The oil ministry also intends to make it clear to the national auditor that such observations as made by it could hinder much-needed private capital in the high-risk exploration business.
The Economic Times has quoted a senior official in the ministry with knowledge of the matter as saying, "All operators, including RIL have to get government approval of their annual work programme budget before making any expenditure in their blocks every year, so the fear of financial loss to the government by allegedly inflating capex of KG-D6 is baseless."
It can be recalled that the Comptroller and Auditor General of India had said in a draft report that the oil ministry and its regulatory arm for oil hunting companies, Directorate General of Hydrocarbons, showed undue favour to at least three private explorers.
The draft report, awaiting comments by the oil ministry said that Mukesh Ambani owned Reliance Industries Limited (RIL) was allowed to violate terms of the contract with the government for Andhra offshore fields.
The report said, "The undue benefit granted to the contractor (RIL) is huge, but cannot be quantified. The intent of the operator (Reliance) right at the outset, to submit revisions and changes to the development plan was evident all through from the submission of an initial development plan (IDP) rather than a comprehensive plan."
The CAG report was also at a loss to ascertain the high-value procurement activities by RIL involving huge payments and cited numerous instances where it failed to verify the "reasonableness of costs incurred" by RIL.
It also admitted that all this was largely due to the lack of adequate competition, including single financial bids, with major revisions in scope and specifications.
The CAG report observed, "(all this led to)adverse implication for cost recovery and GoI's financial stake."