CAG again comes down hard on RIL for overpricing K-G gas, cutting govt dues
29 May 2014
The Comptroller and Auditor General of India, in a report released today, has criticised Reliance Industries Ltd for charging a rate exceeding the government-mandated price for its Krishna-Godavari gas, and for not including the marketing margin for calculating royalties owed to the government.
In October 2007, the union government under former Prime Minister Manmohan Singh had set a sale price of $4.20 per million British thermal units, based on the price discovered by RIL from key customers.
The CAG, in a draft report of its audit of RIL's spending on its offshore block, states that the company charged $4.205 per mmBtu from consumers, amounting to excess billing of $9.68 million.
"As per the price discovery process undertaken by the operator (RIL)... It was categorically indicated that selling price would be rounded off to two decimal points.
"A review of records relating to sales of gas to consumers, however, revealed that the operator has been charging the gas price at the rate of $4.205 per mmBtu (three decimal points) from its consumers in place of $4.20 per mmBtu, arrived at after rounding of 2 decimal points," the CAG said.
This led to excess billing of $9.68 million in first four years of production beginning 2009-10.
Moreover, RIL charged a marketing margin of $0.135 per mmBtu to cover for its marketing risks.
"It has also been noticed that while computing the profit petroleum (government's share of production) and royalty, the operator is considering the price of $4.205 per mmBtu instead of $4.34 being charged by him from the consumers, as the revenue earned through marketing margin is not being treated as revenue for the purpose of calculating cost recovery, profit petroleum and royalty," CAG said.
According to the government auditor's draft report, RIL had collected $261.33 million from the government towards the marketing margin, which has not been accounted for in its books.
"Consequently, cost recovery of $235.20 million (90 per cent) has not been adjusted in the recovered cost up to 2012-13 and there was a short remittance of government share of profit petroleum and royalty by $2.61 million and $13.12 million respectively for the year 2009-10 to 2012-13 to the Government of India," the report said.
The CAG noted that the oil ministry had in December 2011 asked the Petroleum and Natural Gas Regulatory Board (PNGRB) to determine the quantum of marketing margin chargeable on sale of natural gas to end consumers by each marketing entity on the basis of its actual marketing cost.
"The issue of marketing margin has not been decided to date," it said.