charging a rate in excess of the government approved price for its KG-D6 gas field and not including the marketing margin for calculating royalties and government's share.

The government had in October 2007 set a sale price of USD 4.20 per million British thermal unit based on the price discovered by Reliance Industries from key customers.

The CAG in a draft report of audit of Reliance Industries' eastern offshore KG-D6 block spending stated that the company charged USD 4.205 per mmBtu from consumers, leading to excess billing of USD 9.68 million.

"As per the price discovery process undertaken by the operator (Reliance Industries)... it was categorically indicated that selling price would be rounded off to two decimal points.

"A review of records relating to sales of gas to consumers, however, revealed that the operator has been charging the gas price at the rate of USD 4.205 per mmBtu (three decimal points) from its consumers in place of USD 4.20 per mmBtu, arrived at after rounding of 2 decimal points," CAG said.

This lead to an excess billing of USD 9.68 million in first four years of production beginning 2009-10.

On top of this sale price, Reliance Industries charged a marketing margin of USD 0.135 per mmBtu to cover for its marketing risks.

"It has also been noticed that while computing the profit petroleum (government's share of production) and royalty, the operator is considering the price of USD 4.205 per mmBtu instead of USD 4.34 being charged by him from the consumers, as the revenue earned through marketing margin is not being treated as revenue for the purpose of calculating cost recovery, profit petroleum and royalty," CAG said.

A RIL spokesperson did not immediately offer any comments.

RIL, CAG in the draft report said, had collected an amount of USD 261.33 million towards the marketing margin which has not been accounted for in the books.

"Consequently, cost recovery of USD 235.20 million (90 per cent) has not been adjusted in the recovered cost up to 2012-13 and there was a short remittance of government share of profit petroleum and royalty by USD 2.61 million and USD 13.12 million respectively for the year 2009-10 to 2012-13 to the Government of India," the report said.

The CAG noted that the oil ministry had in December 2011 asked the Petroleum and Natural

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