ISLAMABAD: A panel of Public Accounts Committee (PAC) has directed Managing Director Sui Southern Gas Pipeline Limited (SSGCL) to discontinue the wrong practice of unauthorized adjustment of negative Gas Development Surcharge (GDS).

Official documents reveal that audit reports prepared by DG Audit Petroleum and Natural Resources were presented before the Sub Committee of PAC. The Audit apprised that according to law a licencee is required to file a petition with Oil and Gas Regulatory Authority (Ogra) by December 1 each year to enable it to determine an estimate of total revenue requirement for the next financial year and after determination the authority shall advise the federal government that the revised prescribed price of gas to be notified in the official gazette for implementation.

Moreover, a licencee is required to file a petition with the Ogra to review the total revenue requirement for the proceeding financial year based upon charges in the wellhead prices and other factors in the annual accounts of the licencee of that year duly audited by corporate auditors.

M/s SSGCL filed a review petition in August, 2009 for the FY 2008-09 with the Ogra and subsequently the Orga determined a shortfall of Rs 5,174 million for the financial year 2008-09. Following this, M/S, SSGCL created liability of the said amount against the federal government and on this plea the company did not pay GDS due for July and August 2009. Instead, the payable amount of GDS of Rs 2,014 million was adjusted by the company on its own against the shortfall, which was not authorized under the law/ rules. This unauthorized adjustment deprived the government of revenue of Rs 2,014 million which was required to be recovered together with interest accrued thereon for defaulting in making payment of the GDS.

Management explained that the matter of GDS pertains to the revenue receipts of the provinces, which is monitored by the Finance Division. Therefore, draft summary for CCI is in process and will be circulated to the provinces before its submission to the CCI. The Management further explained that the reference with respect to proposed amendments in GDS Ordinance has been forwarded to Law Division for vetting/ clearance and a meeting on the issue was held on January 4, 2021. After clearance from Law Division, it will be placed before the competent forum for approval.

DAC directed the management to pursue the case with Law Division for early finalization of amendment in GDS Ordinance.

The Principal Accounting Officer informed the Committee that a draft summary to rectify the anomaly in GDS Ordinance had been forwarded to CCI of March 11, 2021 for approval. After the Supreme Court’s directions, it had been sent to the ECC on March 7, 2023.

The Sub-Committee expressed displeasure over non-implementation of the PAC directives and pended the Audit Para with the following directions: (i) to inquire the matter of two years’ delay for the submission of summary from the CCI to ECC; (ii) to resubmit the request for approval of summary; and (iii) to complete its preparation before attending the next meeting to be held after one month.

The Sub-Committee also directed MD SSGC to discontinue the wrong practice of unauthorized adjustment of negative GDS. The Committee further directed the PAO to hold a DCA on all paras and attend the DAC in person.

The Sub- Committee of PAC has been apprised by the Audit that according to section 3 of the Natural Gas Development Surcharge) Ordinance, 1967 read with rule 3 of the GDS Rules, 1967, every company shall pay a development surcharge equal to differential margin in respect of natural gas sold. The GDS for the calendar month is payable within two months of the close of that month. The GDS, if not paid within the stipulated period, attracts imposition of interest @ 15 per cent per annum under section 3A of the Ordinance.

M/s Tullow Pakistan (Development) Ltd, Islamabad sold gas to WAPDA but did not pay development surcharge of Rs 318.350 million from Sara/ Suri gas fields January 2002 to December, 2004.

The company has not paid the GDS in subsequent years i.e. 2007-08, 2008-09 and 2009-10 of Rs 1.245 billion.

The management of OGDCL explained that in compliance with PAC directives of March 18, 2021, the legal opinion was sought from external legal counsel wherein the latter was of the view that the funds are under control of M/s Tullow (M/s Spud Energy, new Operator).

Audit is of the view that since OGDCL is neither a party in the suit, or the operator of the field, therefore any action by the operator will have to be taken after the orders of the court.

The Director General (Gas) informed that the matter is subjudice in Islamabad High Court. The DAC directed the management to pursue the court case vigorously.

Copyright Business Recorder, 2023