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Business News/ Companies / PAC questions RIL executives on D6 cost escalation
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PAC questions RIL executives on D6 cost escalation

PAC questions RIL executives on D6 cost escalation

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New Delhi: The public accounts committee (PAC) on Friday questioned top executives of Mukesh Ambani-led Reliance Industries Ltd (RIL) about cost escalations in the D6 block of the Krishna-Godavari (KG) basin and alleged contract violations.

Executive director and RIL board member P.M.S. Prasad and others, who were appearing for the first time before the parliamentary panel, made a presentation to the committee on the project and the reasons behind the increase in the cost.

The Comptroller and Auditor General of India (CAG), in its Performance Audit of Hydrocarbon Production-sharing Contracts report submitted to Parliament last year, had stated that RIL had breached some terms of a production-sharing contract (PSC) with the government for the D6 block. It also blamed the petroleum ministry and the Directorate General of Hydrocarbons (DGH) for their failure to provide adequate supervision of the process.

Bharatiya Janata Party leader Murli Manohar Joshi, who heads the 22-member panel comprised of representatives across political parties, then directed RIL officials to furnish all documents related to the project and correspondence between the company and the government.

The PAC expects RIL to furnish all the documents and information within a week. It will then seek comments from all departments concerned such as the petroleum ministry and the CAG, before taking any further action.

An RIL spokesperson declined to comment. The PAC member cited above didn’t rule out the summoning of CAG officials before the panel.

The CAG had pointed out that RIL had declined to share information that would have enabled it to critically examine the justification of the company for the cost escalation. The report also said the current PSC template encouraged firms to front-load expenditure as it correspondingly reduced the share of the government in profits and commented on cost escalations in the D6 block, particularly on the practice of RIL implementing the work programme even before obtaining approval for increased project costs.

“They (RIL) denied any violation in the product-sharing contract. They (RIL) were also asked to come up with instances in which cost was escalated in similar projects in any part of the world," the PAC member said.

The accusations may hurt the Congress-led United Progressive Alliance government, which is already under pressure over the alleged involvement of some its former ministers and bureaucrats in corruption scandals. This also comes at a time when RIL is facing flak for a decline in production from its D6 block.

sahil.m@livemint.com

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Published: 04 Feb 2012, 12:55 AM IST
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