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A parliamentary panel has directed the Ministry of Commerce to conduct a thorough inquiry into multimillion rupees financial embezzlements in the accounts of Pakistan Horticulture Development and Export Company (PHDEC) from the date of its establishment. A subcommittee of the Public Accounts Committee (PAC) of the Parliament which met here in the chair of Shafqat Mahmood to discuss audit paras of the Ministry of Commerce and attached departments also directed the ministry to take all necessary steps in revival of the PHDEC, saying that the revival could help boost fruit, vegetables, flowers and other agriculture exports.
Audit officials informed that panel that Former Chief Executive Officer (CEO) PHDEC Bashir Hussian made multimillion rupees by giving contracts to handpicked companies and individuals, appointing fake employees in the company and availing foreign tours. Briefing the panel Secretary Ministry of Commerce Muhammad Younus Dagha said PHDEC was created in Musharraf regime in 2002-03 when the then government believed in promoting non-traditional products and as a result the government created an independent entity other than TDAP in order to boost exports of horticulture sector.
He said that since the creation of the PHDEC, no audit has been conducted of the company and the audit department carried out audit of the company in 2017 where it unearthed multimillion rupees financial irregularities. The director general audit commerce briefing the panel said that it was revealed that former CEO of the company awarded various contracts to handpicked companies which failed to produce any result in enhancing exports of horticulture sector.
Dagha said that the sector has great potential; therefore, recently the government decided to revive the company instead of disbanding it and appoint competent workers with relevant experience. On a question of Member PAC Raja Javed Ikhlas, Dagha said that country's exports in past 5 months have witnessing a growth of 10 percent to 12 percent regularly and within coming a few months exports will further go up.
The audit officials informed the committee that cashiers of State Life Insurance Corporation (SLIC) of Pakistan in Islamabad, Multan and Khanewal embezzled Rs 24 million of clients' premium, adding that the issue was unearthed in 2013. The panel was told that Islamabad cashier was suspended while cases against Khanewal and Multan officials have been sent to Federal Investigating Agency (FIA). The panel was further told that national kitty was suffering a financial loss of Rs 60 million for not renting out of an area of 22,000 square feet of Pakistan Insurance Limited.
Audit officials said that an assistant manager of Trading Corporation of Pakistan (TCP) in compliance with private partners M/s Alhamd Traders, M/s Friends Enterprises and M/s MH Zafar Associates withdrew Rs 22.5 million from the accounts of the TCP through fake cheques during 2008-14 in the name of purchasing rice and wheat.
The committee expressed serious anger over the mismanagement of the TCP senior officials saying why they kept on ignoring such a fraud. The officials said that the matter has been referred to FIA for investigation. The meeting was further told that TCP appointed employees on fake degrees caused Rs 9.5 million loss to the company. The panel was informed that the matter was sub judice. The panel said that there are various people rooming here and there in the country with fake PhD degrees and they are insisting to call them as doctors, and such practice must come to an end.
Dagha said that the country's exports five months ago witnessed a significant decline as it declined by $5 billion per annum but now the situation is rapidly improving as exports have started growing at 12 percent per month. Dagha said that after the 18th Amendment, horticulture sector is under the mandate of the provinces and the federal government is nothing to do with it "but they forget to know this and when you talk about exports of horticulture sector then it's is the responsibility of Commerce Ministry to look after the affairs and problems of this sector."
Shafqat said, "It is unfortunate that horticulture export policy has not been formulated yet by the ministry despite our repeated requests. In the last four budgets, horticulture export sector was continually ignored by the officials of the Finance Ministry". Member committee Raja Javed Ikhlas said that horticulture sector has been gaining importance for the last two decades in the world trade, adding that factually, in recent years, developing countries have created a space for themselves in this market, but they are not able to move beyond 4% to 5% of the world trade and in comparison Pakistan's share is just 0.3 percent.
Dagha said that the ministry under Strategic Trade Policy Framework (STPF) for 2015-18 has chalked out a short-term export enhancement strategy and under it, the ministry has identified four areas including horticulture but it has been given no importance practically. According to Auditor General Pakistan documents, during audit of Pakistan Horticulture Development & Export Company (PHDEC) for the years 2002-03 to 2013-14 it was observed that four projects were approved as a part of Trade Policy 2003-04 to leverage the export potential of horticulture projects as independent companies. Funds were also released by Export Development Fund (EDF). The PHDEC was to supervise and provide technical/operational assistance. Companies could not be set up despite release of funds by EDF hence funds to the tune of Rs 91.89 million were blocked for more than 10 years as detailed below:
After 10 years PHDEC recommended to EDF in March 2015 for scrapping the projects and closure of companies. By not setting up the companies and retention of huge funds in the bank account, the management showed slackness. The matter was reported to the management and ministry on October 28, 2015. The DAC in its meeting held on January 15, 2016 directed the management to get the companies closed and return the unspent funds to EDF at an early date. No further progress was reported till finalization of the report.
Audit recommends early winding up of companies and return of unspent funds to EDF. The matter may also be investigated with a view to identify the persons responsible for showing slackness in achieving the targets. In-fructuous investment on establishment of Common Facility Centre for Fresh Fruits & Vegetables processing resulted in Rs 88.753 million irregularities/embezzlement.
During audit of Pakistan Horticulture Development & Export Company (PHDEC) for the years 2002-03 to 2013-14, it was observed that PI-IDEC entered into joint venture agreement with M/s Durrani Associates (Pvt) Ltd Karachi to set up a fruit and vegetable processing facility on September 14, 2010. The board of directors of the company was to comprise of 4 directors - 2 each from PHDEC and M/s Durrani Associates. The parties agreed to contribute equally in the project cost of Rsl77.507 million. The EDF Board sanctioned and released an amount of Rs 88.753 million for the project on July 22, 2010.
The project started commercial processing during 2011-12. Selection of M/s Durrani Associates without inviting expression of interest and prior approval of PHDEC BOD was held non-transparent by audit. M/s Durrani Associates did not submit annual audited accounts to PHDEC since inception of the project. No board meeting was held in violation of rules. The agreement was also defective as no clause regarding engaging any officer of PHDEC in the joint venture was inserted. The PHDEC did not take any step to check violation of contract agreement. Audit was of the view that the management could not safeguard the interests of the organization.
The matter was reported to the management and ministry on October 28, 201 5. The DAC in its meeting held on January 15, 2016 directed the management to hold meeting with M/s Durrani Associates Karachi to resolve the matter otherwise take legal action as per provisions of joint venture agreement. However no progress has been reported to Audit till finalization of this report. Audit recommends recovery of Rs 88.753 million from M/s Durrani Associates Karachi at an early date.
During audit of Pakistan Horticulture Development & Export Company (PHDEC) for the years 2002-03 to 20 13-14, it was observed that the company had six vehicles and incurred expenditure of Rs 17.412 million on POL and repair and maintenance during the above years. However, movement registers and log books of the said vehicles were not provided to audit despite repeated reminders. Audit was of the view that in the absence of these essential documents, the authenticity of expenditure amounting to Rs 17.412 million on POL & repair and maintenance of vehicles could not be ensured.
The matter was reported to the management and ministry on October 28, 2015. The DAC in its meeting held on January 15, 2016 directed the management to hold inquiry into the matter and take action accordingly. No further progress was intimated till finalization of the report. Audit recommends taking action in the light of DAC directives. Audit also recommends action against the person(s) responsible for non-production of record to audit.
During audit of Pakistan Horticulture Development & Export Board (PHDEB) for the years 2002-03 to 2013-14, it was also observed that 16 officers of the PHDEB undertook foreign visits without approval from the minister in-charge and prior clearance from Ministry of Finance which resulted in expenditure worth Rs 11.122 million. According to instructions of Cabinet Division vide its letter No. F 9-148/2002-MIN, dated February 19, 2003, to all autonomous bodies/corporations which are running through government funding, approval of the minister in-charge will be necessary subject to availability of funds in relevant budget and prior clearance by the Ministry of Finance for visit abroad by officers/official up to and including BPS-20 and their equivalent. These instructions were again circulated by Cabinet Division on May 17, 2008.

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