CAG has power to audit oil & gas blocks: Rangarajan

The Prime Minister-appointed Rangarajan Committee, which went into oil and gas contracts, on Wednesday said that the CAG's authority to audit expenses was unquestionable.

"Audit is prerogative of CAG and so the power of audit remains with CAG," C Rangarajan said after the report of the panel, headed by him, was made public.

The comments come in the backdrop of intense bickering over the scope of CAG audit of Reliance Industries' spending on the flagging eastern offshore KG-D6 gas fields.

RIL has argued that while it is open to CAG doing a financial scrutiny as provided, the Production Sharing Contract does not provide a performance audit by the official auditor.

Rangarajan said blocks with low value can be audited by panel of auditors formed by CAG and for high value blocks, the official auditor should audit directly.

The CAG have the power to decide the value of the block that will be audited by it directly, he said.

In its report, the Rangarajan Committee has suggested shunning the present cost recovery model that allows operators like RIL to first recover all their investment before sharing profits with the government.

This model had come in for criticism from CAG which said it encouraged companies to keep raising cost to defer higher profit for the government.

"We want to move from the present format of contracts," he said adding the present system has run into lot of dispute.

These disputes has led to delay of implementation of contract, he said adding under the new system both govt and contractor will have revenue share from day one of production.

For the future, the panel suggested bidding out the blocks based on the highest production share offered.