Auditor General of Pakistan (AGP) has detected a billion of rupees financial loss to the national exchequer by the Pakistan Steel Mills (PSM) management. Auditor General maintained that the corporation has not complied with the requirements of IAS 16 "property, plant and equipment", each significant part depreciated a formal review of useful life and residual of the plant is required to be carried out.
According to audit team, during audit of accounts of PSM for the year 2012-13, it was observed that the management sold 161,933 metric tons of various steel products at a price of Rs 9.119 billion against cost of sales of Rs 18.029 billion which resulted in a loss of Rs 8.909 billion. The matter was discussed in the Departmental Accounts Committee (DAC) meeting held on February 03, 2014. The management stated that losses were incurred due to a decrease in production capacity and resultantly the cost of production increased. The DAC was not satisfied with the explanation and directed the management to constitute a committee to evaluate the input and output factor and causes of under-utilisation of the capacity.
The audit team also observed that the management incurred an expenditure of Rs 532.09 million on cost of billets whereas no billet was produced during the year. Thus negligence of PSM resulted in a loss. It discussed the issue in DAC meeting held on February 03, 2014. The management informed the DAC that the fixed cost does not relate to product and remains unaffected due to a change in volume of product. PMS management argued that since PSM was operating far from break-even in 2012-13, it was beyond their control to avoid the losses. DAC was not satisfied with the explanation of the management and directed the management to constitute a committee to look into the matter.
During the audit of accounts of PSM for the year 20 12-13, it was observed that the management awarded three contracts for running three head office restaurants for three years to one contractor. The contract was extended for one year without recovering previous dues of Rs 8.63 million. The management requested the contractor to vacate restaurants, he approached Sindh High Court, who decreed a stay order. Thus amount could not be recovered.
The matter was reported to the management on October 27, 2013. The matter was discussed in a DAC meeting held on February 03, 2014. DAC was not satisfied with the explanation of the management and directed the management to initiate disciplinary proceedings against the persons responsible for non-recovery of dues from the contractor.
The team also observed that M/s Niksum Enterprises supplied 1,011 Kg Babbit (White Metal Alloy). The material was found rejected but the same quantity of standard material was not supplied by the contractor. The matter was reported to the management on September 22, 2013. The matter was discussed in the DAC meeting held on February 03, 2014. The management informed DAC that the supplier has assured that they will supply the Babbitt Material to PSM and also submit the extension of PBG accordingly. DAC was not satisfied with the explanation and directed the management to hold an inquiry and fix responsibility.
During audit of accounts of PSM for the year 2012-13, it was further observed that the management procured 50 Armour Frames from Heavy Mechanical Complex-3 (HMC-3) through a competitive bidding. Out of 50 frames 10 valued at Rs 3.05 million were rejected by PSM but they were not lifted by the supplier till finalisation of this report. The management revealed that PSM was pursuing the case for an amicable solution with HMC. DAC was not satisfied with the explanation and directed to constitute a committee to look into the matter.