Petroleum Ministry units: over Rs 41.5 billion irregularities detected

The Auditor General of Pakistan has detected embezzlement/irregularities and mismanagement of more than Rs 41.5 billion in the Ministry of Petroleum and Natural Resources.
According to Auditor General of Pakistan (AGP) Report-2010-11, exclusively available with Business Recorder, which would be laid in the coming budget session of the National Assembly, Rs 21.7 billion irregularities, embezzlements and mismanagement was detected in Sui Southern Gas Company Limited (SSGC), Rs 12.28 billion in Sui Northern Gas Pipelines, Rs 6.1 billion in Oil and Gas Development Company Limited (OGDC), Rs 1.24 billion in Pakistan State Oil Company Limited (PSO), Rs 38.039 million in Government Holding (Pvt) Limited, Rs 28.52 million in Pakistan Mineral Development Corporation (Pvt) limited and Rs 31.648 million in Pakistan Petroleum Limited.
The Audit Report said that national exchequer faced a loss of Rs 8.3 billion due to sale of gas at subsidised rate to fertiliser units causing shifting of low-cost burden on other industrial and commercial consumers. The audit argued that the policy of cross charging fertiliser subsidy to other industrial and commercial consumers must be reconsidered, as it was burdening general industries and ultimately their produce that adversely affects their cost competitiveness in local and foreign markets.
The matter was discussed in DAC meeting held on December 11, 2010 and there was agreement that the act of the Company was in line with government policy. However, Audit maintained that policy of cross charging fertiliser subsidy was burdening general industry by affecting the cost of competitiveness in local and foreign markets. However, DAC decided to place the issue before the Public Accounts Committee of the National Assembly.
Similarly, the public exchequer faced loss of Rs 11.257 billion and wasteful expenditure of Rs 13.210 million due to non-implementation of LPG project in time. The matter was brought to the notice of Ministry/management on August 16, 2010. The management''s reply dated October 22, 2010 was silent about getting confirmation of the Prime Minister by the Ministry/management for location of the plant which inaction resulted in loss to the exchequer. However, management admitted the loss and concluded that the delay was a national loss.
The DAC directed in its meeting held on December 11, 2010 that a fact finding inquiry may be conducted at the level of Ministry of Petroleum and Natural Resources. The nation also faced loss of Rs 1.129 billion due to leakage/theft of gas in Quetta and Rs 339 million due to re-appointment of Temporary Assignees in SSGC.
According to Audit Report, SNGPL faced loss of Rs 11.2 billion due to procurement of imported HR coils. According to details, SNGPL floated an international tender and specified API specification 5L grade X-70 PSL2 for procurement of HR Coils worth Rs 11.2 billion which were qualified by the foreign manufacture only. Engineers of SNGPL lodged a complaint and claimed that prescribed specifications deprived Pakistan Steel of business opportunity and that there was no need to specify grade X-70 due to several reasons.
In DAC meeting held on January 8, 2011, the management said that the matter was analysed at a higher forum. The DAC also directed that the working papers submitted to BoD along with other relevant records be provided to Audit for verification but no record was provided till finalisation of the audit report.
The report stated that the national exchequer also faced loss of 131.896 million and Rs 183.922 million due to un-due instalment allowed to Flying Paper and Zaman Paper and for purchase of Customer Car and billing System at higher rates. Audit report says that the national exchequer faced loss of Rs 3.103 billion due to irregular award of contract for hiring of rigs without competitive bidding.
According to details, the OGDC awarded a contract to Oil and Gas Engineering Company SPA China for renting two deep drilling rigs No SPA-04 and SPA-05 at estimated price of US $26,205,000 on single source basis for initial period of two years on January 30, 2006. Before the expiry of initial contract period, the management did not resort to international competitive bidding. The contractor submitted enhanced rates for rigs already rented by OGDC for the same location.
The OGDC management approved the extension at estimated contract price of $38,789,333 for one year up to June 2009 on the rates proposed by the contractor on July 28, 2008 and Jun 26, 2009. Hence that award of contract without competitive bidding on the higher rates without ICB was irregular.
The acceptance of de-mobilisation charges for the same rigs deployed on the same location with new terms and conditions was irregular. The Company also faced the loss of Rs 1.773 billion due to procurement of equipments without adopting international tendering procedure. The Audit report said that PSO faced the loss of Rs 815 million and Rs 248.884 million due to imprudent decision for award of contract and sale of sizeable quantity of products before upward revision in tariff.