Funds worth Rs3 trillion misused in Naya Pakistan’s power division

The Auditor General of Pakistan (AGP) has unearthed misappropriation of public funds worth around Rs3 trillion in the power division during the first year of the Pakistan Tehreek-e-Insaf (PTI) government.

According to reports, the AGP has found huge irregularities, mismanagement, misappropriation and embezzlement, which it has highlighted in its report for the audit year 2019-20 that has been laid before the National Assembly after a delay of almost eight months.

The AGP has also put question marks over sustainability of the power sector under the current state of affairs, governance shortcomings and weak financial and administrative controls.

In particular, the country’s top auditor highlighted a total of 318 cases in the accounts of the power division and its associated entities in which Rs2.965tr worth of public funds had been misused. In its key findings, the AGP said 64 varied irregularities of more than Rs107 billion pertained to the procurement of electrical equipment, civil and electrical works, consultancy services and contractual mismanagement, Dawn reported.

The AGP also highlighted recoveries of more than Rs2.5 trillion and pointed out 108 other cases of violation of internal rules and regulations of the audited entities involving Rs64 billion. In another 50 cases, violations of regulatory laws and regulations involving Rs184 billion were unearthed while a loss of more than Rs4 billion was reported due to fraud, embezzlement, misappropriation and theft in 21 cases.

In four cases, irregularities of Rs1.2 billion were reported on account of the management of accounts with commercial banks and Rs263 million worth of 21 cases were highlighted pertaining to human resource regularities.

On top of these major findings, the AGP also expressed dissatisfaction over the performance of power distribution companies (DISCOS) in reducing transmission and distribution (T&D) losses. It said the DISCOS suffered Rs240 billion losses on account of 18.3pc (at the rate of Rs13.06 per 1pc loss) T&D losses in FY2017-18, which increased to Rs276bn in 2018-19 on account of 17.7pc T&D loss at the rate of Rs15.18 per 1pc loss. This meant that even though a minor reduction of 0.6pc was achieved in technical loss that year, it was overturned by the tariff increase.

Moreover, since the regulator had built the cost of 15.8pc losses to consumer tariff, the DISCOS still suffered losses worth Rs72 billion in these two years even after recovering the cost of such high losses from consumers.

The audit noted that accounting of material was not being done by the field staff as per procedure and hence opportunities rose for leakage and loss. Many reports mentioned maintenance and monitoring of feeders which were not populated, resulting in poor management of feeder losses.

Internal controls in the important areas of cash reconciliation and revenue collection were also found unsatisfactory and fraud in payment of pension in the DISCOS of Peshawar and Lahore and revenue fraud in the Islamabad Electric Supply Company (IESCO) were also highlighted. “Despite having an internal audit (in the power division), recurrence of frequent irregularities made its effectiveness questionable”, the AGP said.

The Discos billed 93,887 million units to consumers in FY2018-19 worth Rs1.342tr and a recovery of Rs1.061tr was made, indicating a recovery rate of 79.06pc. The shortfall resulted in less receipt of recoveries by the DISCOS. “Revenue shortfall in the DISCOS showed managerial inefficiencies and policy bottlenecks constraining CPPA (Central Power Purchasing Agency) to pay-off its energy procurement liabilities”.

The audit noted an improvement of one per cent in the revenue recovery in the previous fiscal 2017-18 but expressed concern that a recovery shortfall of 21pc posed significant operational challenges for the DISCOS, besides highlighting that total receivables from running and dead defaulters amounted to Rs572 billion in June 2019, which added to the financial crunch in the power sector.”