Gujarat Assembly committee raps GSPC for ‘over confidence’

Gandhinagar, Aug 23 (PTI) The Public Enterprise Committeeof the Gujarat Assembly has criticised the Gujarat StatePetroleum Corporation (GSPC) for showing "over confidence" inacquiring the KG Basin block. The committee, which monitors state-run public sectorundertakings (PSUs), in their report tabled in the House todaypointed out several flaws in the process adopted by GSPC inacquiring the KG gas block through aggressive bidding. The committee noted that against the estimated expenditureof USD 109.70 million, GSPC actually incurred an expenditureof USD 1404.86 million for three phases of gas exploration,which is 21.81 times higher than what was estimated whileplacing the bids. "It shows that the company has taken huge risk whileplacing the bids. Without assessing various financial andtechnical aspects, GSPC placed high bid to acquire KG block.Due to this, company’s unsecured debt has rose to Rs 2,140.53crore between 2006 and 2011," said the report. The committee headed by former Gujarat Minister NarottamPatel has 15 members from both ruling BJP and oppositionCongress. This committee scrutinises observations made by theComptroller and Auditor General on PSUs and suggestsrecommendations to the state government. The latest report is based on the CAG’s observationsabout GSPC for the year 2010-11. "This committee feels that the company placed bids havinghigh rates without assessing the advises of their technicalconsultant. This shows company’s inexperience and lack offarsightedness. Due to such overconfidence, the company’scosts sky rocketed," the report added. The committee also raised objection about involvingGeoGlobal Resources(GGR) into the project through 10 per centparticipatory interest(PI), which according to the committeeis against the interest of the PSU. "This committee believes that the decision by GSPC togive away 10 per cent PI through pay-in-cash mode instead ofhiring GGR and paying it for rendering technical services, wasan improper financial decision. This committee is surprised toknow that GGR was not at the risk in case of loss to GSPC,but, they would get 10 per cent from the revenue if productiontakes place," the report stated. The committee then asked GSPC to inform them whetherthe government was aware of such financial model. "We recommend to cancel the prevailing model andreplace it with new one after understanding the concept ofpayments and partnership. This committee recommends PSU toenter into any payment related agreement under the supervisionof government," it added. PTI PJT PD NRBMNGJMF