CAG raps GSPC for mismanagement, investment in KG block

According to the CAG report, GSPC's borrowing stood at Rs 19,716 crore as of March 2015, a jump of 177% since 2011

The Comptroller and Auditor General (CAG) has called into question state PSU Gujarat State Petroleum Corporation's (GSPC's) investment of Rs 19,576 crore in its Krishna Godavari (KG) block project, saying "future prospects" of the block remain shrouded in "uncertainty".

In 2005, Narendra Modi as Gujarat chief minister had announced that GSPC had struck 20 trillion cubic feet gas in the KG basin block, named 'Deendayal block', where commercial production is yet to start.

CAG, in its report tabled before the Gujarat Assembly two days go, painted a gloomy picture of GSPC's finances, as its borrowing stood at Rs 19,716 crore as of March 2015, a jump of 177% since 2011.

"The company went ahead acquiring overseas blocks during 2006-10 mainly as an operator with considerably high participating interests and without any prior experience overseas. The delayed execution of work resulted in cost escalations in such blocks," it said.

The activities in KG block also caused an increase in company's borrowings to Rs 19,716.27 crore as of March 31, 2015, which was 177% higher than Rs 7,126.67 crore as of March 31, 2011, the report said.

"The company had to rely heavily on borrowings mainly for activities in the KG block. The total interest burden rose from Rs 981.71 crore in 2011-12 to Rs 1,804.06 crore in 2014-15," it stated.

"The company did not address properly the risks associated with cost, technology, and gas pricing (regarding KG block). This has resulted in uncertainty regarding the future prospects from the KG block where an investment of around Rs 19,576 crore was made as of March 2015," the report said.