The Auditor General of Pakistan (AGP) has noticed six cases of loss to the tone of Rs.3.866 billion in the accounts of the Mines and Mineral Development Department, Khyber Pakhtunkhwa during financial year 2015-16, said the Audit Report on the accounts of KP government Audit Year 2016-17.

The Audit Report has already been presented in the provincial assembly that had referred it to the Public Accounts Committee (PAC) of the house. The committee headed by the Speaker KP Assembly has representation from all parliamentary parties of the house. The highest loss to the tone of Rs.3.299 billion was noticed in the office of the Assistant Director Mines and Mineral Development Department Mardan. The loss was occurred during financial year 2014-15.

It was noticed that the licensing authority granted mining lease of the plots for mining/extraction of different minerals to various contractors. The work orders to the contractors were issued and the contractors started operation. According to Rule 153 of the Mining Concession Rules 2005, a licensee or a lessee is bound to send monthly returns of production and dispatch of mineral to the licensing authority in the prescribed form on or before the 15th day of each succeeding month. In case there is no production of mineral in any month, a 'NIL' report shall be submitted with reasons thereof. Furthermore, according to Rule 159 of the Mining Concession Rules if a lessee has under-reported mineral production, the licensing authority shall charge royalty up-to ten times the notified rate on the quantity of mineral under-reported by licensee/lessee, forfeit the security deposit and cancel the license or lease on the merit of the case.

But, record revealed that in 18 cases, the contractors did not report any production from the date of grant of lease till the date of audit. This state of affairs put the public exchequer into loss of millions of rupees on account of non-charging of royalty, excise duty and dead rent etc. It was calculated that in case of Nil production, if the average minimum production one ton is taken into consideration with the royalty rate of Rs.90 per ton, with Rs.900/- as ten times penalty per ton, then an approximate loss amounting to Rs.3,299,000,000/- sustained by the government. Thus, penalty of Rs. 3,299,000,000/- should have been imposed on the defaulters.

Loss occurred due to financial indiscipline, week internal controls and non-observance of rules. When pointed out in March 2016, it was stated that detailed reply would be submitted after consulting the record in accordance with Mining Concession Rules 2005. The reply of the department was not tenable. In the Departmental Accounts Committee (DAC) meeting held in December 2016, the department stated that Rule 153 may be read with Rule 139 and not with Rule 159. The lessees are served with notices to deposit dead rent, which is Rs.6000/- minimum per annum or Rs.6/- per acre per annum in accordance with Mining Concession Rules (MCR)-2005. However, DAC disagreed and directed to conduct inquiry to verify the status and record be produced for verification. However, neither inquiry was conducted nor record produced for verification till the finalization of the audit report. The audit has recommended the implementation of the DAC decision.

The second loss to the tone of Rs.489.695 million has been noticed during the financial year 2013-14, in the office of the Director General (DG) Mines & Mineral Development Department, Khyber Pakhtunkhwa Peshawar. It was noticed that a sum of Rs. 489,695,088 was outstanding against different lease holders on account of annual rent and mineral royalty. No timely efforts were made at the district, regional and headquarter level for the early recovery of long outstanding dues, which resulted into loss to the public exchequer. Further, record was not produced for necessary audit check. The audit has attributed the occurrence of the loss to financial indiscipline and weak internal controls. When pointed out in April 2015, the management stated that detailed reply would be furnished after consulting the record.

In the DAC meeting held in December 2016, department replied that, as per provincial government 2009 policy, annual rent was also levied on concessionaries, which the Frontier Mine Owners' Association and others challenged in Peshawar High Court Bench Abbottabad. The court granted relief with the direction that no adverse action against the writ petitioners may be taken, so the case is subjudice. Annual rent will be recovered. The DAC directed that record regarding outstanding government dues be produced for verification within one week. However, no record was produced to audit for verification till finalization of this report. The audit has recommended that the outstanding amount of royalty be recovered and deposited in the public treasury. The annual rent cases be vigorously pursued for recovery, in case the honorable court decides in favor of the government. Record be produced for verification.

The third case of loss to tone of Rs.38 million due to non-finalization of lease contract was also occurred during the financial year 2014-15 in the office of the Assistant Director Mines & Mineral Development Department, Mardan.

It has been noticed that local office forwarded 19 applications of different individuals to Director General during the period from 9.04.2007 to date, for allowing mining leases over an area of 2880.352 acres, which the headquarter did not finalize and kept pending till the date of audit due to unknown reasons. There exists no documentary evidence that these areas were in the control of the local office and there are likely chances of that the applicants might have started the mining work.

Copyright Business Recorder, 2019