ISLAMABAD: The Auditor General of Pakistan (AGP) has raised serious objection to the Rs89.550 billion investment in US dollars by Government Holding Private Limited (GHPL) in the Reko Diq project of Balochistan, without ensuring the availability of funds, as well as, requisite foreign currency.
GHPL acquired an 8.33.33 per cent equity stake in the Reko Diq project on the instruction of federal government.
The Reko Diq project is owned 50 per cent by Barrick, 25 per cent by three SOEs; i.e. GHPL, OGDCL and PPL, and 15 per cent by the provincial government of Balochistan on a fully-funded basis and 10 per cent on a free-carried basis.
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In the Audit Report on Petroleum Division and Oil and Gas Regulatory Authority (OGRA) 2023-24, the audit officials observed that board of directors in a meeting held on June 15, 2023 resolved in compliance of the ECC’s decision on March 15, 2022 that reserves of Rs51.230 billion be reallocated back to accumulated profits and new reserves of Rs20 billion be accumulated over the next four years by setting aside Rs5 billion each year for Reko Diq project.
According to the Board Audit Committee meeting held on May 10, 2023, phase-I for development of Reko Diq would continue till year 2028 and production of copper and gold would start in 2028. The committed investment of GHPL for phase-I would be $398 million (equivalent to Rs89550 million) over the next five years.
The GHPL also had other investment commitments in various ventures which require future financial cover.
Audit contended that in this scenario GHPL invested in Reko Diq project without due diligence and position of cash flows was not properly assessed. Therefore, funds created to fulfil other objectives were also reversed to fund investment in Reko Diq project.
Further, GHPL share of Rs89.550 billion in Reko Diq project would be paid in dollars and provision for maintaining funds in US dollars was not created nor US dollar account was maintained by the management.
Management of GHPL responded to audit para on December 11, 2023 that GHPL business was not exposed to any liquidity risk. The company maintains a healthy cash flow position which could be gauged by the fact that its cash and cash equivalents as of June 30, 2023 were $0.130 billion and the company had full capacity to fulfil its commitment towards the Reko Diq Project.
According to the Companies Act 2017, “The business of the company shall be managed by the board”.
Further, finance, procurement and risk management committee of the GHPL board in its meeting on August 25, 2022 apprised that estimated sale volume for the fiscal year 2022-23 would decrease as major fields are on a natural decline.
Copyright Business Recorder, 2024
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