KARACHI: The Sui Southern Gas Company (SSGC) and the Sui Northern Gas Pipelines Limited (SNGPL) are running on heavy borrowing, and auditors have identified a series of financial irregularities in these two public sector companies.

The two companies refused to produce documents for audit and never replied to the questions raised by the auditors regarding their financial affairs.

According to a latest audit report, the SSGC’s reliance on debt is continuously increasing year by year which is a sign of serious financial risk.

The finance cost increased by 30.1 per cent from Rs5.786 billion in 2011 to Rs7.531bn in the year 2012, said the report.

With poor cash position, the company has been making costly borrowings. The trade debts were Rs49.1bn in 2011 which increased to Rs71.7bn in 2012.

During the audit of SSGCL for the year 2012-13, it was observed that the company could not produce requisite records despite frequent reminders.

From Hyderabad and Sukkur regions, the company failed to recover Rs477.9 million from domestic, industrial, commercial gas consumers and government organisations, which shows poor monitoring, said the report.

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Gas thefts of Rs45.5m in Hyderabad and Rs14.4m in Sukkur were identified in FY-12 but no legal action was taken and a loss of Rs59.9m was incurred, said the report.

The report also identified that the company paid Rs36.9m from May 2003 to July 2011 on account of hiring a portion of State Life Building Hyderabad to shift the company’s office but the premises remained vacant for eight years.

The regional office of Hyderabad of the company purchased HVAC (cooling) system in January 2012 at a cost of Rs31.6m, but it remained uninstalled till finalisation of this report.

In Sukkur region, the company approved a plan of Rs48m to stop gas leakages, but the plan was not executed and the company is sustaining annual loss of Rs17.2m on leakage of gas. Similarly, Rs20m unregistered gas in the same region was detected but the company did not make any recovery.

Along with many irregularities, the report said the company paid Rs58m as fee to lawyers without approval of Ministry of Law, Justice and Human Rights. If fee exceeds Rs100,000, it requires prior approval of the Ministry of Law and Justice.

Like SSGCL, Sui Northern Gas Company Limited also did not provide audited accounts of the company for the year 2012-13 till Dec 31, 2013.

The report identified that the SNGCL’s operating expenses increased by 348pc to Rs937m in the year 2012 compared to Rs208m in 2011. The net sale of the company in 2012 increased by 15.3pc.

The exchange loss of the company rose to Rs638m while it was Rs55m in the year 2011.

The report said the trade debt of the company jumped to Rs73bn in 2012 compared to Rs36.4bn in the preceding year.

Out of this, Rs48bn is unsecured debts. The report said the company was running on borrowed funds instead of recovery of unsecured debts and other outstanding debts, “otherwise the viability of the company appears to be at stake.”

However, the management of the company purchased luxurious vehicles of Rs47.8m for its senior executives during the year 2012.

During the audit, it was also observed that an amount of Rs270m was paid to its employees as bonus during 2012-13 without determining loss or profit and without approval of finance division.

Published in Dawn, July 4th, 2014