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India’s national auditor has slammed three oil and gas exploration groups in a new report that suggested they were irregularly aided by government officials in securing higher profits, costing the exchequer millions of dollars in lost revenue.

A report by comptroller and auditor general of India, which last year revealed alleged irregularities in the auction of mobile-phone spectrum, claimed that the government’s decision to allow Mukesh Ambani’s Reliance Industries to increase development costs in India’s largest gas field reduced the state’s share of revenue.

The report is being examined by the government but has yet to be released to the public.

According to people familiar with the CAG, the audit also alleges that the Indian subsidiary of the London-listed Cairn Energy, which owns important oilfields in Rajasthan, and BG, which operates two fields with India’s largest state-run explorer ONGC, were favourably treated by officials in the petroleum ministry in the production-sharing contracts they signed with the government.

“There are findings that show that some irregularities have been committed in the production-sharing and profit-sharing contracts the government signed with Reliance and other companies that have caused significant financial losses to the exchequer,” a person close to the CAG said. “The production-sharing and profit-sharing deals were not favourable to the government ... private groups like Reliance, Cairn India and BG benefited from these deals.”

Vinod Rai, India’s CAG, told the Financial Times that he had brought expertise from Oman to help with a complex investigation to gain technical knowledge of the oil and gas industry to ascertain whether suspected overpayments had been made.

Mr Rai said he was conscious of the “private muscle” that could be exerted in an investigation that involved listed companies. Without a greater technical understanding private companies had threatened to “run circles” around the state auditor, he said.

Reliance said it had not received a copy of the report but denied any wrongdoing. Meanwhile, Cairn India and BG declined to comment.

Reliance, which holds a 90 per cent stake in Krishna Godavari oil and gas basin off India’s east coast, increased capital expenditure to explore the field to $8.8bn in 2006, up from $2.4bn in 2004, as it forecast it would double its output to 80m cubic metres of gas per day.

However, output from the block has fluctuated between 50m cubic metres and 60m cubic metres a day over the past year, according to Indian energy regulatory officials.

Reliance said in April that boosting gas output had proved to be “more complex than envisaged”.

Analysts said it was too early to say whether there would be any major repercussions from the CAG report, until the findings were made public.

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