Oil Ministry confirms draft CAG report is in

The petroleum ministry has confirmed receiving a report from the Comptroller and Auditor General (CAG) on alleged irregularities in the oversight maintained over the administration of oil blocks under private companies.

The Times of India had, in its story today, reported that the CAG has unearthed alleged favoritism towards Reliance Industries, owned by billionaire Mukesh Ambani, as far as oversight on its KG D-6 gas block was concerned.

It said, in its draft report, that rules were bent to grant “huge benefits” to Reliance when the ministry allowed the company to retain entire block but said gains cannot be quantified, according to PTI. “The increase in cost from (USD 2.39 billion proposed in the) Initial Development Plan (of May 2004) to (USD 5.196 billion) in the addendum to the Initial Development Plan is likely to have a significant impact on the government of India’s financial take,” the draft said.

The chief bureaucrat in charge of keeping an oversight over how much Reliance was spending, the director general of hydrocarbons VK Sibal, was forced to resign in the wake of a controversy over allegations that he took favors from Reliance.

The oil ministry has since passed from Murli Deora, a friend of Mukesh Ambani’s father Dhirubhai Ambani, to Jaipal Reddy, who does not have a pro-corporate reputation. Mukesh’s brother Anil had alleged, in front page ads across India, that Mukesh’s group had needlessly increased the cost of developing the KG D-6 field, since the return promised to Reliance Industries was to be calculated as a proportion of what it spent in development.

The oil ministry said it is in the process of going through the draft report. “The Ministry is examining the draft report. It will prepare a reply to the audit observations after obtaining details from relevant agencies and send it to the Office of the Principal Director of Audit for further necessary action at their end,” it said.

According to CAG’s methodology, the draft will now be commented upon by the ministry and taking those into consideration, a final report will be brought out by the CAG. The CAG’s job is to check whether the Government is spending the people’s money wisely or not.