CAG slams GSPC for mismanagement of overseas blocks, KG Basin2 min read . Updated: 01 Apr 2016, 01:57 AM IST
CAG says Gujarat State Petroleum Corporation Ltd bought overseas blocks without experience as an overseas operator
Ahmedabad: The national auditor has pulled up the Gujarat government-run Gujarat State Petroleum Corporation Ltd (GSPL) for mismanaging its exploration- and development-related activities in its KG Basin and overseas assets, leading to higher costs and financial losses.
The Comptroller and Auditor General of India (CAG), in its report on public sector firms in Gujarat for the year ended March 2015, said GSPL bought overseas blocks between 2006 and 2010 though it had no prior experience as an overseas operator.
“The delayed execution of the work committed resulted in cost escalations in these overseas blocks. The company surrendered 10 out of 11 overseas blocks during 2011-15 incurring an expenditure of ₹ 1,757.46 crore of which ₹ 1,734.12 crore was written off," CAG said in its report, which was tabled in the Gujarat assembly on Thursday.
North Hap’y and South Diyur blocks in Egypt were the major overseas blocks surrendered by GSPL. The delays in execution of minimum work programme (MWP) led to huge cost overruns in the North Hap’y block and the company incurred expenditure of $263.98 million, much higher than the committed $150 million, the CAG report stated.
In all, GSPL had 64 blocks as on 1 April 2011 of which it surrendered 37 blocks, including 27 domestic blocks. The company had to write off exploration expenditure worth ₹ 2,514.65 crore, including ₹ 780.53 crore for domestic blocks, it said.
The national auditor, which had earlier criticized GSPL for cost overruns in KG Basin block where it holds 80% participating interest, said in its report that the company did not properly address the risks associated with cost, technology and price in development of the KG Block.
“GSPC did not act upon a proposal for inducting strategic/financial partner at a appropriate time in spite of high costs and technological challenges," CAG said in its report.
Between 2011 and 2015, the total borrowings increased 177% to ₹ 19,716.27 crore, mainly on account of development activities in KG block. This resulted in the interest burden rising from ₹ 981.71 crore in 2011-12 to ₹ 1,804.06 crore in 2014-15, according to the CAG report.
In this four-year period, the revenue from production fell to ₹ 152.51 crore from ₹ 230.30 crore due to a drop in prices of oil and production of gas from 119.24 million cubic metres to 50.21 million cubic metres.
Hazira block was the main producing block that contributed 110 million cubic metres out of the total 119.24 million cubic metres of gas produced in 2011-12. It declined to 36.9 million cubic metres in 2014-15, the CAG report said.