1. CAG spots Rs 9,034-cr financial lapses by various PSUs, including ONGC, NTC

CAG spots Rs 9,034-cr financial lapses by various PSUs, including ONGC, NTC

CAG has pulled up PSUs for non-compliance of procedures which led to financial implications of Rs 9,034 crore.

By: | Updated: July 30, 2015 10:43 PM
PSU -gov.in photo

The CAG, in a report on compliance audit observations in PSUs for 2013-14, said non-compliance with rules, directives, procedure and terms and conditions of contracts resulted in financial implications amounting to Rs 4,931.56 crore. (Courtesy: india.gov.in)

The CAG has pulled up public sector enterprises, including ONGC and the National Textiles Corporation, for non-compliance of procedures and not safeguarding financial interest, besides other lapses, which led to total financial implications of Rs 9,034 crore.

The CAG, in a report on compliance audit observations in PSUs for 2013-14 tabled in the Rajya Sabha today, said non-compliance with rules, directives, procedure and terms and conditions of contracts resulted in financial implications amounting to Rs 4,931.56 crore.

It also observed non-safeguarding of financial interest of organisations involved Rs 808.29 crore, defective planning Rs 432.37 crore and non-realisation/partial realisation of objectives Rs 7.13 crore.

The CAG came down heavily on ONGC for not doing due diligence while entering into an out-of-the-court settlement with a terminated contractor, Clough Engineering Ltd (CEL), Australia, which was roped in for development of a deepwater and shallow water oil and gas bearing field in Krishna Godavari basin entailing a cost of Rs 992.91 crore.

“By entering into a settlement with CEL without conducting due diligence and whose terms and conditions were not approved by its Board, ONGC obtained a reduction of only USD 0.7 million while it ended up paying a settlement sum of USD 32 million (Rs 149.37 crore) to CEL for out-of-court resolution,” the CAG report said.

Besides, ONGC incurred additional expenditure of USD 66.34 million (Rs 342.34 crore) in deviation of terms approved by the Board in October 2008 for such a resolution, it added.

In the case of the National Textile Corporation, CAG said the company had entered into a settlement agreement with Hall & Anderson Ltd (HAL), the previous owner of Shree Madhusudhan Mills in Mumbai, for sharing of land “ignoring the fact that it was prime freehold land, without ascertaining commercial viability, which resulted in a loss of Rs 205.01 crore to the company”.

The CAG also pulled up steel major SAIL for supplying slag to various joint venture companies much below prices “as a result of which SAIL lost Rs 156.58 crore up to 2013-14”.

Besides, the report found that 10 CPSEs did not adhere to the Department of Public Enterprises guidelines with respect to payment of allowances and perks to their employees by restricting the same within the maximum ceiling of 50 per cent and made irregular payments of Rs 573.1 crore for 2007-08 to 2013-14.

The report disclosed that seven PSUs had made recoveries worth Rs 56.6 crore.

CAG pulls up MMTC, STC, PEC for mismanagement, possible fraud

Government auditor CAG today pulled up three state-run trading firms – MMTC, STC and PEC – for financial mismanagement and possible fraud in trading of agro-commodities.

“Trade in agro commodities by the three central public sector enterprises (CPSEs) highlights mismanagement, possible fraud, negligence and absence of financial prudence,” said a CAG report which was tabled in the Rajya Sabha.

As the entire activity of identifying supplier, buyer, storage, arranging for shipment, among others was performed by the associates which are private parties, it is a “moot point” whether these would qualify to be termed as ‘trading activity, it said.

“In fact, the three CPSEs failed to assess the credit worthiness of associates and have been involved in providing finance to highly risky ventures without adequate safeguards,” the report said.

Resultantly, CAG said, they suffered losses because of inadequate security against the amount financed and they were also not able to secure the pledged stock safely.

“Inordinate delays in disposal of un-lifted material and in taking decision to invoke the risk sale clause as also release of stock on the basis of PDCs (post dated cheques) indicated culpability on the part of the management,” it added.

The report further said that through each company has government nominees on the board of directors, nothing came to notice to show that they had effectively protected the interest of the government by insisting on adequate safeguards.

MMTC, STC and PEC are trading companies under the commerce ministry. These companies undertake import, export and domestic trade by extending financial assistance to their business associates for a fixed trading margin.

The report said though Mehak Overseas Pvt Ltd (MOPL) was a persistent defaulter, STC extended pre-shipment credit beyond October 2010.

“Resultantly Rs 22.03 crore was added to recoverable from MOPL. Though STC was entitled to encash the PDCs in the event of default by MOPL, STC failed to encash the available PDCs on the date of default. Subsequently the PDCs were dishonoured on presentation in February 2013.

“As a result, STC could not recover outstanding dues of Rs 91.51 crore from MOPL. The associate was absconding (since July 2012),” it added.

With regard to MMTC, CAG said the company suffered losses of Rs 1.33 crore in a deal with Suchetan Export Pvt Ltd for procurement of cotton waste.

“…delay in decision to invoke the ‘risk and cost’ sale clause and failure to ensure adequate financial security resulted in on-recovery of Rs 1.33 crore,” it added.

Similarly, PEC suffered losses to the tune of Rs 81.73 crore in a deal with Prime Impex Ltd for import of 1 lakh tonnes of CYP.

Tags: CAGONGC
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