Report of the Comptroller and Auditor General of India
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Report of the Comptroller and Auditor General of India Union Government (Commercial) No. 21 of 2015 (Compliance Audit Observations) Volume II Report of the Comptroller and Auditor General of India for the year ended March 2014 Union Government (Commercial) No. 21 of 2015 (Compliance Audit Observations) Volume II CONTENTS CHAPTER/ SUBJECT PSU PAGE PARAGRAPH NO. PREFACE v EXECUTIVE SUMMARY vii Chapter I MINISTRY OF HEAVY INDUSTRIES AND PUBLIC ENTERPRISES 1.1 Non-regularisation of land and delay Bharat Heavy Electricals 1 in execution of lease deed Limited 1.2 Avoidable expenditure towards Bharat Heavy Electricals 2 payment of demurrages and Limited detention charges 1.3 Unfruitful Expenditure on Bharat Heavy Electricals 4 procurement of rail wagon Limited 1.4 Blocking of funds towards payment Bharat Heavy Electricals 6 of Sales Tax Limited 1.5 Loss due to withdrawal of price Bharat Heavy Electricals 7 variation without approval of Limited competent authority 1.6 Undertaking project expansion Cement Corporation of 8 activities without adequate finance India Limited led to infructuous investment 1.7 Idle investment Hindustan Paper 10 Corporation Limited 1.8 Unfruitful investment in salt refinery Sambhar Salts Limited 11 Chapter II MINISTRY OF MINES 2.1 IT Audit on implementation of Hindustan Copper 14 Oracle e-Business Suite (EBS) Limited 2.2 Fraudulent accounting activities Hindustan Copper 17 Limited Chapter III MINISTRY OF PETROLEUM AND NATURAL GAS 3.1 Wasteful Expenditure Indian Oil Corporation 20 Limited 3.2 Avoidable expenditure due to non- Indian Oil Corporation 21 rescheduling mechanical completion Limited of tankage facilities within the stipulated period i 3.3 Deficient tender document coupled Indian Oil Corporation 22 with Company’s failure to negotiate Limited with L1 bidder in view of reduced rate of withholding tax led to avoidable expenditure 3.4 Non achievement of envisaged Indian Oil Corporation 25 benefits from Flue Gas Cooler Limited 3.5 Loss of revenue on account of Oil India Limited 26 discount allowed on sale of crude oil containing basic sediments and water content above the norm 3.6 Avoidable assumption of liabilities Oil and Natural Gas 29 and incurring avoidable expenditure Corporation Limited in development of two oil and gas bearing fields due to acceptance of unfavourable terms in Settlement Agreement with a defaulting contractor 3.7 Follow-up IT Audit of Oil and Natural Gas 35 implementation of Material Corporation Limited Management module in Oil and Natural Gas Corporation Limited 3.8 Under-utilization of Water Injection Oil and Natural Gas 45 Platform despite revamping Corporation Limited 3.9 Avoidable expenditure due to Oil and Natural Gas 47 change in scope of work after the Corporation Limited award of contract and interface problems among the constituent projects 3.10 Extra expenditure due to Oil and Natural Gas 49 retendering at the instance of a Corporation Limited technically disqualified bidder 3.11 Extra expenditure due to non- Oil and Natural Gas 52 availing of concessional customs Corporation Limited duty 3.12 Avoidable payment of rental due to Oil and Natural Gas 54 abnormal delay in restoration and Corporation Limited surrender of abandoned drill sites and approach roads 3.13 Defective contracts providing ONGC Petro additions 56 interest free advances to contractors Limited and linking their recovery to progress of work in violation of CVC guidelines leading to loss of interest ii Chapter IV MINISTRY OF POWER 4.1 Metering and Billing Damodar Valley 59 Corporation 4.2 Loss of opportunity to recover Damodar Valley 66 Engine Detention Charges Corporation 4.3 Avoidable expenditure towards Damodar Valley 67 additional UI charges Corporation 4.4 Incorrect evaluation and award of Power Grid Corporation 68 contracts to Joint Ventures led by a of India limited financially weak firm 4.5 Loss of Interest due to disbursement Rural Electrification 71 of soft loans under RGGVY Corporation Limited Chapter V MINISTRY OF STEEL 5.1 Investment of SAIL in Joint Steel Authority of India 74 Ventures Limited 5.2 Performance of Coke Oven Batteries Steel Authority of India 80 Limited 5.3 Non-recovery of interest on Steel Authority of India 85 differential excise duty Limited 5.4 Under recovery of electricity Steel Authority of India 86 charges Limited 5.5 Blocking of funds Steel Authority of India 88 Limited 5.6 Avoidable expenditure in ISP/SAIL Steel Authority of India 90 Limited Chapter VI MINISTRY OF TEXTILES 6.1 Loss due to deficiency in settlement National Textile 92 Corporation Limited Chapter VII MINISTRY OF WATER RESOURCES, RIVER DEVELOPMENT AND GANGA REJUVENATION 7.1 Inordinate delay in terminating National Projects 94 projects Construction Corporation Limited iii Chapter VIII IRREGULARITIES IN PAYMENT OF ENTITLEMENTS AND RECOVERIES, CORRECTIONS/RECTIFICATIONS BY CPSEs AT THE INSTANCE OF AUDIT 8.1 Irregular payment towards Oil and Natural Gas 97 encashment of Half Pay Corporation Limited, Leave/Earned Leave/Sick Leave as Hindustan Petroleum well as employer's share of EPF Corporation Limited, contribution on leave encashment Bharat Petroleum Corporation Limited, GAIL (India) Limited, Indian Oil Corporation Limited and Engineers India Limited 8.2 Recoveries at the instance of audit Steel Authority of India 100 Limited, National Highways Authority of India, National Building Construction Corporation of India Limited, and National Projects Construction Corporation Limited 8.3 Corrections/rectifications at the Instrumentation Limited, 100 instance of audit Steel Authority of India Limited and Ferro Scrap Nigam Limited Chapter IX Follow up on Audit Reports 101 Appendix I 105 Appendix II 106 Appendix III 108 Annexures 110 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 619 of the Companies Act, 1956. 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. Airport 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 ended 31 March 2014 has been prepared in two volumes. This is Volume II of the Audit Report and contains 37 individual audit observations relating to 18 PSUs under the control of seven Ministries/Departments. Volume I contains 31 individual audit observations pertaining to 28 PSUs under the control of seven Ministries/Departments. Instances mentioned in this Report are among those which came to notice in the course of audit during 2013-14 as well as those which came to notice in earlier years. Results of audit of transactions subsequent to March 2014 in a few cases have also been mentioned. 5. All references to ‘Companies/Corporations or PSUs’ 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. 21 of 2015 (Volume II) EXECUTIVE SUMMARY I Introduction 1. This Report includes important audit findings noticed as a result of test check of accounts of records of Central Government Companies and Corporations conducted by the officers of the Comptroller and Auditor General of India under Section 619(3) of the Companies Act, 1956 or the statutes governing the particular Corporations. 2. The Report contains 37 individual observations relating to 18 PSUs under 7 Ministries/Departments. The draft observations were forwarded to the Secretaries of the concerned Ministries/Departments under whose administrative control the PSUs are working to give them an opportunity to furnish their replies/comments in each case within a period of six weeks. Replies to 27 observations were not received even as this Report was being finalised. Earlier, the draft observations were sent to the Managements of the PSUs concerned, whose replies have been suitable incorporated in the report. 3. The paragraphs included in this Report relate to the PSUs under the administrative control of the following Ministries/Departments of the Government of India: Ministry/Department (Number of Number of Number of paragraphs PSUs involved paragraphs in respect of which Ministry/Department’s reply was awaited 1. Heavy Industries and Public 8 6 Enterprises (BHEL, CCIL, HPCL and SSL) 2. Mines 2 2 (HCL) 3. Petroleum and Natural Gas 13 11 (IOCL, OIL, ONGC and OPAL) 4. Power 5 2 (DVC, PGCIL and REC) 5. Steel 6 3 (SAIL) 6. Textiles 1 1 (NTC) 7. Water Resources, River 1 1 Development and Ganga Rejuvenation (NPCCL) vii Report No. 21 of 2015 (Volume II) 8. Irregularities in payment of 1 1 entitlements by CPSEs (BPCL, GAIL and EIL) Total 37 27 4. Total financial implication of audit observations is ` 2,854.78 crore. 5. Individual Audit observations in this Report are broadly of the following nature: Non-compliance with rules, directives, procedure, terms and conditions of the contract etc.