The Auditor General of Pakistan (AGP) has detected embezzlements and irregularities of Rs 1.25 billion due to mismanagement in Pakistan State Oil Company (PSO) Limited. According Audit Report-2010-11, national kitty faced loss of Rs 815 million due to imprudent decision for award of contract.
The report says that as per directives of the Government of Pakistan, PSO took up ''LPG Autogas Station Project'' and started to pursue long-term associations with potential private business partners having experience of LPG business and requisite infrastructure/capability to supply LPG to its Autogas stations.
For this purpose, PSO obtained a licence from the Oil and Gas Regulatory Authority (Ogra) Pakistan. The project envisaged PSO''s granting permission/licence to interested parties for 10 years and setting up of 400 Autogas stations over a period of 5 years at selected PSO retail outlets.
For this purpose, an agreement was executed on March 25, 2010 between PSO and Petrosin for the establishment of LPG Autogas stations. However, on May 6, 2010 PSO informed Petrosin that its BoM had not approved this business relationship due to the reasons that Petrosin was involved in a number of court cases and that true financial picture of Petrosin had been concealed from PSO.
Petrosin, however, opted for legal course claiming that by April 21, 2010 it had already invested an amount of Rs 815 million in the project. The case was decided in favour of Petrosin, and PSO went into appeal with more litigation expenditure of Rs 1.500 million and the case is pending.
The report says that the Audit observed that the impending loss of Rs 815 million plus damages and litigation expenditure was avoidable. The management failed to exercise pre-requisite checks as mentioned in the audit criteria as a result there is an imminent danger of losing the said amount. The matter was discussed in the DAC meeting held on December 11, 2010. Audit suggested investigation into the case at appropriate level and suitable remedial action as well as action against the concerned officers/officials to avoid recurrence-of such irregularities.
The DAC directed the management to conduct an inquiry in the matter and submit the report to Audit with specific replies to their observations. However, no progress was reported by the management till finalisation of this report. Similarly, in another case, the report said that PSO faced loss of Rs 248.89 million due to sale of sizeable quantity of products before upward revision in tariff.
The report says that Audit of accounts of PSO for the year 2009-10 showed that its supply chain was involved in sales of sizeable quantity of petroleum products one day before the upward revision in tariff. PSO sold petroleum products to few of its customers on the last date of the month, especially when the price was to rise very next day. Audit analysed the sales record and found the abnormalities in sales.
The report says that the analysis showed that the company issued high speed diesel and Mogas to 36 petrol station in different parts of the country, especially on January 29 and 30, 2010, a quantity of 23,631 kilo litres (KL) just a day or two before the notification of the new prices while on March 30 and 31, 2010 a quantity of 7,270 KL HSD was sold.
Thus 36 dealers out of a total of 3600 dealers lifted HSD amounting to Rs 77.982 million against Rs 104.75 million on 29 & 30 January 2010 and Rs 25.445 million against R.s29.279 million on March 30 & 31, 2010, which reflected that undue favour was extended to these 1 percent dealers.
Audit was of the view that the sales of HSD and MOGAS in above mentioned days before the announcement of new prices led to loss of Rs 248.88 million to PSO. Despite instruction to depots about the sales in last week, excess per day average sales to the selected dealers were made, who ended up making windfall profits in 24 hours.
The matter was discussed in DAC meeting held on December 2010.The DAC observed the correctness of audit observation therefore directed the management to conduct inquiry into the matter and submit a report to this effect expeditiously. However, no progress was reported by the management till finalisation of this report.
It also showed loss of Rs 66.030 million due to fraud in credit control department, Rs 32.83 million misappropriation/theft of prepaid cards, 68.1 million furnace oil at Lalpir Depot and Rs 5.27 million due to irregular payment of advertisement tax on behalf of dealers.