Pulling up the state PSU Gujarat State Petroleum Corporation (GSPC) for not addressing properly risks associated with cost, technology and gas pricing, the latest Comptroller and Auditor General (CAG) report on public sector undertakings of the Gujarat government has found outstanding dues of Rs 2,329.52 crore yet to be recovered by GSPC from its joint venture partners.
As per the report, GSPC’s total borrowings also rose by 177 per cent during the period 2011-15 to Rs 19,716.27 crore, mainly on account of development activities in KG block, resulting in increased interest burden of Rs 1,804.06 crore in 2014-15.
“During the period 2011-15, the total borrowings increased by 177 per cent to Rs 19,716.27 crore, mainly on account of development activities in KG block, which resulted in increase in interest burden from Rs 981.71 crore in 2011-12 to Rs 1,804.06 crore in 2014-15. Considering the quantum of borrowings and associated interest costs for the Company, adequate and sustained production of gas from KG block would be required in future to sustain the financial position of the Company. Further, there were outstanding dues of Rs 2,329.52 crore not recovered from joint venture partners,” the report stated.
The auditor also pulled up the state PSU for not addressing properly risks associated with cost, technology and gas price in development of the KG block. During the audit period, GSPC surrendered 37 blocks out of 64 blocks in hand as on April 1 2011. Out of 27 blocks in hand as on March 31 2015, 16 blocks were under production and 11 blocks were under exploration and development.
However, the CAG report observed that the Field Development Plan (FDP) for Deen Dayal West (DDW) field did not take into account the fact that the project was not viable at the gas prices as per Government approved formula prevalent at that time and the viability was dependent on subsequent higher price if any obtained through Government approved formula for NELP contractors.
“This has resulted in uncertainty regarding the future prospects in the block where an investment of around Rs 19576 crore was incurred. The company did not act upon the proposal for inducting strategic/financial partner at an appropriate time in spite of the high costs and technological issues,” the report observed.
According to CAG, GSPC went ahead acquiring the overseas blocks during 2006-10 mainly as an operator with considerably high participating interests without any prior experience as an overseas operator. “The delayed execution of the work committed resulted in cost escalations in these overseas blocks. The company surrendered 10 out of 11 overseas blocks in hand during 2011-15 incurring an expenditure of Rs 1,757.46 crore, of which Rs 1,734.12 crore was written off,” it further observed while advising caution in venturing into overseas exploration and timely completion of work committed.
With regards to other state run ventures, the CAG audit found that Alcock Ashdown (Gujarat) Limited had accepted the contract for constructing two ships without having technical and financial capacity. The contract was cancelled due to time over-run which resulted in a loss of Rs 42.8 crore.
The CAG audit also rapped the four distribution companies (discoms) of Gujarat Urja Vikas Nigam Limited over incurring avoidable power purchase cost. As per the audit report, the excess consumption of electricity by unmetered agricultural consumers as compared to metered agricultural consumers during the period 2009-10 to 2014-15 in the four discoms of GUVNL ranged from 5,885.84 MUs to 7,569.48 MUs every year resulting in an avoidable power purchase cost every year of Rs 1,775.97 crore to Rs 2,910.75 crore.
The metered agricultural consumers pay energy charges based on actual energy consumption. The unmetered agricultural consumers pay fixed amount irrespective of actual consumption. The average consumption per HP by unmetered agricultural consumers was 1,833 units in 2014-15 as against the average consumption of 719 units by metered consumers. This indicates that unmetered consumption leads to wastage of electricity as well as creates subsidy burden on the state. Probability for excess consumption of water also exists.
Further, a delay in releasing subsidy by Government of Gujarat during the period 2009-15 resulted in interest burden of Rs 890.51 crore on GUVNL, the CAG audit found.
Meanwhile, the audit also found that the metro rail project under the Metro Link Express for Gandhinagar and Ahmedabad Company Limited incurred an expenditure of Rs 373.62 crore on the development of Indroda, Motera and Chiloda site under the earlier phase without the approval of project report. “As the earlier phase was scrapped and the expenditure incurred could not be used in the new phase under progress, it resulted in infructuous expenditure of Rs 373.62 crore,” the report stated.
