CAG may also audit RIL's profit from gas price increase

Will the Comptroller and Auditor General (CAG) add more fuel to the already controversial gas price increase by the government? Indications are that it will.

According to a report in the Times of India, the CAG is planning to find out what is the profit that Reliance Industries will make from the KG D6 block after the price increase.

RIL, ONGC and OIL have been touted as the key beneficiaries of the doubling of the gas prices by the government from April 2014.

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Various experts have already expressed reservations about the viability of the government’s step, which has been projected as a key reform in the fuel pricing regime.

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The CAG and RIL have been at loggerheads after the company objected to a performance audit of its KG D6. The national auditor is now auditing the block expenses during 2008-12.

However, as per the ToI report quoting sources, the scope of the audit will include “decisions taken by the government that would benefit the private player and a presumptive loss to the exchequer”.

Sources have told the newspaper that RIL has already covered the cost part and the increase in gas price will be its profit.

“About 90% of receipts from K-G D-6 were so far booked as expenditure and in the remaining 10%, only 1% was paid to the government and rest 9% went to the operator as profit,” the report said.

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The development assumes significance as there has been criticisms from various quarters that the gas price increase was aimed at favouring Reliance Industries.

On Monday, Tamil Nadu Chief Minister J Jayalalitha alleged that the decision to increase the gas prices was taken to favour a Mumbai-based company.

According to a report in the Economic Times, she did not take the name of the company, but dropped enough hints as to the company being referred to was Reliance Industries.

“Instead of penalising the industrial house for producing far lower levels of gas than guaranteed from the KG-D6 basin, the new policy will only pave the way for it to make huge profits,” the ET report quoted from a statement issued by Jayalalithaa in Tamil.

Last week, CPM Polit Bureau had also slammed the government saying the intention behind the move was to help RIL make more profit.

Disclosure: The Reliance Group has funded the promoter of Network18, which publishes Firstpost