CHECKS & BALANCES

RINGING IN TROUBLE 

The telecom sector is just not getting over its bad stars. The latest is the jolt it has received from the Delhi High Court,which has given a go-ahead to the Comptroller and Auditor General (CAG) to audit private telecom companies in order to assess whether these companies have underpaid the license fees. Rejecting a plea filed by the Cellular Operators Association of India, and the Association of Unified Telecom Service Providers filed against the TDSAT order issued in 2010 on this contentious issue, the Court has permitted the CAG to undertake this audit. 

The decision is likely to have a very crucial and long term impact on the telecom sector. In fact, it may lead to the opening up of the proverbial can of worms. Private companies, till now, have been asserting that they being private entities cannot be subjected to a CAG audit. However, the court’s decision has come as an absolute shocker. Experts are of the opinion that this will prove beneficial for the government while companies would certainly be at a loss. In fact in its reply to the High court, the CAG has categorically stated that that as per the constitution of India and the CAG act 1971, it is the duty of the CAG to audit the accounts of the Union and those “in relation to accounts of the Union.” It has also sought the revenue sharing details of companies, which could turn out to be the real problem area. 

In June 2010, the honourable High Court had directed the telecom companies to submit their account books (only revenue sharing details) to CAG so that it can be assessed whether there was any under reporting of license fees by them. The order was later modified by the SC, which directed the firms to furnish their financials to CAG, but stopped the auditor from vetting the papers till the HC decided the case.

GREEN REGULATOR 

In another important decision, the Supreme Court has directed the Central Government to set up an environment regulator for the clearance of industrial projects. The Court has very clearly stated that until a new law is passed, the government should follow its 2011 Lafarge judgment, in which it has instructed the Government to set up a green regulator for the clearance of projects. 

In fact, the central government has been avoiding the creation of such a supreme regulatory body on the grounds that there is no requirement for such a body. In its decision in the Lafarge Cement case related to environmental clearance, the Supreme Court had directed the government to set up a regulator so that the burden on the court could be reduced. All the minor industrial issues have been referred to it for review until now. 

The Ministry of Environment and Forests has always opposed this proposal of the apex court. According to the response filed by the Minister “requisite regulatory mechanism for appraising projects, enforcing environmental conditions for approvals and to impose penalties on polluters is already in place. The Ministry, in consultation with the ministries concerned, departments in the Central government and state governments, and guidance of this court, is making serious efforts to streamline and strengthen the same.” With a green regulator being set up soon according to the court order we hope project clearances will be far smoother than what they have been until now.

LOOKING OUT

Oil and gas companies of Indian origin are acquiring both conventional and unconventional assets overseas in a big way. Upstream major Oil India along with ONGC Videsh has completed the acquisition of a 100 per cent stake in Videocon Mozambique Rovuma 1 Limited from Videocon Mauritius Energy Limited, while IOC is all set to acquire a 10 per cent stake of Malaysian state oil company Petronas’s in a shale gas asset in Canada. Both these acquisitions by Indian PSUs are considered strategic in the country’s quest to attain self reliance in oil requirement. 

As far as the OIL-OVL deal is concerned, Videocon Mozambique Rovuma 1 Limited holds a 10 per cent participating interest in the Rovuma Area 1 Offshore Block in Mozambique. OIL had signed a definite agreement in June last year in this regard and terms remained more or less the same. As per Oil India, Area 1 covers approximately 2.6 million acres in the deepwater Rovuma Basin offshore Mozambique and represents the largest gas discovery offshore East Africa with estimated recoverable resources of between 35 and 65 TCF. Area 1 has the potential to become one of the world’s largest LNG producing hubs with first LNG expected in 2018. 

In another development, the IOC board has approved the acquisition of Petronas’ stake and it is expected that this deal will be frozen around USD 80-90 crore. Petronas, through its wholly- owned subsidiary Petronas International Corp, had in 2011 bought Canada’s Progress Energy Resources in 5.2 billion Canadian dollar to get the Altares, Lily and Kahta shale gas assets in north-eastern British Columbia. By this deal Indian Oil is looking to expand its portfolio of exploration and producing assets while Petronas wants to share some of its costs.