Parliament's panel pulls up Oil Ministry for vague replies on encashing bank guarantees of Reliance Gas

The Parliament's Public Accounts Committee (PAC) has pulled up the oil ministry for vague replies on encashing bank guarantees of Reliance Gas during the Congress-led UPA rule after authorisation for laying four pipelines was cancelled over failure to adhere to timelines.

The PAC, headed by Congress leader Adhir Ranjan Chowdhury, in a report tabled in Parliament on Monday said the petroleum ministry, despite repeated reminders, did not give reasons for not forfeiting bank guarantees given as assurance for completing the project.

Oil regulator PNGRB had in May 2012 asked the government to cancel licence granted to Reliance Gas Transportation Infrastructure (RGTIL) to lay four gas pipelines, saying the company has been dragging its feet on implementation of the 2,175 km pipelines.

Relogistics Infrastructure Limited, the special purpose vehicle to which the 2007 authorisation for laying the Chennai-Bangalore-Mangalore, Kakinada-Basudepur-Howarh, Kakinada-Vijayawada-Nellore and Chennai-Tuticorin pipeline was transferred, had cited uncertainty about the availability of gas for not building the lines.

"Ministry of Petroleum and Natural Gas has neither furnished the reasons for non-renewal/non-forfeiture of bank guarantee nor the details regarding the action taken thereon despite repeated reminders," the PAC said.

The ministry told the PAC that the performance bank guarantee was "deemed" to have been forfeited with the rescinding of the authorisation for the pipelines.

"Vide letters dated September 24, 2012 rescinding the authorisations in respect of the four pipelines, the Ministry had deemed forfeited the performance bank guarantees and asked the authorisation holder to furnish an amount of Rs 20 crore for each authorisation failing which the government reserves its right to take due legal action against RGTIL to recover the dues," the ministry told the PAC.

It, however, did not say how the bank guarantees ceased to exist and if RGTIL furnished fresh guarantees which were then forfeited.

The PAC said while the authorisation for the four gas pipelines was rescinded on September 24, 2012, it "is unclear and vague on the aspect of forfeiture of performance bank guarantees from the contracting entity and initiating appropriate legal action." It wanted the ministry to thoroughly examine "the failure to initiate penal measures on account of the performance-related issues pertaining to the gas pipeline projects." PAC asked the ministry to furnish a detailed account of the action taken, including identifying and taking action on the officials responsible for the lapses within three months.

The Petroleum and Natural Gas Regulatory Board (PNGRB) had vide letter dated May 14, 2012, asked the Ministry of Petroleum and Natural Gas to cancel the authorisation of the four pipelines as physical progress was "extremely slow" and the authorised entity "neither submitted the performance bank guarantee to the PNGRB nor renewed the guarantee given to the Ministry." As per the original authorisation, the pipelines were to be completed within 36 months of the notification of expression of interest or 24 months from the date of 100 per cent availability of right of user (RoU), whichever is later. The twin deadlines expired between June to August 2012 for the four pipelines.

The ministry issued the cancellation of authorisation order on September 24, 2012.

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