Govt asks SFIO to begin prosecution against Sesa Goa

After an investigation, spanning almost two years, the SFIO has found that iron-ore exporter Sesa Goa has over-invoiced import receipts of coking coal by Rs14.6 crore and also sale of iron ore by Rs42.51 crore, while under-invoicing exports by Rs1,002 crore

New Delhi: The corporate affairs ministry is understood to have ordered prosecution against mines major Sesa Goa on eight grounds, including over and under-invoicing of exports and imports of over Rs1,000 crore, reports PTI.

Proceedings will be initiated on eight grounds in an economic offences court in Goa, sources said.

“We have asked the Serious Frauds Investigation Office (SFIO) to begin prosecution against the company. We have accepted eight of the nine grounds that SFIO had recommended prosecution on,” a senior MCA official told PTI.

After an investigation, spanning almost two years, the SFIO has found that iron-ore exporter Sesa Goa has over-invoiced import receipts of coking coal by Rs14.6 crore and also sale of iron ore by Rs42.51 crore, while under-invoicing exports by Rs1,002 crore.

When contacted, the company said in a statement that the allegations contained in SFIO report are misconceived and even factually incorrect.

On the prosecution, PK Mukherjee, managing director, Sesa Goa, said, “We are yet to hear anything about this since end June when we submitted our comments on SFIO report to the ministry. As and when we receive any further communication in this regard, we’ll deal with it appropriately.”

Under-invoicing is normally done to avoid paying tax.

Under the practice, companies mention in their records an amount less than what was actually delivered and pocket the difference.

The SFIO has also recommended prosecution against the Sesa Goa’s managing director, and the company secretary for violations under the Companies Act, 1956.

The SFIO has also alleged that Sesa Goa made excess payment of agency commission to sales agent amounting to Rs40.6 crore to facilitate its exports of iron ores to foreign buyers.

“Such sales agents included Mitsui & Co (of Japan and Hong Kong), Nissho Iwai Corporation (Japan), Ahmed Jaffer & Co (Pakistan), and Arim Peks (Turkey),” the SFIO report has said.

It has also accused the company’s independent directors and statutory auditor of non-cooperation with the investigations, and has also recommended prosecution on this basis.

In 2009, the SFIO was asked to investigate the affairs of Sesa Goa, following a report of the Registrar of Companies (ROC), which 'prima facie' found the company guilty of fudging invoices.

Allegations against the company also included diversion of funds, which, the SFIO report has rejected.

The RoC had been looking into Sesa Goa’s case since 2003 when the company was majority-owned by Mitsui Co.

Anil Agarwal-promoted Vedanta Resources acquired 51% controlling stake in Sesa Goa in 2007 from the Japanese company for $981 million.

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RBI hints that 2nd quarter review may not lower policy rates

The RBI is scheduled to hold its quarterly review of credit policy on 25th October. However, it is unlikely that the central bank will pause its rate hike strategy on account of the slowdown in industrial output growth

Jaipur: Ahead of second quarter review of monetary policy on 25th October, the Reserve Bank of India (RBI) indicated that it may not lower the key interest rates as inflation is still high, reports PTI.

“...We need to bring inflation down in order to bring interest rates down,” RBI governor D Subbarao said here.

He further said that the central bank is conscious of the need to bring down interest rates to boost economy, but it might take time.

RBI is for a low interest-rate regime but that will take time, he said.

The governor expressed concern over the rising inflation, but said it could be controlled by the end of this year.

The RBI is scheduled to hold its quarterly review of credit policy on 25th October. However, it is unlikely that the central bank will pause its rate hike strategy on account of the slowdown in industrial output growth.

The RBI has already hiked rates 12 times since March 2010 to control inflation, which stood at 9.8% in August.

During August, the Index of Industrial Production (IIP) declined to 4.1% against 4.5% recorded in the same month a year ago.

Factory output stood at 5.6% in the April-August period, as against 8.7% in the same period last year, according to official data released on Wednesday.

Addressing members of Rajasthan Chamber of Commerce, Mr Subbarao said the economic growth will remain between 7.5% and 8%.

Earlier during the day at special State Level Bankers’ Committee (SLBC) meeting of Rajasthan, the governor said financial inclusion needs to be meaningful.

Banks in Rajasthan will ensure that all 3,883 identified villages with total population of more than 2,000 are meaningfully covered in the first phase of financial inclusion plan by March 2012, RBI said in a statement.

It said banks will draw up specific strategies to improve the credit-deposit ratio in three districts of Rajasthan, namely, Dungarpur, Rajsamand and Sirohi which have low CD ratio.

The state government of Rajasthan will release its share of Rs39 crore towards recapitalisation of five regional rural banks in Rajasthan, it said.

The governor and other senior officials of RBI are in Jaipur to attend a meeting of the Reserve Bank's Central Board of Directors being held in Jaipur on Thursday.

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CAG advises oil ministry of caution on RIL’s KG-D6

“The ministry of petroleum and natural gas may like to take precautions to ensure that the audit of expenditure prior to adjustment to the account of Reliance Industries be effectively done to ensure that only admitted items are approved,” deputy CAG Rekha Gupta wrote to the ministry on 3rd October

New Delhi: The Comptroller and Auditor General of India (CAG) has advised the oil ministry to allow Reliance Industries (RIL) to recover expenditure on its eastern offshore KG-D6 field only after it has been audited, reports PTI.

Stating that the CAG’s letter to the ministry was to “flag the critical issues so as to facilitate adequate precautionary action”, deputy CAG Rekha Gupta said in the 3rd October communiqué summed by the CAG report on KG-D6 that was tabled in Parliament last month.

The letter asked the ministry to review the decision to allow RIL to retain entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001 besides seeking review of 10 contracts, including the eight awarded to Aker Group for the MA oilfield in the same block, on a single-bid basis.

But it did not mention of CAG report calling for an audit of increase in expenditure proposed by Cairn on its Mangala Rajasthan oilfields from $1.24 billion to $3.34 billion.

It also did not mention the $201.54 million expenditure that was disallowed for cost recovery by CAG.

“The ministry of petroleum and natural gas may like to take precautions to ensure that the audit of expenditure prior to adjustment to the account of this operator be effectively done to ensure that only admitted items are approved,” Ms Gupta wrote to the ministry on 3rd October.

The CAG had audited expenses RIL incurred during 2006-07 and 2007-08, and spending incurred from 2008-09 onwards is to be covered in future audits.

As practice, operators are allowed to recover from sale of hydrocarbons, only that part of investment which has been audited. Even in case of RIL’s KG-D6 block, $5.26 billion out of $5.69 billion invested till 31st March was allowed to be cost recovered only after audit.

The CAG audit of KG-D6 was the second audit and expenses had previously been audited by a government appointed auditor.

“Permitting inadmissible items may lead to legal complication if recovery has to be undertaken after audit by the CAG,” Ms Gupta wrote.

Ms Gupta said there was considerable scope for improvement in the management of exploration and production. “We also found numerous deficiencies in compliance and control issues with reference to the provisions of the Production Sharing Contract (PSC) by the ministry/Director of Hydrocarbon (DGH).”

“Government representatives should protect Government of India’s financial interests (not just technical perspective) at the time of review and approval of development plans in the Management Committee (MC),” she wrote.

Ms Gupta said a review of the award of 10 specific contracts, of which eight were awarded to Aker Group companies, on the basis of a single financial bid may be undertaken. “The expertise, ownership pattern and experience of the Aker group needs to be ascertained.”

CAG said the entire PSC process is designed to ensure that the private contractors fully explore the contract area within designated timelines, relinquish areas where hydrocarbon prospects appear poor in a phased manner, and retain only those areas where hydrocarbon discoveries are made, relinquishing the remaining area for re-allocation to other potential bidders.

“Therefore, the stipulated timelines and processes in the PSC for relinquishment of contract area should, under no circumstances, be relaxed,” it said.

“The discovery and development areas should be rigorously delineated, keeping strictly to the discoveries made through exploratory and appraisal well drilling and proper delineation of reservoir boundaries,” she wrote.

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COMMENTS

Nagesh Kini FCA

5 years ago

Either a JPC and/or PAC should constitute a special committee to immediately go into each of the contracts and compliance. This loot of nation's natural resources needs to be nipped in the bud without further delay. There is more than meets the eye.
If any big business group believes that it can get away with blue murder must be put in place.
What is Salman Khursid talking of judicial activism affecting FDI. Union Carbide and Bhopal are bad enough.
A lot of Annagiri is called for!

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