Oil ministry calls for restraint on CAG report on KG-D6 field cost

On receipt of the ministry’s reply, the CAG will examine the reply on merits and will hold an exit conference with it before making its final observations. “The ministry, therefore, appeals to all concerned to exercise restraint and allow the process to be completed,” a statement issued by the oil ministry said

New Delhi: Amidst a raging controversy over the Comptroller and Auditor General’s (CAG) draft report severely criticising its role in approving Reliance Industries’ (RIL) KG-D6 field cost, the oil ministry yesterday called for restraint and not jumping to conclusion saying the top auditor has not yet finalised its report, reports PTI.

“The CAG report is at the draft stage,” the ministry said in a press statement here. “This ministry is examining the draft report, it involves scrutiny of administrative/ policy issues and technical issues. The preparation of a detailed reply will take some time.”

“It is only after taking into account the reply of government that the office of CAG will suitably amend the draft report and send the final report for placing it on the table of Parliament,” it added.

The CAG in its draft report had alleged that the oil ministry and its technical arm DGH favoured RIL but did not say if by doubling of cost of developing eastern offshore KG-D6 field the Mukesh Ambani firm had overbilled the government and thereby caused loss to the state exchequer.

It also pulled up the ministry for going out of its way to grant nearly 1,700 sq km of additional area to Cairn India adjacent to its oil discovery in Rajasthan block.

“As the process of preparation of reply and its vetting by the office of CAG is yet to be completed, it would be premature for the ministry to give any response on the observations made in the draft report at this stage,” it said.

“It would be equally incorrect for the media commentators, political leaders and civil rights activists to jump to conclusions and thus short-circuit the process,” the statement added.

On receipt of ministry’s reply, the office of CAG will examine the reply on merits and will hold an exit conference with it before making its final observations.

“The ministry, therefore, appeals to all concerned to exercise restraint and allow the process to be completed,” the statement said.

The ministry said it was at its request in November 2007 that the CAG agreed to carry out special audit in respect of certain blocks/fields operated under pre-New Exploration Licensing Policy (NELP) and NELP regimes.

“The draft performance audit report has been received in this ministry on 8 June 2011,” it added. “While the above process is underway, the leaked draft report is being reported and commented upon in sections of the media.”

The CAG in its draft audit report on KG-D6 block said the ministry and the Directorate General of Hydrocarbons (DGH) also bent the rules to grant ‘huge benefits’ to RIL when it was allowed to retain the entire block, but said gains cannot be quantified.

“The increase in (Phase-1) cost from $2.39 billion proposed in the Initial Development Plan of May 2004 to $5.196 billion in the addendum to the Initial Development Plan is likely to have a significant impact on the government of India’s financial take.

“However, at this stage, based on the information provided, we are unable to comment on the reasonableness, or otherwise of the increase in cost, both overall and in respect of individual line items,” CAG said in the draft report.

Responding to the reports in media, RIL earlier this week said that “as a responsible operator, it has fully complied with the requirements in the Production Sharing Contract (PSC) at all times in conducting petroleum operations, and refutes any suggestion to the contrary.”

“The KG-D6 project has been globally acclaimed for its cost effective, speedy, flawless execution and smooth commissioning,” RIL had said in a statement.

Reliance had raised the cost of bringing to production India’s first deep-sea and the largest gas field after reserves almost doubled to 11.3 trillion cubic feet, raising the peak output two times to 80 million cubic meters per day.

An operator like Reliance is allowed to recover all the capital cost incurred on developing a field from revenues earned from the sale of oil or gas before profits are split between the stakeholders, including the government.

The CAG conducted the audit of the RIL accounts after allegations of ‘gold-plating’, or artificially inflating the development costs of Dhirubhai-1 and 3 gas fields, two of the 18 discoveries in KG-D6 block, were levied by the Anil Ambani Group.

The premier auditor, whose report will be tabled in Parliament after incorporating comments from the oil ministry, said RIL never had the intention of developing KG-D6 gas fields as per the initial cost estimates and said it did not initiate tendering for equipment as per the original plan.

CAG recommended that the “role of DGH and government of India representative on the Management Committee may be closely scrutinised to see why the operator was allowed to violate the provisions of Production Sharing Contract (PSC) and not adhere strictly to the terms of the approved initial development plan”.

On Cairns India, the CAG said as per the PSC, the total contract area of the company’s operated RJ-ON-90/1 block' in Rajasthan was 11,108 sq km. The oil ministry agreed to Cairn’s request for grant of additional 852.2 sq km in August 2004 and 856 sq km in March 2005.

“In our view, the contract area under the PSC is sacrosanct... It can by no means be argued that already discovered reservoirs extend over the entire extended area of 852.20 sq km (and) 856 sq km,” it said.

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Tata Steel sells Riversdale stake for $1.11 billion

“Tata Steel has decided that it would not want to hold its equity investment in Riversdale Mining, which is proposed to be delisted, without any joint venture agreement with the majority shareholder in unlisted Riversdale,” the company said in a statement

New Delhi:  Tata Steel on Thursday said it has sold its 26.27% stake in Australian coal miner Riversdale to global mining major Rio Tinto for A$1.06 billion ($1.11 billion), reports PTI.

“The sale consideration of about A$1,060 million (about Rs5,074 crore) represents around 100% appreciation of value in less than four years since the first investment,” the Indian steel major said in a statement.

The Anglo-Dutch miner Rio Tinto holds 73.2% stake in Riversdale, which has an estimated 13 billion tonne reserves in its two projects in Mozambique—Benga and Zambeze.

Riversdale has been a takeover target for Rio Tinto since December 2010 when it put in a bid of A$16 per share to acquire a majority stake in the Australian mining firm.

Tata Steel, along with Brazilian steel maker CSN, has been continuously opposing Rio’s buying stake in Riversdale, maintaining that it was more interested in getting coal from Riversdale to feed its European operations than making a quick buck.

CSN backed out from its earlier stand in April and sold its entire 19.9% stake to Rio Tinto.

“As a part of the ongoing review of the strategic investments of the company, Tata Steel board has considered the recent announcement of Rio Tinto Jersey Holdings 2010 to delist Riversdale following its increased shareholding to 73.2% in Riversdale.

“Tata Steel has decided that it would not want to hold its equity investment in Riversdale Mining, which is proposed to be delisted, without any joint venture agreement with the majority shareholder in unlisted Riversdale,” Tata Steel said.

Tata Steel scrip was trading at Rs567.30 per share, up 2.56% in noon trade on the Bombay Stock Exchange today.

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Workers’ strike at Maruti’s Manesar plant called off

As part of the deal brokered by Haryana chief minister Bhupinder Singh Hooda, MSI will reinstate all the sacked 11 workers and take a lenient approach on enforcing no-work-no- pay rule of eight day’s salary cut for every single day of the strike, while the workers have agreed to the management’s demand of not allowing the formation of a second union in the company

New Delhi: The 13-day strike at the country’s largest car maker Maruti Suzuki India's (MSI) Manesar plant in Gurgaon was called off late last night following a deal brokered by Haryana chief minister Bhupinder Singh Hooda between the workers and the management, reports PTI.

As part of the deal, MSI will reinstate all the sacked 11 workers and take a lenient approach on enforcing no-work-no- pay rule of eight day’s salary cut for every single day of the strike.

On the other hand, the workers have conceded to the management’s demand of not allowing the formation of a second union in the company.

“Agreement has been signed and workers have decided to call off the strike. They will resume work from tomorrow,” Haryana labour secretary Sarban Singh said.

He said the company has decided to reinstate all the 11 sacked employees and a disciplinary inquiry will be initiated against them.

Sources privy to the development said the formula was worked out after Mr Hooda met MSI top executives, including managing director and CEO Shinzo Nakanishi, last evening.

As the strike continued for the last 13 days, the company lost production of 12,600 units valued at about Rs630 crore.

Under the deal to end the strike, the management agreed to reduce the no-work-no-pay rule of eight day's salary cut for every single day of the strike to three days and it can be reduced further to just one day depending on the conduct and productivity of the workers at the plant in the next few months, said sources close to the development.

The workers, on the other hand, agreed that they will not press for the management’s recognition for a new union.

CPI and AITUC leader Gurudas Dasgupta, who had met Mr Hooda several times in the past 10 days, said the agreement will have no reference to the management’s decision of not allowing trade union activities at the plant.

On 4th June, the workers went on a strike demanding recognition of a new union, Maruti Suzuki Employees Union (MSEU), formed by those working at the Manesar plant.

Currently, the company has one recognised union—Maruti Udyog Kamgar Union—which is dominated by workers at the Gurgaon plant.

Retaining the contract labourers for the two upcoming new units inside the Manesar complex was another demand.

While a company spokesperson said only about 600 people were on strike, MSEU general secretary Shiv Kumar claimed at least 2,000 workers were on the sit-in stir at the plant.

Cracking the whip, the company had fired 11 workers last week for allegedly inciting others to go on strike.

The Manesar plant rolls out about 1,200 units every day in two shifts. The factory produces hatchbacks Swift and A-Star and sedans DZiRE and SX4.

Mr Dasgupta said so far there has been no incident of violence and the workers have been ‘united, responsible and patient, which is remarkable’.

“We also congratulate all trade unions of Gurgaon-Manesar area who rallied behind the agitating Maruti workers at the Manesar plant,” he added.

The shares of the company today were trading 0.16% lower at Rs 1,187.55 apiece on the Bombay Stock Exchange in mid-morning trade today.

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