Report of the Comptroller and Auditor General of India for the year ended March 2016 Union Government (Commercial) No. 9 of 2017 (Compliance Audit Observations) CONTENTS CHAPTER/ SUBJECT CPSE PAGE PARAGRAPH NO. PREFACE vii EXECUTIVE SUMMARY ix Chapter I DEPARTMENT OF ATOMIC ENERGY 1.1 Extra expenditure on purchase of Nuclear Power 1 power from external source due to Corporation of India delay in completion of power supply Limited system Chapter II MINISTRY OF CIVIL AVIATION 2.1 Lack of appropriate action by AAI Airports Authority of 3 led to loss of its revenue and undue India benefit to contractor 2.2 Loss of revenue due to non- Airports Authority of 5 inclusion of land in lease agreement India 2.3 Idling of civil enclaves due to Airports Authority of 7 absence of realistic assessment of India their requirement 2.4 Non-realisation of potential rental Air India Limited 9 income 2.5 Short coming in tendering process in Air India Limited 11 renewal of Aviation Insurance resulting in a loss of USD 30,89,959 to Air India Limited 2.6 Irregular award of contract Air India Limited 15 Chapter III MINISTRY OF COAL 3.1 Loss due to non-utilisation of Bharat Coking Coal 19 Cenvat Credit Limited 3.2 Loss due to incorrect fixation of Coal India Limited & its 22 reserve price of coal under e-auction subsidiaries sale 3.3 Delayed Payment of Central Excise Eastern Coalfields 25 Duty Limited 3.4 Failure to earn additional revenue Northern Coalfields 26 Limited 3.5 Operational performance of Power NLC India Limited 29 Plants i 3.6 Non-recovery of Transportation Western Coalfields 37 Charges from the Customer Limited Chapter IV MINISTRY OF COMMERCE AND INDUSTRY 4.1 Imprudent financing decisions The State Trading 40 resulted in non-realisation of dues Corporation of India Limited Chapter V MINISTRY OF DEVELOPMENT OF NORTH EASTERN REGION 5.1 Review of Non-Performing Assets North Eastern 46 Development Finance Corporation Limited Chapter VI DEPARTMENT OF FERTILIZERS 6.1 Failure to safeguard the interests of Rashtriya Chemicals and 56 RCF Fertilizers Limited Chapter VII MINISTRY OF FINANCE (DEPARTMENT OF FINANCIAL SERVICES) 7.1 Non-Performing Assets Canbank Factors Limited 58 7.2 Failure to exercise due diligence IFCI Venture Capital 65 before sanctioning/disbursing loan Fund Limited led to non-recovery of dues 7.3 Loss of Premium in respect of National Insurance 67 Group Mediclaim Insurance Policies Company Limited 7.4 Absence of monitoring mechanism United India Insurance 70 for assessment and prompt recovery Company Limited of reinsurance claims 7.5 Implementation of CORE Insurance United India Insurance 71 Solution Company Limited Chapter VIII MINISTRY OF HEAVY INDUSTRIES AND PUBLIC ENTERPRISES 8.1 Violation of CVC and internal Bharat Heavy Electricals 83 guidelines resulted in avoidable Limited expenditure Chapter IX MINISTRY OF HOUSING AND URBAN POVERTY ALLEVIATION 9.1 Sanction of loan violating internal Housing and Urban 85 guidelines Development Corporation Limited ii Chapter X MINISTRY OF PETROLEUM AND NATURAL GAS 10.1 Implementation of City Gas GAIL Gas Limited 87 Distribution Projects by GAIL Gas Limited 10.2 Irregular payment of special GAIL (India) Limited 97 monetary appreciation 10.3 Additional burden on RGGLV Bharat Petroleum 98 consumers due to incorrect Corporation Limited and declaration of Retail Selling Price of Hindustan Petroleum LPG Corporation Limited 10.4 Inability to operate newly Indian Oil Corporation 100 constructed Liquefied Petroleum Limited Gas Bottling Plant due to lack of Environmental Clearance 10.5 Idle investment of `15.30 crore Indian Oil Corporation 101 Limited 10.6 Extra expenditure of `18.52 crore on Oil and Natural Gas 103 pipeline replacement project due to Corporation Limited shortcomings in the Bid Evaluation Criteria 10.7 Supply of gas without security Oil and Natural Gas 105 resulted in non-recovery of dues Corporation Limited 10.8 Delay in repair of critical HP flare Oil and Natural Gas 107 tip led to extra expenditure of Corporation Limited `16.11 crore due to replacement of repairable HP flare tip 10.9 Failure to obtain the share of cost Oil and Natural Gas 108 of Immediate Support Vessels Corporation Limited purchased by ONGC for security of offshore assets from private Exploration and Production (E&P) operators 10.10 Wasteful expenditure on idling of ONGC Videsh Limited 110 rig Chapter XI MINISTRY OF POWER 11.1 Incorrect decision for payment of Damodar Valley 113 ex-gratia to the employees Corporation 11.2 Loss due to delay in rectification of Damodar Valley 114 defect Corporation 11.3 Water Resource Management Damodar Valley 115 Corporation 11.4 Violation of CVC guidelines NHPC Limited 124 resulted in undue benefit to contractor iii 11.5 Injudicious investment of REC Rural Electrification 125 Corporation Limited Chapter XII MINISTRY OF ROAD TRANSPORT AND HIGHWAYS 12.1 Undue benefit to the concessionaire National Highways 128 resulted in accumulation of dues Authority of India 12.2 Loss of revenue on account of National Highways 130 failure to charge user fee since Authority of India completion of the project 12.3 Incorrect revenue projection in National Highways 131 financial analysis Authority of India 12.4 Toll Operations in NHAI National Highways 134 Authority of India Chapter XIII DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH 13.1 Infructuous expenditure of `20.21 Central Electronics 145 crore on Integrated Security System Limited at Old Delhi Railway Station Chapter XIV MINISTRY OF SHIPPING 14.1 Operation and Maintenance of Dredging Corporation of 148 Dredgers India 14.2 Loss due to failure to restore interest The Shipping 157 payment clause Corporation of India Limited 14.3 Management of Agency Agreements The Shipping 159 Corporation of India Limited Chapter XV MINISTRY OF STEEL 15.1 Failure to safeguard financial MSTC Limited 164 interest of MSTC 15.2 Avoidable expenditure towards NMDC Limited 166 interest on delayed payment of royalty 15.3 Loss of `11.25 crore due to failure Steel Authority of India 168 of BSL/SAIL to effectively manage Limited imported coal 15.4 Avoidable expenditure of penalty/ Steel Authority of India 169 idle freight Limited 15.5 Deficient project management of Steel Authority of India 170 CRM complex in BSL/SAIL Limited 15.6 Unauthorised supply of power to a Steel Authority of India 174 contractor cost `22.83 crore to Limited RSP/SAIL 15.7 Loss on account of payment of Steel Authority of India 175 penalty in Bokaro Steel Plant/SAIL Limited iv 15.8 Deficient production planning Steel Authority of India 177 resulted in avoidable stock carrying Limited cost in Bokaro Steel Plant and Rourkela Steel Plant of SAIL 15.9 Material Management Steel Authority of India 178 Limited Chapter XVI MINISTRY OF TEXTILES 16.1 Implementation of revival scheme National Jute 190 Manufactures Corporation Limited Chapter MINISTRY OF WATER RESOURCES, RIVER DEVELOPMENT XVII AND GANGA REJUVENATION 17.1 Irregularities in execution of work National Projects 196 of construction of road and fencing Construction Corporation along the Indo-Bangladesh Border Limited Chapter IRREGULARITIES IN PAYMENT OF ENTITLEMENTS, XVIII RECOVERIES AND CORRECTIONS/RECTIFICATIONS BY CPSEs AT THE INSTANCE OF AUDIT 18.1 Excess payment of Performance NLC India Limited and 200 Related Pay to the employees Rashtriya Ispat Nigam Limited 18.2 Undue benefit extended to the GAIL (India) Limited, 201 executives in the form of shift Hindustan Petroleum allowance Corporation Limited, Bharat Petroleum Corporation Limited and Steel Authority of India Limited v 18.3 Recoveries at the instance of audit Airports Authority of 204 India, Bharat Heavy Electricals Limited, Mangalore Refinery and Petrochemicals Limited, National Insurance Company Limited, National Projects Construction Corporation Limited, Northern Coalfields Limited, NLC India Limited, Oil India Limited, Rashtriya Chemicals and Fertilizers Limited, SJVN Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and Western Coalfields Limited 18.4 Corrections/rectifications at the Balmer Lawrie & 205 instance of audit Company Limited, National Fertilizers Limited, National Payments Corporation of India Limited and Oil & Natural Gas Corporation Limited Chapter XIX Follow up on Audit Reports (Commercial) 206 Appendix I 209 Appendix II 212 Appendix III 215 Annexures 217 vi 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 2016 contains 57 individual audit observations relating to 36 CPSEs under control of 17 Ministries/Departments.