KP Mineral department: AGP detects irregularities worth Rs 364.128 million

The Auditor General of Pakistan (AGP) has detected three cases of the illegal operation, unauthorized sale and wasteful expenditure to the tone of Rs364.128 million in the accounts of the Mines and Mineral Development Department of Khyber Pakhtunkhwa during financial year 2015-16, said an AGP report on the accounts of the KP government departments. The report has already been presented in the provincial assembly that had referred it to the Public Accounts Committee (PAC) of the house. The KP PAC is headed by the Speaker Assembly has representation from all parliamentary parties of the house.

According to Mine Concession Rules 2005, a license or a lease shall, within sixty days of the issue of the license or a lease, cause the granted area to be demarcated on ground according to the survey data and submit a certificate on the prescribed form signed by a Registered Surveyor of having carried out the said boundary demarcation.

On receipt of the certificate, the Licensing Authority may cause boundary demarcation to be checked and corrected on payment of fee to be notified by government.

A licensee or a lessee may get his area demarcated officially, after paying such fee as may be notified by the Licensing Authority from time to time. A licensee or a lessee shall not commence prospecting or mining operations unless he has submitted the demarcation certificate to the Licensing Authority and it has been approved. The license or the lessee shall, at his own expense, erect and at all times maintain boundary marks and pillars standing not less than one meter above the surface of the ground.

But, during the financial year 2014-15, it was noticed in the office of the Assistant Director Mines & Mineral Development Mardan, that the licensing authority granted mining lease of Palo Dheri over an area of 90 acres revised to 91.744 acres and 166.91 acres respectively for mining/extraction of marble.

The work order to the contractor was issued on 25.11.1999. In the final renewal order issued on 12.07.2013, for the period from 22.09.2013 to 21.09.2018, it was clearly mentioned that lessee has not yet erected the boundary pillars and will have to deposit fie of Rs.3000/- in this behalf. The AD local was further directed that the party will erect the boundary pillars to be verified by the AD and report to this effect be submitted to the high ups.

The lessee has neither erected the boundary pillars nor reported by the AD local to the high ups, despite the fact that an overall production of 243,311 ton and 180,385 ton was reported by the contractor up to 11/2015 and 8/2015. This resulted in an unauthorized production of minerals valuing Rs121,655,500 (243,311 ton x Rs.500 per ton) respectively.

Audit holds that non construction of the boundary pillars is a serious issue and was required to have been constructed in time for prevention of illegal mining and safeguarding the public interest, but, these were not constructed, which resulted into illegal mining of Rs.211,848,000/-.

Illegal operation and non-erection of boundary pillars occurred due to undue favour to the contractor, non-adherence to provision of MCR and weak internal controls.

When pointed out in March 2016, it was stated that detailed reply would be submitted after consulting the record in accordance with Mining Concession Rules 2005.

In the Departmental Accounts Committee (DAC) meeting held in November 2016, the department replied that the party was fined for Rs.3000/- for non-erection of boundary pillars, which was deposited. DAC directed that an Inter-Departmental committee be constituted and a fact-finding inquiry be conducted. However, the inquiry was not been conducted till finalization of this report.

The audit has recommended that DAC directives be implemented, responsibility be fixed against the persons at fault and the loss sustained by government be made good.

In second case, the audit noticed illegal and unauthorized sale of mineral produce worth Rs165 million in violations of the Mining Concession Rules 2005.

During the financial year 2014-15, in the office of the Director General (DG) Mines & Minerals Khyber Pakhtunkhwa, it was noticed that exploration license over an area of 162.26 square kilometer near village Tashkar Dormil, Parisan District Chitral, was awarded to M/S Tuny Pak Minerals Pvt. Limited for a period of 3 years dated 7.08.2012.

The lab result, conducted on 25.07.2012, showed that a sample of 500 M.ton was brought out of which 15 ton of chip channel was scrutinized and the lab authorities found composite sample collected for Research and Development (R&D) purpose through Eyro-metallurgical process, which would be undertaken at China for extraction of Antimony metal. However, the facility was not available at Mineral Testing Laboratory (MTL) Peshawar.

The contractor carried the sample of 500 M.Ton to China and sold in the Chinese market in violation of MCR 2015 and without any consent or approval of the provincial government of KP regarding sale.

According to the terms of the approval of license, the holder could use the metal for exploration purpose and could not sell even in local market. The license holder has admitted the export of the metal to China, where it was sold out. He told the metal sold to international market of China in violation of rules and gained handsome amount of Rs.165,000,000/ (500MT @ US$ 3300 per MT). Thus, due to this illegal sale government sustained a loss of Rs.165,000,000/-.

The illegal and unauthentic transportation of minerals to China occurred due to violation of clauses of the allotment letter, undue favour to license holder and weak internal controls.

When pointed out in June 2016, the management furnished no reply.

In the DAC meeting held in December 2016, the department replied that M/S Tunky Pak Minerals (Pvt) Ltd, sold out 413 ton of Antimony in China in violation of Mining Concession Rules 2005, recovery notice for US Dollars 206,546 was issued and license was cancelled.

The case of the company is also under inquiry with NAB authorities. The company filed an appeal before the Appellate Authority (the Secretary Minerals Development Department) which was rejected. Party filed writ petition before Peshawar High Court against the decision of the Appellate Authority, where the decision is awaited. The company also filed the case before the Senior Civil Judge. DAC directed for recovery and pursue the case in the court of law. No progress was intimated till finalization of this report.

The third case of unauthentic and wasteful expenditure of Rs27.28 million was also detected by the audit on a feasibility study.

During financial year 2014-15, in the office of the Director General (DG) Mines and Mineral, KP it was noticed that contract of consultancy was awarded, with completion period of only 30 months, starting from July 2012 to 2014 to Director Excellence Geology Department, University of Peshawar under a development scheme 'Regional Geochemical Exploration for precious metal in southern part of KP'. However, the project was not completed by consultant despite lapse of considerable time.

During the period from 2011-12 to 2014-15, an overall expenditure of Rs27,280,000 was incurred, out of which Rs25,498,000 was paid to consultant, but the study was neither been completed by consultant nor any fruitful result shown.

Thus, on one hand resulted in wastage of the public resources and on the other the objective of the study could not be achieved, which means that the entire expenditure of Rs27,280,572 including Rs25,498,000 paid to consultant, was wasted as no fruitful result achieved.