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CAG raps govt, RIL, AI

business Updated: Sep 08, 2011 23:23 IST
Comptroller and Auditor General

The Comptroller and Auditor General (CAG) on Thursday criticised the government for allowing Mukesh Ambani-controlled Reliance Industries Limited (RIL) to retain its entire eastern offshore KG-D6 block whereas it should have got a part of it under the terms of its contract.

The CAG observed that the development cost of India's largest gas field had gone up significantly from the original estimate, but the government auditor refrained from making a definite observation on the cost escalation and left room for covering the ground in future audits.

What the Auditor dug up

According to the production sharing contract (PSC), RIL should have relinquished a quarter of the of the total area outside the discoveries, but the entire block was declared a "discovery area" and the government allowed RIL to retain it.

"We recommend that the ministry ... review the determination of the entire contract area as 'discovery area' strictly in terms of the PSC provisions," the CAG said.

RIL said it would be "unable to comment as we have not yet seen the final audit report" and that the company had already provided the ministry, the oil regulator and the CAG its detailed comments on the issue.

"As a contractor, we remain committed to complying with the PSC provisions," RIL said.

Auditor slams IA-AI merger mess, plane deals

The decision to acquire 111 airplanes by Air India (AI) five years back was a "recipe for disaster" from the start and should have raised "alarm signals" in the government, the Comptroller and Auditor General (CAG) said in a performance audit of the civil aviation ministry on Thursday.

The auditor came down on the merger of Air India with the erstwhile Indian Airlines (IA) and the government’s policy of concluding bilateral agreements with foreign countries.

Air Pocket

The CAG said Air India's 68-aircraft deal with Boeing "imposed an undue long-term financial burden" on AI. On the 43-Airbus aircraft deal, the auditor noted that the "Net present values of all the considered sets of aircraft were negative, even assuming constant cost and revenue yield at 2001-02 levels".

Commenting on the merger, the CAG has said that it was unable to "ascertain the detailed justification for the ‘in principle’ approval of the government for working towards the merger".

"The initiation of action towards the merger, less than a few months after completion of independent large scale acquisition of aircraft appears somewhat ill-timed, with loss of significant synergistic opportunities," it has said.

"In May 2005, the aviation ministry had written to the CAG and CVC referring to them the entire set of documents and had sought their advice on whether to go ahead with the deal or not but their was no response," said Praful Patel, who was the aviation minister when the aircraft deals were signed.

The CAG questioned the timing of bilateral air agreements, saying it created an unfair field for domestic carriers.