Days after a CAG draft report said his firm got out of turn favours from the oil ministry and its technical arm DGH, Reliance Industries Chairman Mukesh Ambani met Prime Minister Manmohan Singh.
No details were available on what India’s wealthiest man discussed with the Prime Minister. Reliance Industries (RIL) offered no comments on the meeting.
Separately, RIL wrote to the oil ministry requesting a copy of the draft report of the Comptroller and Auditor General (CAG), after which the relevant portions of the draft
CAG report were provided to the company, sources said. RIL earlier this week had written to the ministry saying that the reported comments from the leaked report reflected a “complete misunderstanding of legal and contractual issues” and hurt its reputation.
RIL shares have fallen 8 per cent since the draft CAG report first appeared in media on June 13. It ended almost flat today at Rs 870.40 even though the BSE Sensex rose 513 points or 2.89 per cent.
Officials in the Prime Minister’s Office (PMO) said the meeting between Singh and Ambani happened around noon but offered no further details.
Ambani, however, did not seek any meeting with Oil Minister S Jaipal Reddy who had earlier this week stated that his ministry will approach the draft report of the nation’s top auditor with an “open mind” and give its response within eight weeks.
“While the actual contents of the report are not available to us, from the media reports doing the rounds, it is extremely disheartening to note that there is complete and basic misunderstanding of legal and contractual issues which we presumed had been sufficiently clarified in our responses,” RIL said requesting a copy of the draft CAG report. CAG in its June 8 draft report stated that the ministry and its technical arm Directorate General of Hydrocarbons (DGH) favoured RIL allowing it to retains the entire 7645 square kilomter KG-DWN-98/3 or KG-D6 block in the Krishna Godavari basin off the east coast. Also, the development plan RIL submitted for Dhirubhai-1 and 3, two of the 18 gas discoveries in the KG-D6 block, was not in compliance with the PSC and the ministry and DGH turned blind eye to the company raising capital spending without having begun work on the previous one expenditure plan.
CAG however did not say Reliance had over billed the government or caused loss to the exchequer with 114 per cent increase in development cost to $5.2 billion.
RIL had in May 2004 proposed investment of USD 2.4 billion for producing 40 million standard cubic meters per day of gas from D1 and D3 fields and later in October 2006 moved an addendum to this saying USD 5.2 billion would be required in Phase-1 to produce 80 mmscmd of gas and another USD 3.3 billion to sustain the peak output for longer duration.
“The increase in cost from Initial Development Plan (IDP) to Addendum to IDP is likely to have significant adverse impact on Government of India’s financial take. However, at this stage, based on the information provided, we are unable to comment on the reasonableness, or otherwise, of the increase in cost from IDP to AIDP, both overall and in respect of individual line items,” CAG said.
CAG stated that oil ministry and DGH “irregularly allowed the operator (Reliance) to enter successive exploration phases without the stipulate relinquishment of area, and then allowed the operator to declare the entire contract area as “discovery area”,” thus avoiding any relinquishment whatsoever.”