THEHINDU
31MAR2012
Manas Dasgupta
The Comptroller and Auditor-General has slammed the Narendra Modi
government for financial irregularities, particularly for mismanagement of
public sector undertakings, resulting in losses of over Rs. 16,000 crore.
It has come down heavily on the state-owned Gujarat State
Petroleum Corporation (GSPC) for extending “undue benefits” to the Chief
Minister's “favoured few,” mainly Adani Energy and Essar Steel companies, which
coupled with its poor management and faulty agreements on exploration of oil
and gas in the Krishna-Godavari Basin alone cost the exchequer over Rs. 5,000 crore.
The report of the CAG was tabled in the Assembly on the
concluding day of the budget session on Friday and in the absence of the
Opposition members, who had been suspended on Wednesday for the remainder of
the session for creating ruckus. Leader of the Opposition Shaktisinh Gohil said
the tabling of the report was deliberately delayed to deny the Opposition an
opportunity to “expose” the misdeeds and “massive financial irregularities” of
the Modi government.
The CAG report said the GSPC purchased natural gas from the spot
market at the prevailing prices and sold it to Adani Energy at a fixed price
much lower than the market price, benefiting the private company to the tune of
over Rs. 70 crore. To the Essar Steel, the corporation extended undue benefits
of over Rs. 12.02 crore by way of waiver of capacity charges, contrary to the
provisions of the gas transmission agreement.
Improper assessment
The CAG was particularly critical of the GSPC's operations in the
KG Basin, where its “improper assessment” of the oil and gas reserves and
technical and financial issues led to the drilling cost shooting up to $1,302
billion against the original estimates of $102.23 billion.
The main reason for the incorrect estimation was the adoption by
the GSPC of a deficient geological model prepared by its joint venture partner,
Geo Global Resources of Canada, which led to an escalation of the cost of the
exploration phase from Rs. 531.94 crore to Rs. 6,265.68 crore.
“Because of the adoption of the Geo Global Resources' model, the
GSPC had to drill 12 high-pressure, high-temperature wells instead of the
estimated four wells,” the report said.
Adding the Canadian firm as a joint venture consortium without
any financial risk and only on the strength of its technical expertise “did not
yield the desired results.” Because of the faulty agreement, the GSPC had to
bear the Canadian company's share of $175.07 million in exploration cost,
besides losing Rs. 104.14 crore in interest during 2007-11 , the report said.
According to Mr. Gohil, with the CAG estimating financial
irregularities to the tune of over Rs. 16,000 crore in its latest report, the
total misappropriation during Mr. Modi's tenure crossed Rs. 43,000 crore. “It
is the most corrupt government the State had ever seen in its history of 52
years,” he claimed.
Cabinet spokesman and Health Minister Jaynarayan Vyas, however,
said the report was based only on accounting figures. Certain decisions
required to be taken from time to time for the larger benefit of the people did
not come into the CAG's consideration. He pointed out that the Public Accounts
Committee, which was headed by a senior member from the Opposition, had already
cleared all discrepancies mentioned in various CAG reports till 2005. “I am
sure the PAC, when considering the latest CAG report, will also give a clean
chit to the government,” he said.
The functioning of the GSPC came under severe criticism from the
CAG right from the bidding process to explorations, development activities,
trading of gas, management of finances, and for lack of proper internal control
and monitoring. The exploration and development activities suffered from
several deficiencies such as delay in acquisition of study data, excessive time
on drilling work, delay in preparing a field development plan and others, which
led to financial losses to the PSU, the auditing body said.
The CAG observed that the GSPC suffered financial losses in
trading activities on account of undue favours extended to buyers by way of
non-recovery of ‘Take or Pay' charges and sale of gas and oil at prices below
purchase cost, as it seemed to be focussing on trading rather than on
production from its oil and gas blocks.
Unreasonable time
Taking 14 to 106 months for environment impact studies in eight
out of nine blocks was “unreasonable,” the CAG said. As against the estimated
drilling rate a day of 27.76 metres, the actual rate was 22.49 metres in
drilling 16 wells in the KG offshore block between July 2004 and April 2010,
resulting in an “avoidable expenditure” of Rs. 180.91 crore on drilling work.
It also incurred an expenditure of Rs. 104.29 crore on drilling wells without
obtaining the approval of the Centre and did not qualify for recovery.
The GSPC's management of finances was far from being prudent and
efficient as it financed the exploration and developmental activities through
short-term borrowings — against the accepted business practices, the report
said.
According to Mr. Gohil, the Adani group was favoured by the Modi
government not only in the sale of gas but also in allotment of land. The group
was “doled out” over 5. 84 crore square metres of precious coastal land at a
paltry rate ranging from Re. 1 to Rs. 32 at Mundra in Kutch district when the
market rate was over Rs. 1,500 a square metre. The market rate of this land was
valued at up to Rs. 15,000 a sq. m. The Adani group merely acted as a middleman
and, after getting the land at throwaway prices from the government, sold off
chunks at premium market rates, making huge profits, he said.