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PAC to grill Reliance officials on KG basin controversy

The committee's chairman Murli Manohar Joshi has said the KG basin issue is as big as the 2G scam and he would go to the root of it.

A.M. Jigeesh | February 3, 2012 | Updated 11:26 IST

The representatives of Reliance Industries Ltd (RIL), who will appear before the Public Accounts Committee (PAC) on Friday are likely to face some "tough" questions from the members.

PAC members as well as the secretariat have prepared a number of questions that are likely to be put before the RIL executives.

A source in the PAC said that they are not satisfied with the petroleum ministry's explanations on the reasons for allowing RIL to enter the second and third phases of explorations without relinquishing 25 per cent each of the total contract area. In a proposal to the oil ministry RIL had said that the entire block area had been covered by 2D seismic surveys during 2001, based on which perspective leads, spread over the entire contract area, had been identified.

A PAC member said the committee is likely to seek clarifications from the contractor on the issue. The members would ask RIL how many wells it proposes to drill to cover the original contract area and how many it has drilled till now in both phases I and II. They are also likely to ask RIL why it did not seek changes in the profit sharing contract (PSC) as it clearly stated that discovery from wells has to be established for retaining the contract area. RIL, on the other hand, had argued that 2D and 3D seismic surveys were enough to establish the presence of petroleum in the contract area.

Another major issue that could find place in the list of questions is the alleged gold- plating of the capital expenditure. RIL's earlier proposal of augmentation of production capacity from 40 mmscmd to 80 mmscmd can also come under PAC's scrutiny. The members are set to question the basis of RIL's decision to augment the production capacity to 80 mmscmd.

RIL had also increased the capital cost from $ 2.2 billion to $ 8.8 billion for doubling the production capacity. The members are likely to question the logic behind such a decision from RIL. PAC had already asked the oil ministry if in the view of the underutilisation of the facilities the ministry proposes to restrict cost recovery on the basis of prorata development cost proportionate to the current gas production in relation to the projections made by RIL. It had also asked whether it will re- calculate the cost petroleum and profit petroleum accordingly. The ministry had told PAC that the matter is being examined.

PAC members are keen to ask RIL why the production figures are still only marginally higher than the original production figures. Questions will be there on the estimated liabilities of $ 746 million, which were added to RIL's cost.

The Mukesh Ambani-led firm will also have to justify the cost of $1.1 billion for bare boat contract of ten years when the cost of the vessel and its conversion cost is around $ 100 million. The Comptroller and Auditor General (CAG) had pointed out this anomaly in its report.

RIL had been complaining that the CAG did not wait for its comments before submitting the final report. In a response to PAC, RIL has said that it was given just a week to respond with comments on the CAG's draft report, which contained highly technical observations.

The company claimed that comments in the draft audit report pertained to highly technical and contractual issues, rather than matters of accounting and audit.

PAC chairman Murli Manohar Joshi has been maintaining that the KG basin scam is as big as 2G scam and PAC would go to the root of it. The CAG report was critical for the petroleum ministry and Directorate General of hydrocarbons (DGH) because of their activities that protected the contractor RIL.

Courtesy: Mail Today 

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