ISLAMABAD: During the fiscal year 2018-19, the Auditor General of Pakistan (AGP) found more than Rs1.543 trillion worth of malfeasance and mismanagement of government funds by public sector agencies, including the Petroleum Division and its subordinate oil and gas firms.
“The AGP noted with severe concern in an audit report the management shortcomings in the Ministry of Energy, Petroleum Division, as” no system was in place to track the appraisal, collect tax receipts, recover gas production surcharge arrears, cessation of gas pipeline development, petroleum levy and royalties.
As a result , non-collection instances of non-tax receipts amounting to Rs146,076 billion have been noted.
“Financial lapses have also been found in the case of OGDCL, PSO, PPL, SNGPL and SSGC,” the AGP noted in its report on the PTI government’s first fiscal year.
Blames weak financial reporting for discrepancies;
advocates the development of an appropriate
framework for assessing receipts
It illustrated ’16 cases of non-recovery by public sector entities (PSEs) of receivables from customers amounting to Rs792.778bn.’
As a result of its audit, the AGP claimed that recoveries of more than Rs1.1tr had been recorded in the study and that a recovery of Rs15.239bn had been made between January and December 2019, as confirmed by the audit. The Petroleum Division’s gross budget of Rs5.384tr and non-tax revenues worth Rs347bn and its 16 PSEs were checked by the AGP.
It also included Rs142.367bn illicit output of petroleum products in the main findings either at the expiry of the construction production lease or at the extended well testing level and mismanagement in the RLNG market, exposing PSEs to financial danger and resulting in big arrears of Rs105.68bn becoming accrued.
The audit found out that when making new appointments, re-employment of employees and hiring of contractors, PSEs were not following regulations. The Petroleum Division, OGDCL, PSO, SNGPL and SSGC were clearly flagged for anomalies in the recruiting method.
Due to non-initiation of petroleum exploration, the OGDCL management was found to have postponed development of 12 fields discovered between 1989 and 2016, resulting in a loss of possible Rs69.5bn revenue. In addition, losses due to incompetence and poor output of two gas companies due to unaccounted for gas were stated to have amounted to Rs63bn while a delay in the construction of the LPG plant at Nashpa field caused a loss of Rs49bn.
The auditors noted that gas utilities asserted revenue obligation by not including all of their profits consisting of Rs18 million in other operational income and including exorbitant expenditures related to the cost of human capital of Rs26bn, which added additional pressure to the customers of gas.
In addition, unusual holding of considered duty was found by a refinery involving Rs24bn when losses were noticed due to unlawful flaring of gas by OGDCL amounting to Rs19bn. In addition, a loss of Rs19bn was incurred by failure to complete construction works within the stipulated period.
The audit reported that OGDCL did not deposit Rs7.4bn of low-pressure gas sales revenues into the government exchequer and incurred a revenue loss owing to the construction of outdated plants.
Similarly, as required under the financial laws, the Oil and Gas Regulatory Authority (Ogra) was found to have spent Rs2bn in treasury bills instead of depositing them in the consolidated fund. Ogra was also suspected, without the approval of the Finance Division, of framing service rules, resulting in irregular expenditure of Rs699.388 million.
The auditors reported that gas producers did not prosecute cases of gas theft that amounted to Rs1.258 billion. In eight cases of appointments worth Rs391 m, the auditors have found irregularities.
The AGP demanded disciplinary action from the petroleum and cabinet divisions against those responsible for the non-production of records and ordered the management of the respective PSEs to take measures to recover the unpaid customer dues.
The audit report claimed that while the country was facing serious gas shortages, the Petroleum Division awarded excessive extensions of exploration licences to exploration and production firms without showing any improvement in labour commitments.
Out of a total of 158 exploration licences granted between 2016 and 2019, 37 were either surrendered by the companies or withdrawn by the Petroleum Division as a result of hydrocarbon exploration deficiencies, based on available evidence.
In spite of the energy crisis and the late construction of pipelines for transmission and delivery of gas, unlawful extraction of oil and gas worth Rs18.5bn without leasing and unjustified flaring of natural gas of Rs18.6bn was neglected by the Petroleum Division, which also struggled to recover Rs24bn found unlawfully held by Byco Refinery.
The AGP found that there was no system for the evaluation and compilation of receipts of Rs228bn in the Directorate General of Oil (Petroleum Division) and the authorities relied on the details supplied by the companies concerned. It claimed that the authorities had only kept a database of windfall levy payment challans on crude oil, maintained discounts on crude oil and other case payment receipts, and did not determine the due receipts on their own.
By cross-examining output data generated by LMKR, a private consulting company, the audit recommended the implementation of an appropriate method for evaluating receipts.
Published in Dharti News, November 2nd, 2020