ISLAMABAD: The Auditor General of Pakistan has unearthed a massive irregular payment of subsidies amounting to Rs 28,224 million to export-oriented sectors allegedly in violation of the Economic Coordination Committee’s (ECC) directives.
According to the audit report, irregular payment of subsidy amount of Rs 28 billion were unlawfully allocated to export oriented sectors in violation of ECC’s decision.
The Auditor General has recommended a thorough investigation into these captive power plants, raising concerns about the lack of records showing whether the factories that received subsidies actually exported their products.
In one year alone, captive power plants received 28 billion rupees illegally, benefiting from the most expensive imported gas provided at subsidized rates. The Petroleum Division released these funds in direct violation of ECC’s decision, further complicating the issue by failing to submit details of captive power plants within the stipulated one-month period.
The audit report, highlighting the lack of a mechanism for third-party audits, pointed out that the heat rates of Captive Power Plants (CPPs) were not checked, and the subsidies were not audited.
According to ECC’s decision dated July 25, 2022, there was supposed to be a quarterly review of the subsidy provided to the export industry for both gas and electricity. The Petroleum Division was tasked with preparing a report listing all captive units of the export-oriented sector receiving subsidized gas/RLNG and electricity, which was to be presented to the ECC within one month.
Despite these shortcomings, DG (Gas) disbursed Rs 28,224 million in subsidy claims for subsidized RLNG during 2022-23. Moreover, the report of the committee constituted by the ECC under the Minister of Energy to address the misuse of RLNG supply at concessional rates was not provided to the audit.
During the audit of DG (Gas) for the fiscal year 2022-23, significant irregularities were discovered. These included the absence of quarterly reviews showing entitled consumers, missing actual RLNG supply data, and the lack of verification with the Ministry of Commerce (MoC) and the Federal Board of Revenue (FBR) to confirm that the subsidized gas/RLNG was used for producing exported goods. Additionally, there was no mechanism for a third-party audit or pre-audit of subsidy claims.
During audit of DG (Gas) for the FY 2022-23, serious irregularities were observed in supply of RLNG supply at concessionary rate to export oriented sector scheme which included (i) missing quarterly review of subsidy provided to export industry showing the list of entitled consumers, contractual load (ii) actual RLNG supplied along with consumer wise export data was not available (iii) verification with MoC and FBR was not ensured to ascertain that customers included in the claims had actually exported the goods manufactured by utilization of subsidized RLNG during the period of claim (iv) no mechanism for 3rd party audit / pre-audit of claims was devised.Â
Despite all these shortcomings, DG (Gas) released Rs 28,224.000 million on account of subsidy claims in respect of subsidized RLNG during 2022-23. Further, report of the committee constituted by the ECC under the convenorship of Minister of Energy to address the issue of misuse of RLNG supply at concessionary rate was not provided to Audit.
Audit was of the view that due to weak monitoring by DG (Gas), subsidy claims were paid without proper pre-audit and instructions of the ECC were not complied with.
The matter was reported to the management in September, 2023. The management in its reply dated December 14, 2023 stated that verified claims were submitted to Finance Division on monthly basis before any release with all details related to each consumer availing the tariff. Therefore, submission of separate report to the ECC was not required. The management further, stated that based on the recommendations of Committee constituted under Convenorship of MoE, a summary was submitted which was accordingly considered by the ECC. The reply was not tenable as no report was provided to Audit.
The DAC in its meeting dated December 20, 2023 directed the DG (Gas) to take up the matter with competent forum for regularization of non-implementation of ECC’s directives. No further progress was reported till finalization of the report.
