by Khaleeq Kiani in Dawn, November 2nd, 2020
ISLAMABAD: The Auditor General of Pakistan (AGP) has pinpointed more than Rs1.543 trillion worth of malfeasance and mismanagement of public funds by public sector entities, including the Petroleum Division and its subordinate oil and gas companies, during the fiscal year 2018-19.
In an audit report, the AGP noted with serious concern the management weaknesses in the Ministry of Energy — Petroleum Division — as “no mechanism was in place for monitoring the assessment, collection of revenue receipts, recovery of arrears of gas development surcharge, gas infrastructure development cess, petroleum levy and royalties”.
As a result, cases of non-collection of non-tax receipts of Rs146.076 billion were noticed.
“In the case of OGDCL, PSO, PPL, SNGPL and SSGC, financial lapses were also noticed,” the AGP observed in its report on the first fiscal year of the PTI government.
It highlighted “16 cases of non-recovery of receivables from consumers by public sector enterprises (PSEs) amounting to Rs792.778bn”.
The AGP said as a result of its audit, recoveries of more than Rs1.1tr were pointed out in the report and a recovery of Rs15.239bn was made between January and December 2019, which was verified by the audit. The AGP had reviewed the total expenditure of Rs5.384tr and non-tax receipts worth Rs347bn of the Petroleum Division and its 16 PSEs.
It also included in the key findings Rs142.367bn unlawful production of petroleum products either on expiry of development production lease or at extended well testing stage and mismanagement in RLNG business, exposing PSEs to financial risk and resulting in accumulation of huge arrears of Rs105.68bn.
The audit pointed out that PSEs were not observing regulations while making fresh appointments, re-employment of personnel and hiring of consultants. It particularly flagged the Petroleum Division, OGDCL, PSO, SNGPL and SSGC for discrepancies in the hiring process.
The OGDCL management was found to have delayed development of 12 fields discovered between 1989 and 2016 due to non-initiation of production of petroleum, resulting in a loss of potential Rs69.5bn revenue. Also, loss on account of unaccounted for gas due to negligence and poor performance of two gas companies was reported to have amounted to Rs63bn while delay in installation of LPG plant at Nashpa field inflicted a loss of Rs49bn.
The auditors said gas utilities claimed revenue requirement by not including all of their revenues consisting of other operating income of Rs18 million and including exorbitant expenses on account of human resource cost of Rs26bn, which added extra burden on gas consumers.
Moreover, irregular retention of deemed duty by a refinery involving Rs24bn while loss due to unlawful flaring of gas by OGDCL amounting to Rs19bn was noticed. Besides, non-completion of development works within the stipulated time caused a loss of Rs19bn.
The audit said OGDCL did not deposit Rs7.4bn sale proceeds of low pressure gas in the government exchequer and suffered loss in revenue due to installation of obsolete plants.
Likewise, the Oil and Gas Regulatory Authority (Ogra) was found to have invested Rs2bn in treasury bills instead of depositing in consolidated fund as required under the financial rules. Ogra has also been accused of framing service regulations without concurrence of the Finance Division, resulting in irregular expenditure amounting to Rs699.388m.
The auditors said gas companies did not pursue gas theft cases which amounted to Rs1.258bn. The auditors also found irregularities in eight cases of appointments worth Rs391m.
The AGP asked the petroleum and cabinet divisions to take disciplinary action against those responsible for non-production of record and direct the managements of respective PSEs to take steps for the recovery of outstanding dues from consumers.
The audit report said the Petroleum Division had been granting undue extensions in exploration licences to exploration and production companies without showing any progress in work commitments when the country was facing severe gas shortages.
Based on available data, out of a total of 158 exploration licences issued between 2016 and 2019, 37 were either surrendered by the companies or revoked by the Petroleum Division as a result of failure in exploration of hydrocarbon.
Unlawful extraction of oil and gas worth Rs18.5bn without obtaining leasing and unjustified flaring of natural gas of Rs18.6bn, despite energy crisis and late installation of pipeline for transmission and distribution of gas, were overlooked by the Petroleum Division, which also did not recover Rs24bn deemed duty unlawfully retained by Byco Refinery.
The AGP observed that there was no mechanism in the directorate general of oil (Petroleum Division) for assessment and collection of receipts of Rs228bn and the authorities relied on the information provided by the companies concerned. It said the authorities just maintained record of payment challans of windfall levy on crude oil, discount retained on crude oil and other case payment receipts and did not itself evaluate the due receipts.
The audit recommended development of adequate system for assessment of receipts by cross-examination of production data provided by LMKR — a private consultancy firm.https://www.dawn.com/news/1588129/agp-finds-non-recovery-of-over-rs11tr-in-petroleum-sector
