BPCL loss amounts to Rs 8 crore on sale of aviation fuel to Modiluft

New Delhi, May 22: BHARAT Petroleum Corporation Ltd (BPCL) suffered a loss of Rs 7.84 crore on account of selling aviation turbine fuel (ATF) on credit to private airline Modiluft against the norms, Comptroller and Auditor General of India (CAG) has pointed out.

“The company suffered a loss of Rs 7.84 crore on account of extension of credit facilities to the private airline, in violation of the terms and conditions of the agreement,” CAG said in its latest report.

BPCL on April 30, 1993, when there was no credit policy for sale of ATF, entered into an agreement with Modiluft, for supply of ATF whereby the buyer was to furnish a bank guarantee equivalent to the value of the fuel to be lifted. The company was to present bills to Modiluft, on weekly basis for payment.

“Though the buyer failed to furnish the required bank guarantee and was also irregular in the settlement of the invoices, BPCL continued to supply ATF on credit basis, without ensuring that it received its past dues in full,” CAG observed.

On November 1, 1996, when the buyer stopped its operations, an amount of Rs 7.84 crore was outstanding, which BPCL wrote-off as doubtful debt in 1999-2000, the report said.

CAG rejected the BPCL contention that ATF was supplied on credit to protect the market share of the company, as it (CAG) found no justification for enhancing the sale of ATF, even when the recovery of outstanding sale proceeds was clearly at stake.
CAG also pulled up BPCL for undercharging Reliance Indusries Ltd (RIL) on sale of naphtha, which resulted in a loss of Rs 3.51 crore.

In May 1990, BPCL entered into an agreement with RIL, for supply of naphtha at government fixed prices.

The ministry of petroleum and natural gas increased the prices of naphtha by Rs 1,660.56 per tonne from September 16, 1992.
BPCL, however, implemented the price increase by Rs 997.10 per tonne only as against Rs 1,660.56 per tonne for naphtha till November 27, 1992, on the grounds that they were supplying special cut naphtha (SCN), which was a free trade product.

The balance increase of Rs 663.46 per tonne for naphtha was implemented from November 27, 1992.

“The delay in giving effect to the price revision resulted in loss of revenue of Rs 3.51 crore on 52,920 tonne of naphtha supplied to RIL between September 16, 1992 and November 26, 1992,” the CAG report said.

CAG termed as untenable the BPCL contention, that SCN was a free trade product, saying the Centre had clearly indicated, that the increase in price of naphtha by Rs 1,660.56, was for use other than the manufacture of fertiliser. RIL was buying naphtha from BPCL, for use of feedstock for the manufacture of petrochemicals.

“Thus, the company (BPCL) had extended undue financial benefit to RIL by undercharging for its products,” CAG added. (PTI)