No. 18 of 2020 (Compliance Audit Observations)
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Report of the Comptroller and Auditor General of India for the year ended 31 March 2019 Union Government (Commercial) No. 18 of 2020 (Compliance Audit Observations) CONTENTS CHAPTER/ SUBJECT CPSE PAGE PARAGRAPH NO. PREFACE v EXECUTIVE SUMMARY vii Chapter I MINISTRY OF CHEMICALS AND FERTILIZERS 1.1 Non-Compliance of DPE Rashtriya Chemicals 1 Guidelines on payment of and Fertilizers Limited Performance Related Pay Chapter II MINISTRY OF CIVIL AVIATION 2.1 Payment of Performance Airports Authority of 3 Related Pay due to non- India adherence of conditions of ‘Bell Curve Approach’ 2.2 Short recovery of liquidated Airports Authority of 4 damages from a contractor India 2.3 Irregular absorption by Air Air India Limited 6 India Limited towards ground handling services charged by Air India SATS Airport Services Private Limited 2.4 Undue favour to M/s Ballarpur Air India Limited 8 Industries Limited by withdrawal of recovery proceedings pending final payment of dues Chapter III MINISTRY OF COAL 3.1 Excess payment to the Mahanadi Coalfields 10 contractor under mining Limited contract 3.2 Avoidable expenditure on NLC India Limited 11 excavation outsourcing in South West Area of Mine II 3.3 Avoidable payment of NLC Tamilnadu Power 13 demurrage charges Limited Chapter IV MINISTRY OF COMMERCE AND INDUSTRY 4.1 Information Systems Audit of Government 15 Government E-Marketplace E-Marketplace i Chapter V MINISTRY OF FINANCE (DEPARTMENT OF FINANCIAL SERVICES) 5.1 Review of Loans to Road India Infrastructure 49 Projects Finance Company Limited 5.2 Avoidable loss due to extension India Infrastructure 68 of loan in terminated projects Finance Company Limited 5.3 Non-Performing Assets NABFINS Limited 69 5.4 Review of Underwriting of National Insurance 83 Group Mediclaim Insurance Company Limited Policies 5.5 Avoidable expenditure on rent National Insurance 91 due to delay in relocation of Company Limited offices 5.6 Failure to collect motor National Insurance 92 insurance premium from Company Limited discontinued dealer outlets resulted in loss 5.7 Imprudent underwriting and Oriental Insurance 94 arrangement of injudicious Company Limited reinsurance cover leading to loss 5.8 Non-liquidation of factoring SBI Global Factors 96 facility to a client despite clear Limited signs of incipient sickness leading to non-recovery 5.9 Violation of specific directions United India Insurance 100 of the Ministry led to loss of Company Limited premium 5.10 Factoring and Loan Services by IFCI Factors Limited 102 IFCI Factors Limited Chapter VI MINISTRY OF HEAVY INDUSTRIES AND PUBLIC ENTERPRISES 6.1 Loss due to non-performance Bharat Heavy 131 under a contract Electricals Limited 6.2 Avoidable payment of Bharat Heavy 133 sewerage cess Electricals Limited 6.3 Township and Land HEC Limited 134 Management 6.4 Avoidable payment of income Tungabhadra Steel 143 tax Products Limited ii Chapter VII MINISTRY OF HOUSING AND URBAN AFFAIRS 7.1 Unauthorised payment to NBCC (India) Limited 146 employees Chapter VIII MINISTR OF MINES 8.1 Unfruitful investment in Hindustan Copper 148 acquisition and loss from Limited operation of Gujarat Copper Project Chapter IX MINISTRY OF PETROLEUM AND NATURAL GAS 9.1 Irregular payment of Brahmaputra Cracker 151 Performance Related Pay and Polymer Limited 9.2 Follow up IT Audit of the Oil and Natural Gas 153 Financial and Controlling Corporation Limited (FICO) modules 9.3 Loss of revenue due to sale of Oil and Natural Gas 164 crude oil containing Basic Corporation Limited Sediments & Water above the norms as per sales agreement 9.4 Implementation of de- Indian Oil Corporation 166 regulation of pricing regarding Limited, Bharat major Petroleum Products Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited 9.5 Additional expenditure on Hindustan Petroleum 174 energy charges Corporation Limited Chapter X MINISTRY OF POWER 10.1 Avoidable loss due to under- Damodar Valley 177 recovery of capacity charges Corporation 10.2 Undue favour extended by NTPC-SAIL Power 179 NSPCL in award of contracts Company Limited on nomination basis Chapter XI MINISTRY OF ROAD TRANSPORT AND HIGHWAYS 11.1 Improper contract management National Highways 181 by NHAI resulted in loss of Authority of India revenue 11.2 Undue Benefit to Contractors National Highways 183 Authority of India 11.3 Less receipt to Consolidated National Highways 185 Fund India due to delay in Authority of India collection of User fees 11.4 Short remittance of additional National Highways 187 concession fee Authority of India iii Chapter XII MINISTRY OF SHIPPING 12.1 Non-safeguarding of financial Dredging Corporation 188 interests under dredging of India Limited contract Chapter XIII MINISTRY OF STEEL 13.1 Loss due to termination of Mecon Limited 191 contract and encashment of BG by the client 13.2 Energy Management Rashtriya Ispat Nigam 193 Limited 13.3 Performance of Captive Mines Steel Authority of India 208 of SAIL Limited 13.4 Safety and Environment Steel Authority of India 230 Management in SAIL Limited 13.5 Avoidable expenditure by Steel Authority of India 248 SAIL/ RSP Limited Chapter XIV RECOVERIES AND CORRECTIONS/RECTIFICATIONS BY CPSEs AT THE INSTANCE OF AUDIT 14.1 Recoveries at the instance of Air India Limited, 251 audit Northern Coalfields Limited, National Highways Authority of India, Oil and Natural Gas Corporation Limited, Madras Fertilizers Limited, Mahanadi Coalfields Limited, Oriental Insurance Company Limited, United India Insurance Company Limited, The New India Assurance Company Limited 14.2 Corrections/ rectifications at the Rashtriya Chemical and 251 instance of audit Fertilizers Limited, India Oil Corporation Limited, Steel Authority of India Limited Chapter XV FOLLOW UP ON AUDIT REPORTS 252 (COMMERCIAL) Appendix I 257 Appendix II 259 Appendix III 260 Annexures 261 iv PREFACE 1. The accounts of Government Companies set up under the provisions of the Companies Act (including Companies deemed to be Government Companies as per the provisions of the Companies Act) are audited by the Comptroller and Auditor General of India (CAG) under the provisions of Section 143(6) of Companies Act, 2013. The accounts certified by the Statutory Auditors (Chartered Accountants) appointed by the CAG under the Companies Act are subject to the supplementary audit by CAG whose comments supplement the reports of the Statutory Auditors. In addition, these companies are also subject to test audit by CAG. 2. The statutes governing some Corporations and Authorities require their accounts to be audited by CAG. In respect of five such Corporations viz. Airports Authority of India, National Highways Authority of India, Inland Waterways Authority of India, Food Corporation of India and Damodar Valley Corporation, the relevant statutes designate CAG as their sole auditor. In respect of one Corporation viz. Central Warehousing Corporation, CAG has the right to conduct supplementary and test audit after audit has been conducted by the Chartered Accountants appointed under the statute governing the Corporation. 3. Reports in relation to the accounts of a Government Company or Corporation are submitted to the Government by CAG under the provisions of Section 19-A of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971, as amended in 1984. 4. The Audit Report for the year 31 March 2019 contains 42 individual audit observations relating to 31 CPSEs under control of 13 Ministries/ Departments. Instances mentioned in this Report are among those which came to notice in the course of audit during 2018-19 as well as those which came to notice in earlier years. Results of audit of transactions subsequent to March 2019 in a few cases have also been mentioned. 5. All references to ‘Companies/ Corporations or CPSEs’ in this Report may be construed to refer to ‘Central Government Companies/ Corporations’ unless the context suggests otherwise. 6. The audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. v Report No. 18 of 2020 EXECUTIVE SUMMARY I Introduction 1. This Report includes important audit findings noticed as a result of test check of accounts and records of Central Government Companies and Corporations conducted by the officers of the Comptroller and Auditor General of India under Section 143 (6) of the Companies Act, 2013 or the statutes governing the particular Corporations. 2. The Report contains 42 individual observations relating to 31 Central Public Sector Enterprises (CPSEs) under 13 Ministries/ Departments. The draft observations were forwarded to the Secretaries of the concerned Ministries/ Departments under whose administrative control the CPSEs are working to give them an opportunity to furnish their replies/ comments in each case within a period of six weeks. Replies to 34 observations were not received even as this Report was being finalised as indicated in para 3 below. Earlier, the draft observations were sent to the Managements of the CPSEs concerned, whose replies have been suitably incorporated in the report. 3. The paragraphs included in this Report relate to the CPSEs under the administrative control of the following Ministries/ Departments of the Government of India: Ministry/ Department Number of Number of paragraphs in (CPSEs involved) paragraphs respect of which Ministry/ Department’s reply was awaited 1. Chemicals and Fertilizers 1 1 (Rashtriya Chemicals and Fertilizers Limited) 2. Civil Aviation 4 4 (Airports Authority of India, Air India) 3. Coal 3 2 (Mahanadi Coalfield Limited, NLC India Limited, NLC Tamil Nadu Power Limited) 4. Commerce and Industry 1 1 (Government E-Marketplace) 5. Finance 10 6 (IIFCL, NABFINS Limited, National Insurance Company Limited, Oriental Insurance Company Limited, SBI Global Factors Limited, United India Insurance Company Limited, IFCI Factors Limited) vii Report No. 18 of 2020 6. Heavy Industries and Public 4 4 Enterprises (BHEL, HEC Limited, Tungabhadra Steel Products) 7. Housing and Urban Affairs 1 1 (NBCC (India) Limited) 8. Mines 1 1 (Hindustan Copper Limited) 9.