Govt-RIL dispute over Panna-Mukta 'tax evasion' intensifies

The dispute between the Modi government and Reliance Industries Ltd over the Panna-Mukta and Tapti oil and gas fields has reportedly intensified, with $1 billion in contention.

The government alleges that RIL is guilty of furnishing financial statements different from audited accounts, which is tantamount to massive tax evasion.

Questions are also being asked on the neutrality of arbitrators in the dispute between the petroleum ministry, RIL, and BG (British Gas).

The oil fields, which were discovered by ONGC, were originally allotted to a consortium of Enron Corp, which sold its stake to BG later), Reliance Industries with 30 per cent and ONGC holding the remaining 40 per cent.

Petroleum minister Dharmendra Pradhan has held discussions on the legal implications of the alleged excessive tax deduction and the submission of accounts to the arbitrators, which were different from the audited accounts and has asked appropriate agencies and legal advisors for opinion if these amounted to "fraud", according to a report in  The Economic Times citing sources.

The government has also questioned the appointment of arbitrators.

The government's legal advisors suspect that the chief arbitrator, Christopher Lau, had some connections with Allen & Overy, which represented Reliance and BG in the arbitration. Lau had himself made a declaration in the beginning of the arbitration process that his daughter had worked for Allen & Overy.

The government is also demanding that the contractors should not assume an income tax rate of 50 per cent as this reduces the state's share of profit.

This issue was flagged earlier by the Comptroller & Auditor General of India.