Cag Castigates Public Sector Unit For Rs 38 Crore Nugatory

The comptroller and auditor general of India has castigated the Oil and Natural Gas Corporation (ONGC) for abandoning the single buoy mooring (SBM) project mid-way which resulted in a nugatory investment of Rs 38.88 crore.

Besides this, the contractor has made an additional claim of Rs 80 crore which is under arbitration.

CAG says the immediate consequence of not setting up the SBM at Hazira was the extra expenditure being incurred by the oil industry on transportation of natural gas liquid (NGL) from Hazira to Kandla for export.

The extra expenditure on this account during December 1988 to June 1995 was Rs 250.56 crore. Further, export through Kandla port aggravated the bottlenecks in the already congested port.

The long-term consequence, according to CAG, is the lack of facilities to the public sector import and export of petroleum products. This was reflected in sharp increase in demurrage payment every year. The amount of demurrage incurred by Indian Oil Corporation alone during 1994-95 was Rs 209.95 crore.

The Public Investment Board had cleared ONGCs proposal for setting up the Rs 27.42-crore SBM off Hazira in May 1986. The SBM was to be installed by November 1988.

ONGC took 30 months from the date of opening of the technical bids to award the contract. The delay in the finalisation of tenders shifted the envisaged completion date by 13 months to December 1989.

CAG says that although the oil industry had been exploring the possibility of augmenting the import facilities for liquified petroleum gas (LPG), which were grossly inadequate, the possibility of importing LPG also through the proposed SBM was not considered in the initial design stages.

Even after perceiving in July 1987 the need to create SBM facilities in a manner that it could also handle LPG import for IOC, prompt action was not taken to incorporate this requirement in the design before the letter of intent was placed on the contractor in September 1988.

CAG says the delay in decision regarding inclusion of IOCs requirement further extended the completion date of SBM to May 1990.

When substantial work, including procurement of SBM and pipes, and laying of onshore pipeline had already been completed, the Gujarat Maritime Board (GMB) asked ONGC in October 1989 to stop all work in connection with the laying of the submarine pipeline and imposed a number of additional conditions which were not there when the project was initially approved by GBM in April 1987.

The contractor demanded an extra compensation of Rs 23.19 crore for carrying out the additional work arising out of GBMs stipulations. However, ONGC terminated the contract in January 1991 without taking into consideration a number of vital issues. The project was finally abandoned in May 1993.

The CAG report says that in the meantime, a private party has put up its SBM at Hazira. The government has also cleared in principle a proposal of IOC to utilise the private partys SBM for export of NGL and import of diesel.

Had ONGCs SBM been installed, the public sector would have been saved from dependence on the facilities of a private party for export and import at Hazira, concludes CAG.