Gandhinagar, Aug 23 The Public Enterprise Committee of the Gujarat Assembly has criticised the Gujarat State Petroleum Corporation (GSPC) for showing "over confidence" in acquiring the KG Basin block.
The committee, which monitors state-run public sector undertakings (PSUs), in their report tabled in the House today pointed out several flaws in the process adopted by GSPC in acquiring the KG gas block through aggressive bidding.
The committee noted that against the estimated expenditure of USD 109.70 million, GSPC actually incurred an expenditure of USD 1404.86 million for three phases of gas exploration, which is 21.81 times higher than what was estimated while placing the bids.
"It shows that the company has taken huge risk while placing the bids. Without assessing various financial and technical aspects, GSPC placed high bid to acquire KG block. Due to this, company's unsecured debt has rose to Rs 2,140.53 crore between 2006 and 2011," said the report.
The committee headed by former Gujarat Minister Narottam Patel has 15 members from both ruling BJP and opposition Congress.
This committee scrutinises observations made by the Comptroller and Auditor General on PSUs and suggests recommendations to the state government. The latest report is based on the CAG's observations about GSPC for the year 2010-11.
"This committee feels that the company placed bids having high rates without assessing the advises of their technical consultant. This shows company's inexperience and lack of farsightedness. Due to such overconfidence, the company's costs sky rocketed," the report added.
The committee also raised objection about involving GeoGlobal Resources(GGR) into the project through 10 per cent participatory interest(PI), which according to the committee is against the interest of the PSU.
"This committee believes that the decision by GSPC to give away 10 per cent PI through pay-in-cash mode instead of hiring GGR and paying it for rendering technical services, was an improper financial decision. This committee is surprised to know that GGR was not at the risk in case of loss to GSPC, but, they would get 10 per cent from the revenue if production takes place," the report stated.
The committee then asked GSPC to inform them whether the government was aware of such financial model.
"We recommend to cancel the prevailing model and replace it with new one after understanding the concept of payments and partnership. This committee recommends PSU to enter into any payment related agreement under the supervision of government," it added.