The Comptroller and Auditor General (CAG) today pulled up Gujarat government company, GSPC for extending undue benefits to Adani Energy and Essar Steel and said the company's poor management of oil and gas exploration business led to over Rs 5,000 crore loss.
The CAG report, which was tabled in the state assembly today, said GSPC bought natural gas from the open market (spot market) and sold it to the Adanis at a price lower than the purchase price. CAG estimated that Adani Energy received undue benefit of Rs 70.54 crore in the process.
The firm passed on undue benefit of Rs 12.02 crore to Essar Steel by way of waiver of capacity charges contrary to the provision of gas transmission agreement.
CAG was severely critical of GSPC's operations in the Krishna Godavari basin gas block where improper assessment of technical and financial issues led to drilling cost shooting up to $1.302 billion as against estimate of $102.23 million.
"The bidding process adopted by the company for acquisition of hydrocarbon block was found to be defective as in case of KG block. The bids of the company ignored the actual cost involved which exposed the company against high risk in exploration activities," CAG report stated.
The main reasons for the incorrect estimation, CAG said, was adoption of deficient geological model prepared by its joint venture partnre, Geo Global Resources of Canada, which led to escalation in the cost of exploration phase from Rs 531.94 crore to Rs 6,265.68 crore.