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Petroleum secretary Vivek Rae has decided to take one last shot at resolving the dispute between Reliance Industries (RIL) and the national auditor at the oil ministry level, after which the government will seek legal opinion.
In his first major initiative since he took charge last month, Rae wants to reconcile the bitter conflict over the scope of the audit of Reliance Industries' D6 block. The company wants the audit to be conducted strictly according to the contract while the Comptroller and Auditor General (CAG) wants a comprehensive audit.
Government officials said that while Rae has made a good beginning and bridged some differences between the company and the auditor, the key issue of the scope of audit remains contentious.
Oil minister Veerappa Moily had directed Rae on February 15 to take opinion of the solicitor general to put the "ultimate curtain" on this "controversial" matter. Moily decided to take legal opinion immediately after he received a strongly worded letter from CAG Vinod Rai asking the minister to follow in the footsteps of Murli Deora and help the auditor access the records of D6.
"The minister has accepted the secretary's request to end the deadlock through dialogue and to avoid any litigation," an oil ministry official said. The oil ministry and RIL did not respond to ET's queries.
Oil ministry officials say that RIL has no object to the CAG scrutinising the financial records of the KG-D6 block, which is as per the contract between the government and the company.
But, it has objections to the CAG's direct and indirect attempts to conduct comprehensive audit of the block.
Reliance told the oil ministry last month that it did not furnish certain documents to the audit team because these documents were not relevant for financial audit as envisaged in the accounting procedure of KG-D6 productionsharing contract.
RIL declined CAG access to documents related to the status of an ongoing arbitration with the government after the oil ministry disallowed cost recovery of over $1 billion because of a steep fall in gas output from the block. The company also refused to provide records of assessment of capacity and prepare a note detailing functions of major equipment set up in the deepwater block.
Officials say that RIL's major apprehension is auditor's insistence to carry out audit as per the CAG Duties, Power and Conditions of Service (DPC) Act. "RIL expressed the apprehension that in case the audit is conducted under DPC Act, it may possibly extend beyond the scope of PSC, which is not acceptable to them," an oil ministry official said.
The ministry officials are hopeful that the matter would be resolved soon. The government will explain to Reliance that CAG, which is a constitutional authority, can be engaged though the DPC Act for conducting an audit of a private firm on behalf of the government. However, CAG would audit RIL's block on behalf of the government.
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