Export-oriented sectors: AGP recommends probe into subsidy against RLNG
- Audit notes that due to weak DG (Gas) monitoring, subsidy claims were processed without proper pre-audit and ECC’s instructions were not followed
ISLAMABAD: The Auditor General of Pakistan (AGP) has recommended a probe into Rs 28 billion subsidy extended to export-oriented (erstwhile zero-rated) sectors against RLNG claims, in blatant violation of the Economic Coordination Committee’s (ECC) decision.
According to the AGP’s report for the audit year 2023-24, the ECC’s decision dated July 25, 2022, mandated a quarterly review of subsidies provided to the export industry for both gas and electricity. This review was to include a report from the Petroleum Division listing all captive units in the export-oriented sector receiving subsidies for gas/RLNG and subsidized electricity, with the report to be presented to the ECC within one month. Additionally, an ECC decision from August 16, 2021, established a committee led by the Minister for Energy to address the issue of RLNG being supplied at concessional rates to the export-oriented industry and to provide viable recommendations for ECC consideration.
During the audit of DG (Gas) for FY 2022-23, serious irregularities were noted in the RLNG subsidy scheme for the export sector. These included: (i) the absence of a quarterly review of the subsidy, including the list of entitled consumers and contractual load; (ii) lack of available data on actual RLNG supplied and consumer-wise export data; (iii) failure to verify with the Ministry of Commerce (MoC) and Federal Board of Revenue (FBR) whether the customers included in the claims had actually exported goods using the subsidized RLNG; and (iv) no mechanism for third-party audit or pre-audit of claims. Despite these issues, DG (Gas) approved Rs 28.224 billion in subsidy claims for RLNG during 2022-23.
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Furthermore, the committee report established by the ECC to address RLNG misuse for audit review was not provided to the ECC. The audit found that due to weak monitoring by DG (Gas), subsidy claims were processed without proper pre-audit, and ECC’s instructions were not followed. This issue was reported to management in September 2023. In their response dated December 14, 2023, the management claimed that verified claims were submitted to the Finance Division monthly before any release, with details for each consumer. They argued that a separate report to the ECC was unnecessary and stated that the ECC had considered a summary based on the committee’s recommendations.
The response was deemed insufficient as no report was provided for audit review. The Public Accounts Committee (DAC), in its meeting on December 20, 2023, directed DG (Gas) to address the matter with the appropriate authority for regularization of the non-implementation of ECC’s directives. As to the report’s finalization, no further progress has been reported. The Audit recommended investigating the irregularities and presenting the findings to the competent forum for appropriate action.
Copyright Business Recorder, 2024
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