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DGH rubbishes Anil’s gas claim

business Updated: Aug 05, 2009 00:42 IST
HT Correspondent
HT Correspondent
Hindustan Times
DGH rubbishes Anil’s gas claim

The petroleum sector regulator, directorate general of hydrocarbons (DGH), rubbished the charges made by Anil Ambani on increased capital expenditure (capex) by his elder brother Mukesh’s Reliance Industries Ltd (RIL) in producing gas from its D6 fields in the Krishna Godavari basin.

“There was no hasty approval of RIL’s revised expenditure and due diligence of revised expenditure by different agencies had been carried out,” said VK Sibal, director general, DGH.

The Rs 45,000-crore capex by RIL has “undergone three audits including one by the Comptroller and Auditor General of India,” Sibal said. “In the opinion of the independent and reputed technical experts, RIL’s development plan is highly cost effective and on the fast track.”

Sibal said the production sharing contract (PSC) --- the agreement on gas exploration and production signed between RIL and the government --- provides for auditing the actual expenditure by three sets of auditors: management-appointed auditors, government-appointed auditors and CAG.

“The idea of gold plating (a process by which a company increases its capital costs) betrays a lack of knowledge of business economics,” Sibal said without naming Anil. “Inflating the expenditure does not benefit any stakeholder --- neither the contractor nor the government.”

The KG D6 project is the first deepwater development project in India, Sibal said. “In any other country, it would have been hailed and cherished. However, we are content with squabbling over this outstanding success.”

“We are surprised by the DGH’s comments that inflating the capex on KG-D6 does not benefit RIL,” a spokesperson of Anil’s Reliance Natural Resources Ltd said. “RIL is entitled to first recover its entire capex before the government gets any meaningful share, and hence, RIL has substantial motivation to claim higher capex.”