Wednesday, August 03, 2011

Largesse to Private Explorers

An audit of production-sharing contracts reveals violations that have hurt the interests of the public.

The Comptroller and Auditor General (CAG)’s draft performance audit report on petroleum/natural gas production-sharing contracts (PSCs) ­– the first of its kind by the audit officer on the petroleum sector – suggests favours by the United Progressive Alliance (UPA) government to private players, especially Reliance Industries (RIL), and has expanded the ­already long list of “scams” associated with this government.

Well before the CAG’s audit, overpricing of natural gas produced by Reliance in the Krishna-Godavari (KG) basin had shown the UPA government in a poor light. In September 2007, an ­empowered group of ministers had recommended, against the advice of officials, that the sale price of natural gas from the KG basin be set at $4.2 per million British thermal unit (MBTU). This was despite estimates of Reliance’s production costs not ­exceeding $1.43 per MBTU. This very generous decision by the government allowed Reliance to garner super profits from the basin. Now, in 2011, the CAG has come up with more evidence which proves that large private players have violated the PSCs.

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