Tuesday, December 18, 2012

CAG slams GSPC for Rs 5,000cr loss

GANDHINAGAR: The Gujarat State Petroleum Corporation Limited (GSPC), the most precious of all Gujarat PSUs, has come under severe criticism from the Comptroller and Auditor General (CAG) in a damning report which a worried Narendra Modi government intends to table in the state assembly only on the last day of the budget session on March 30. The idea is to avoid uproar from the Opposition which has often been critical of the inflated claims of Modi about GSPC's gas find in the Krishna-Godavari (KG) Basin and the tendency of corporates and the political establishment to milk the PSU for their own ends.

The final CAG report, a copy of which is available with TOI, has slammed the losses running into nearly Rs 5000 crore. An entire chapter running into 37 pages is dedicated to GSPC.

The CAG has observed that GSPC with its consortium submitted bid for acquiring KG block "without properly assessing related technical and financial issues." As a result, it said, against the estimated drilling cost of US $ 102.23 million and the total depth committed of 45,348 meters in the minimum work prog ramme (MWP), the actual drilling cost incurred was US $ 1302.88 million (Rs 5,920.27 crore) and the total depth drilled was of 77,395.07 meters.

The report says, "The main reason for the incorrect estimation was adoption of deficient geological model prepared by a joint venture (JV) partner, Geo Global Resources Inc., Canada (GGR). The Company on the ground that GGR was a technical expert, admitted GGR in the JV without taking any financial contribution from it. As a result, the company incurred GGR's share of US $ 175.07 million (Rs 780.81 crore) towards the exploration cost and suffered loss of interest of Rs 104.14 crore during 2007-11, states the report.

The CAG found it "unreasonable" that a time of 14 to 106 months was taken (during 2006-11) for completing the environment impact studies (EIS) in eight out of nine domestic blocks where the company was operator. Besides, against the estimated drilling rate per day of 27.76 meters, the actual rate was 22.49 meters in drilling 16 wells in KG offshore block between July 2004 and April 2010. This resulted in avoidable expenditure of Rs 180.91 crore.

The company incurred total expenditure of Rs 104.29 crore on drilling wells without obtaining approval of Government of India for the field development plan (FDP). In absence of necessary approval, the said expenditure could not qualify for recovery.

During 2006-11, the total revenue from trading of gas was Rs 19,245.39 crore and the revenue from sale of its own production of gas and oil was Rs 1,563.63 crore which indicated that GSPC was focusing mainly on trading rather than production activity.

In trading activities, the report says, GSPC failed to safeguard its interest due to non-insertion of clause for recovery of Take or Pay (ToP) charges in the contracts for sale of gas with 25 to 36 customers out of 38 to 47 customers. This led to potential revenue loss of Rs 502.19 crore in selected cases, CAG pointed out.