The Ministry of Industries and Production has caused a loss of Rs 3.1 billion to the national exchequer by making an unauthorized payment on account of subsidy on sugar, according to the audit report for the year 2014-15 prepared by the Auditor General of Pakistan’s office.
According to the audit, the Finance Ministry paid Rs 4 billion to the Utility Stores Corporation (USC) against the entitled amount of Rs 871.169 million for subsidy provision on sale of sugar to the masses – resulting in the excess payment of Rs 3.1 billion. The excessive amount was paid by the Finance Ministry to the Ministry of Industries, in violation of a decision of the Economic Coordination Committee (ECC).
The audit report says that the ECC of the Cabinet considered a summary of Ministry of Industries & Production (MoI&P) on January 19, 2012 on “Review/update on Sugar Situation – Purchase of Sugar from Domestic Sugar Mills” and took a decision in Case No. ECC-18/02/2012 dated 20-01-2012 that price differential between sugar price at Utility Stores Corporation (USC) outlets and the market price shall be Rs 5 per kilogramme.
The Finance Division paid an amount of Rs 4000 million to the USC in its Bank Account No. NIDA. 3-4 maintained with National Bank of Pakistan, Blue Area Branch, Islamabad on account of subsidy on sugar.
Audit observed that the claims for the month of January 2013 to March 2013 for subsidy by the USC were based on purchase price and outlet price and not the differential of Rs 5 per kilogramme decided by the ECC.
According to the details provided by the report, the per kilogramme subsidy was paid in the range of 23.220 to Rs 25.710, which was much beyond the subsidy sanctioned by the ECC.
An amount of Rs 4,000 million was paid against the entitlement of Rs 871.169 million resulting in the excess payment of Rs 3,128.318 million.
Claim for the month of January 2013 was for 25,487,307 kilogrammes of sugar at sale price of Rs 45/kg while the market rate was Rs 50/kg. Actual subsidy for the sugar was Rs 127,436,535. Another 36,444,896 kilograms of sugar was sold at the rate of Rs 47/kg during the same period while the market rate was Rs 52/kg. The subsidy was Rs 182,224,480 for the sugar sold during January, 2013.
During February 2013, 22,604,029 kilograms of sugar was sold at the USC outlets for Rs 47/kg while the market rate was Rs 52/kg. Subsidy for the sold sugar was Rs 113,020,145.
Another 26,033,322 kilograms of sugar was sold at rate of Rs 45/kg against the market rate of Rs 50/kg. Subsidy for the said sugar was Rs 130,166,610 paid for the sugar mentioned.
During March 2013, the USC sold 44,245,348 at rate of Rs 45/kg against the market rate of Rs 50/kg. The government provided subsidy amounting to Rs 221,226,740 for the sugar sold at the USC outlets.
While another 19,418,817 kilograms of sugar was sold at USC stores at rate of Rs 47/kg against the market rate of Rs 52 per kilogram. The subsidy mentioned by the MoI&P for the sold sugar was Rs 97,094,355 for the mentioned sugar sold.
So the total subsidy paid was Rs 871,168,865 for the sugar sold at USC stores during the first three months of year 2013.
Grilled by the auditors for making an unauthorized payment, officials of the MoI&P said that the Finance Division had paid Rs 4000 million as subsidy to the USC provisionally on the basis of market rates and not the outlet rates of the USC in accordance with the price difference of Rs 5 per kilogram as approved by the ECC and not on the basis of its cost of purchase rate and sale rate. In this regard, the ministry added, supporting documents/working would be provided in due course of time.
The reply was accepted because subsidy was to be paid on the basis of market rate and outlet rate decided by the ECC and was not meant for covering purchase/losses of the USC.
The departmental accounts committee (DAC) in its meeting held on 15.01.2015 directed the management that complete record including the ECC decisions regarding the subsidy paid to the USC may be got verified from the audit within two weeks. The Audit recommends that responsibility may be fixed for the irregularity.
