RIL reacts: KG-D6 costs not overstated | business | Hindustan Times
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RIL reacts: KG-D6 costs not overstated

A day after a Comptroller and Auditor General (CAG) report said that the cost estimates given by Reliance Industries Ltd (RIL) for developing India's largest gas block in Andhra Pradesh's Krishna-Godavari (KG D6) basin had tripled within two years, the company said that the costs were not overstated and these have been corroborated by findings of independent experts and consultants. HT reports.

business Updated: Sep 09, 2011 20:57 IST
HT Correspondent

A day after a Comptroller and Auditor General (CAG) report said that the cost estimates given by Reliance Industries Ltd (RIL) for developing India's largest gas block in Andhra Pradesh's Krishna-Godavari (KG D6) basin had tripled within two years, the company said that the costs were not overstated and these have been corroborated by findings of independent experts and consultants.

RIL had engaged Ernst & Young (E&Y), a global consulting firm, IPA Inc., quantitative analysis of project management consultants; and Daniel Johnston & Co Inc, an independent US based consulting firm, all of which have concluded that cost estimates were not overstated, the company said Friday.

"There was no evidence identified suggesting that KG-D6 costs were overstated in purchases from third parties or purchases from related parties and affiliates and in respect of other costs including allocated costs and non-purchase order-based expenditure," RIL said on findings of the E&Y report.

The CAG report observed that development cost of the gas field has tripled from $8.8 billion or about Rs 39,000 crore within two years from earlier estimate of $2.4 billion in 2004. The auditor, however, refrained from a definite observation on the cost inflation and left it open for covering in future audits.

IPA Inc, according to RIL, concluded that the KG-D6 project faced considerable physical and execution environment challenges as well as difficulties in the exploration and production.

RIL said Daniel Johnston & Co Inc observed that activities which RIL has carried out in relation to the various discoveries in the KG-D6 block are consistent with the provisions of the production sharing contract (PSC).