CAG flays SAIL on avoidable expenditure

Government auditor CAG has flayed steel maker SAIL for incurring Rs 10.74 crore avoidable freight expenditure and wasting opportunity to save Rs 28.36 crore by delaying commissioning of a project at VISP.
"Due to delay in completing the required documentation to avail concessional Class 180 rate for transportation of iron ore from captive mines to IISCO Steel Plant, Burnpur, SAIL had to incur avoidable higher freight of Rs 10.74 crore," Comptroller and Auditor General (CAG) said in a recent report.
The Railway Board had in 2009 notified the Rate Circular stipulating Class 180 rate for train load movement of iron ore for domestic consumption in the manufacture of iron and steel.

It also stipulate that the distance based charge on the traffic would not be levied in case of one-time submission of documents and submission of certified copies of the relevant monthly exercise returns on a quarterly basis.
"Examination in Audit revealed that ISP did not fulfil these conditions despite repeated reminders from the Railways in March 2011, June 2011 and July 2011.
Indian Railways finally de-notified ISP from Class 180 from September 18, 2011 and charged higher rate applicable on exports resulting in ISP incurring avoidable expenditure of Rs 10.74 crore from September 18 and October 22, 2011," CAG said.

The government auditor has chided SAIL for deficiencies in planning and technical due diligence in deciding the scope of work delayed in commissioning new Reheating Furnace (RHF) by over 58 months at Visvesvaraya Iron and Steel Plant (VISP) in Karnataka.

"Visualised savings of Rs 28.36 crore from new RHF on account of lower scale loss and furnace oil consumption were not achieved even after incurring an expenditure of Rs 9.85 crore," CAG said.
The two RHFs of VISP outlived their lives since installed in 1965-66. These had inherent design limitations leading to abnormal generation of scale and were consuming furnace oil of more than 75 litre per tonne of output compared to about 50 litre per tonne consumed by modern furnaces.

The Centre for Engineering and Technology, an in-house consultancy wing of SAIL, suggested replacement of the two at an estimated Rs 8.79 crore capital investment. This would have accrued Rs 9 crore total savings each year.
The company placed orders, but they were not commissioned as of January, 2014 even after lapse of 58 months. CAG said the matter was reported to the Steel Ministry in February, but its reply was awaited till March this year.