The Comptroller and Auditor General (CAG) has come down heavily on GAIL (India) for extending Rs.246-crore worth ‘undue benefits’ to private power producers by supplying gas at subsidised rates and failure to recover dues from Mukesh Ambani-owned Reliance Industries Ltd. (RIL).

The CAG report, tabled in Parliament on Tuesday, has criticised GAIL for its failure to check misuse of subsidised gas by fertilizer companies for manufacturing non-fertilizer products. The state-owned gas transmission company also faced criticism for its failure to recover Rs.29.78 crore penalties from RIL for over-drawing gas for one month.

In a poor reflection on the working of GAIL, the report stated that the company supplied natural gas at subsidised rates to ineligible power producers generating and supplying electricity to their consumers at commercial rates in violation of the Petroleum Ministry’s directives.

It said GAIL had failed to evolve a suitable system to ascertain the quantity of natural gas utilised by fertilizer companies for manufacturing non-fertiliser products and its billing at market price instead of subsidised price. “This led to non-implementation of the Ministry's directives and consequent substantial under recovery in the gas pool account besides extra avoidable burden on government subsidy towards fertilizer production.

The CAG report also said GAIL failed to make effective a regular clause in the gas supply agreement with RIL for recovery of charges levied for overdrawal of gas beyond the allocated quantity. “While RIL paid the charges levied by GAIL at 120 per cent of the highest priced gas for July, 2008, it refused to pay the overdrawal charges, amounting to Rs.29.78 crore, for August, 2008, contending that there was no mention of the daily quantity allotment in the gas supply agreement. The fact remains that although a system did exist for levy and recovery of overdrawal charges, the same was not implemented effectively in the above case, resulting in non-recovery of Rs. 29.78 crore,’’ the report added.

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