• KG Basin cost GSPC 12 times estimate

    The Public Enterprise Committee of the Gujarat assembly chaired by former minister, BJP MLA Narottam Patel, has criticised the Gujarat State Petroleum Corporation (GSPC) for showing undue haste in acquiring the KG basin through aggressive bidding which had caused the state government loss of millions of rupees. The committee has noted in its report that against the estimated expenditure of US $109.70 million, the GSPC had actually incurred an expenditure of US $1,404.86 million for three phases of gas exploration. This was 12.81 times higher than what was estimated while placing the bids.

    The committee did not accepted the company’s excuse that when exploration was planned, the price of crude oil was $22 to $24 a barrel but it had shot up to US $140 by the time the actual work started. The committee’s report states: “The company did not evaluate the technical consultant’s advice and jumped in with a very high bid.” The latest report of the committee tabled on Tuesday is based on the Comptroller and Auditor General’s (CAG) observations about the GSPC for the year 2010-11. The committee has accepted the CAG observation that massive financial irregularities had taken place in the GSPC.

    Prior to deciding the bid, the technical and financial risks were not assessed properly and a very high bidding price was quoted. “As a result, during the 2006 to 2011 period alone, the company’s unsecured debt had increased to Rs. 21.4053 billion,” the report says. The estimated total loss to the state due to GSPC’s gas exploration misadventures in the past one decasde is around Rs. 300 billion. The committee scrutinises observations of the CAG on PSUs and suggests recommendations to the state government. For last several years, the state’s BJP government had tried to shirk responsibility by claiming that CAG’s observations were not certified by the assembly’s committee but this year the state government is left with no excuse.

    The report also accepts the CAG’s observation that the GSPC had partnered with the controversial company, GeoGlobal Resource, in an arrangement that posed no risk to the latter. “The committee is amused how the GSPC could partner with GGR only in profit but not in loss. It’s a totally unacceptable commercial decision,” the committee’s report says.

    Further, due to the faulty advice of GeoGlobal, the projected Rs. 5.3194 billion cost had increased to a massive Rs. 62.6568 billion, the report says. The committee has also asked the government to explain whether it knew of such a faulty deal. The committee, which monitors state-run public sector undertakings (PSUs), is yet to assess the CAG reports on GSPC from 2011 to 2015. It is expected that the committee will find more and bigger skeletons in the GSPC cupboard in the coming days. Ryan O’Reilly Jersey

    Share This