ISLAMABAD, July 24: The war on terror has apparently benefited the Pakistan Ordnance Factories (POF) that registered a profit of Rs502.98 million in 2009-10, due to a 45 per cent increase in sales to Rs14.12 billion over the previous year and a 27 per cent increase in exports to Rs1.18 billion.
However, audit objections pertaining to the organisation increased to 21 from 15. The objections involve just over Rs1 billon.
The most serious objection in the audit report is non-clearance of ammunition worth Rs494.67 million by the inspection authorities.
A consignment of bombs and ammunition worth Rs494.67 million produced by POF, Gadwal, was not cleared by the inspection authority due to deviations from standards. Bullets of 7.62 bore were rejected because of low quality, causing a loss of Rs12.23 million.
Bangladesh stopped a payment of Rs41.02 million for the supply of 3,000 rounds of 105mm.
The payment is withheld since May last year as the consignment was defective with 27 per cent failures and the audit report says the POF is also likely to face a penalty by the Bangladesh government for the faulty supplies.
A loss of Rs15.04 million was caused by shipment of 1,146 faulty submachine guns to Jamaica that was reshipped after rectification of the faults.
The auditors highlighted misappropriation of Rs186.65 million due to violation of Public Procurement Rules in the purchase of medical equipment for the POF Hospital in Wah Cantt.
The anti-aircraft ammunition factory of delayed the signing of a contract for purchase of 1,000 bomb bodies and signed it after the prescribed date at a 19 per cent higher price, causing a loss of Rs14.44 million.
The small arms ammunition factory failed to recover Rs15.28 million from a defaulting firm and the POF, Sanjwal, made non-transparent procurement worth Rs18.17 million and granted undue favour resulting in the installation of a defective exhaust system worth Rs26.28 million.
There are audit objections of Rs1.72 million for irregular appointment of consultants, rehiring after superannuation and granting a bonus of Rs773,000 to the chairman and managing director despite. According to the regulations, MDs and members of the board are not entitled to bonus.
The audit report says the POF has a high cost of production because of excessive overhead charges.
The Wah Industries suffered a loss of Rs16.9 million after the sale of faulty ammunition manufactured in the POF.
According to the report, average assets employed during the year were Rs36.81 billion against the production of Rs13.24 billion -- the ratio of average assets to production increasing to 2.8:1 from 2.5:1 in the previous year.
It said the POF suffered from old technology, weak inventory management and lack of professional accounting staff.
With a monopoly status enjoyed, the POF has a high dependence on the army and has to seek opportunities and access to international markets and utilise its spare capacity for production of civil products.