Islamabad       -         Auditor General of Pakistan has unearthed irregularities worth more than Rs100 billion in the procurement, re-gasification and sale of imported LNG.

In its special study on import of LNG for the period of 2015-16, the Auditor General of Pakistan pointed out serious irregularities in the Purchase of LNG in noncompetitive manner.

During the Special Study of import of LNG for the period 20l5-l6 it was observed that the Price Negotiation Committee (PNC) constituted by ECC, in its I3th meeting dated October 30, 2015 recommended e rate of 13.9 percent of Brent for purchase of LNG from Qatar for acquiring 400 MMcfd LNG (through approximately 495 ships) in 15 years to the ECC for approval. Meanwhile PSO (a member of the PNC) also engaged in open tendering for purchase of LNG separately.

In November 20l5, PSO entered into a contract with M/s Gunvor a trading company to acquire 60 ships in 5 year at 13.37% of Brent. Thus, PNC, after considering the cheaper rates available from open market re-negotiated the price of LNG with Qatar at rate of 13.37 percent of Brent.

Audit was of the view that had open competition been followed and complete facts of open market/ other LNG producing countries submitted to ECC for consideration, the Government would have been able to procure LNG at appreciably lesser rates saving public money in the process.

The reply in this regard was not tenable because PNC should have negotiated a better price slope with Qatar. Audit recommended to justify the justification for non-communication of the open market rates to ECC enabling it to make the weIl-informed decision besides fixing responsibility for purchase of LNG at higher than the market rate.

The audit also noted that overpayment owing to higher rates of re-gasification was made. The Cabinet vide its decision dated April 18, 2014 endorsed the decision of ECC dated February 28, 2014 regarding fixing of levelised tolling tariff of @ $ 0.66per MMBTU. The same was endorsed by MPNR.

During the Special Study of import of LNG for the period 20IS-l6,it was observed that M/s SSGC paid USS 100.285 million to M/s EETL on account of capacity charges and utilization fee for RLNG from March 26. 2015 to March 25. 20l6.This corresponds to a quantity of 74,264,523 MMBTU of RLNG. The cost paid to M/s EETL for levelised terminal charges was worked out to be $1.35 per MMBTU. Thus M/s SSGC paid terminal charges in excess to those allowed by GoP/OGRA by $0.69 (1.35-0.66) per MMBTU resulting into overpayment of Rs 5.372.265 million (US I Rs 104.84). Furthermore scrutiny of LSA document disclosed that M/s SSGC had failed to include levelised charge of $0.66 per MMBTU in the agreement in violation of direction of GoP which not only resulted in violation of such heavy amount but could continue to cause excessive payment during the next l5 years causing huge loss to public exchequer.

Audit was of the view that the LSA was irregular and deficient due to none inclusion of levelised terminal charges which resulted in overpayment of Rs5,372 million.

Audit recommended to fix responsibility for non inclusion of levelised tariff clause in the LSA besides adjustment of overpayment made till date.

The audit further observed that due to acceptance of higher trolling charges by ISGS and SSGC cause a loss of Rs33.62 billion. No negotiation on the tolling charges was done with m/s ETTL as was advised by Law Division and excessive rate were allowed to the terminal operator.

At the existing rate of $0.66 per MMBTU the total project came to $1320.924 million whereas if contract was awarded at prevailing rate of $ 0.50 per MMBTU, the total payment would come to $ 1000.700 million. Thus $320 million (equivalent to Rs33,623.520 million at Rs 105 per US$) could have been saved had negotiations been carried out and prevailing rates were finalised. Audit recommends to justify the reasons for non-compliance of the advise of Law division as per the directives of ECC besides fixing the responsibility.

Another issued was non utilization of GIDC for development of LNG Infrastructure. According to Section 3(I) of the Gas Infrastructure Development Cess (GIDC) Act 20l5, the Cess shall be levied and charged by the Federal Government from gas consumers other than domestic sector consumers or the company at the rate as provided in Second Schedule to this Ordinance. Further as per Section 4(1) of the GIDC Ordinance, 2014 the Cess shall be utilized by the Federal government for or in connection with various gas infrastructure projects.

Auditor noted that during 2015-16 SNGPL and SSGC demanded Rs58000 million and Rs40000 million respectively for laying of RLNG pipeline from Karchi to Lahore. The amount was not provided and consequently the gas utilities had to borrow that money from the commercial banks. On the other hand the government collected more than Rs101000 million from 2011 to 2016 under GIDC which were lying unspent.

Audit recommended to justify the reason of non-utilization of GIDC and incurrence of commercial liability for construction of such projects resulting into additional burden of RLNG liability for construction of such projects resulting into additional burden on RLNG consumers.

Furthermore unjustified payments of fixed capacity charges of Rs 1.46 billion, unjustified payment of excessive port charges of Rs3.2 billion, undue infrastructure cess worth Rs291 million, overpayment of hiring charges and other irregularities were also unearthed by the Auditor.