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Home News Power Sector News CAG raps Gail for supplying gas at cheaper prices to private firms

CAG raps Gail for supplying gas at cheaper prices to private firms

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CAGIndia's top auditor has criticised Gail India for extending undue benefits of Rs 246 crore to private power producers by supplying them cheap gas against a government directive, and castigated ONGC for hiring a rig from Reliance Industries in an "opaque and irregular manner." 

The Comptroller & Auditor General (CAG) of India's latest report said Gail supplied fuel to the power firms that sold electricity at commercial rates against the oil ministry's instructions.

Gail continued the practice despite CAG's earlier audit objection that Rs 227.37 crore revenue loss was incurred because it supplied cheap gas to seven such companies from April 2006 to March 2010, the report said. "Consequently, undue benefit to aforesaid ineligible customers increased to Rs 246.16 crore by March 2011 and would continue to increase if no immediate corrective action is taken by the Gail/ministry," the report said.

CAG brushed aside Gail's reply that it had raised the issue with the oil ministry "on a number of occasions, since 2006," and its advice was awaited. The report said, "being custodian of the gas pool account, it was Gail's primary responsibility to charge the correct rate instead of creating the confusion, which led to the undue benefit to ineligible consumers." The oil ministry informed CAG that Gail had been charging market rates for gas from the seven consumers from November 16, 2011. But it could not recover old dues after raising credit note because the customers approached the court and the matter was subjudice.

The auditor pulled up Gail for its inability to recover Rs 29.78 crore from RIL, which it overdrew in August 2008. "Gail did not even invoke the letter of credit amounting to Rs 7.5 crore (valid up to Sept 2009) to reduce its due to that extent ...," the report said. Gail referred to the matter for arbitration on Sept 2011.

The report also criticised ONGC for taking a rig from competitor RIL without competitive bid, which is a must for any public sector company before they acquire any product or service from the market.

"The deviation from the standard terms and conditions resulted in an extra expenditure of Rs 9.36 crore besides additional expenditure of Rs 29.32 crore on idling of support services due to abnormal breakdown time of the rig," the report said.

The CAG rejected the company's defence that there was a pressing need to hire the rig. "In sum, as of July 2009, there was no need for the company to have an ultra deepwater rig on an urgent basis and there was no panic situation to acquire the rig in deviation of the standard tendering procedure," it said.

Source - Economic Times


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