Embezzlement, mismanagement: AGP detects causes behind over Rs 16.5 billion EPZA losses

The Auditor-General of Pakistan has detected embezzlements, mismanagement and irregularities of more than Rs 16.5 billion in the Export Processing Zones Authority (EPZA). Auditor General of Pakistan''s Report-2010-11, exclusively available with Business Recorder, has exposed that Pakistan faced loss of Rs 13.8 billion of foreign exchange due to sanctions on 30 units imposed by the government.
In Karachi Zone of Export Processing Zones Authority (EPZA), the export of 30 sick/closed units with a committed export of 13.8 billion remained zero during 2009-10 because of their being inoperative. In view of Audit, the management should have checked the feasibility of the projects before sanctioning units to the applicants. The matter was brought to the notice of management through an observation memo date October 14, 2010. The Audit suggested investigation into the matter with a view to checking the increasing number of non-performing units and fixing responsibility for any lapse on the part of person(s) if any such case is found.
The matter was also discussed in DAC meeting held on December 20, 2010. The DAC directed the management to reallocate the cancelled plots to other prospective investors and provide information of Audit regarding forfeiture of the deposited amounts of cancelled units. However, progress was awaited from the management till finalisation of the audit report.
The report showed that the national exchequer faced loss of Rs 2.6 billion due to the failure of 19 projects of Export Processing Zones Authority (EPZA) to start construction despite approval during 2006 and 2007. According to details, 19 investors had started construction work in time with an envisaged investment of Rs 2.4 billion ($27.781 million) but they could not materialise the projects. In addition, the EPZA did not impose the non-construction penalty of $5/square metre/month, as provided in the agreement, which caused a loss of Rs 194.345 million ($2.286 million).
This situation resulted because economic viability/capability of the investors and their true potential were not properly scrutinised due to which non-serious persons not only managed to get projects sanctioned but also unnecessarily held thousands of square metres of developed land for years. The report says that the irregularities were brought to the notice of the management through an observation memo dated October 14, 2010. The Audit also suggested fixing of responsibility on the person(s) responsible and recovery of the outstanding amount. The matter was also discussed in the DAC meeting. However, progress was awaited from the management till finalisation of this report.
In another audit para, the report uncovered a loss of Rs 43.56 million to the country due to blockage of funds and non-transfer of possession of land. The report says that the management of EPZA made a payment of Rs 43.5 million in April 2006 to the government of Sindh for 200 acres of land. The land was disputed and included in the package of 1,200 acres of land already pledged to Sindh Alkalis and was therefore under litigation. The EPZA had not been given possession of land despite payment of complete amount till close of audit in November 2010.
The matter was brought to the notice of management on October 6, 2010. The management stated that the land was disputed and the case was in the Supreme Court of Pakistan. The management also added that government of Sindh had agreed to provide alternative land at some other place in Karachi for KEPZ phase-III. The matter was also discussed in DAC meeting held on December 20, 2010. The DAC directed the management to submit reply of the query to Ministry under intimation to audit.
However, progress was awaited from the management till finalisation of this report. Similarly, the report showed that the nation faced loss of Rs 43.691 million due to non-recovery of Annual Ground Rent and Utility Charges from investors, and Rs 15.082 million for delaying construction of canteen building.