Rs73.4bn irregularities found in Pesco 2021-22 audit

PESHAWAR: Serous irregularities have been detected in the audit report of Peshawar Electric Supply Company (Pesco) during 2021-22.

The financial statements of Pesco for the year 2021-22 revealed that the company suffered huge losses, going up from Rs22.746 billion in financial year 2020-21 to Rs102.128 billion in financial year 2021-22, registering a 349 per cent increase. Auditors observed irregularities amounting to Rs73.407 billion, including fraud, embezzlement, misappropriations, theft, irregularities, and non-recoveries, in their report.

The Auditor General of Pakistan report said the company was suffering from consistent losses over the years, which reflected operational inefficiencies as well as policy bottlenecks requiring urgent remedial action. A huge balance of receivables depicts the poor recovery efforts of the company, which needed justification.

The reports say the company has suffered a net loss of Rs102,128 million for the financial year ended June 30, 2022, and at that date, the accumulated losses were Rs452.222 billion. Similarly, the current liabilities exceeded the current assets by Rs231.327 billion at the year’s end. These factors indicate the existence of material uncertainty, which may cast significant doubts on the company’s ability to continue as a going concern. The company was suffering from consistent losses over the years, which showed operational inefficiencies as well as policy bottlenecks requiring urgent remedial action.

The sale of the company stood at Rs223.172 billion including a subsidy received from the federal government for an amount of Rs51.390 billion, and the cost of sale of the company stood at Rs292.803 billion which was 131.2pc of the sale. This meant that the company could not recover the operating expenses for the year.

The audit further said the total receivables of the company were Rs220.110 billion as of June 30, 2022. An amount of Rs42.901 billion was receivable from the federal government (Ministry of Finance) against tariff differential subsidy, Rs95.735 billion from other associated companies, tax authorities, and other receivables, Rs78.977 billion from various consumers on account of electricity sold and Rs2.496 billion of loans and advances. The huge balance of receivables depicted the poor recovery efforts of the company, which needed justification.

The payables of the company substantially increased from Rs434,248 million during the financial year 2020-21 to Rs462.689 billion during the financial year 2021-22. The major amount of Rs411.988 billion was payable to the CPPA-G on account of the purchase of electricity, which indicated the poor liquidity position of the company and needed justification.

The company has not recorded supplemental charges since 2010 being charged by the Central Power Purchasing Agency (CPPA), which are delayed payment charges of Independent Power Producers (IPPs).

Auditors pointed out irregularities amounting to Rs73.407 billion, including fraud, embezzlement, misappropriations and theft, irregularities, recoveries, and others. The auditors have reported Rs16.70 million cases of fraud, embezzlement, misappropriation, and theft. Rs23.23 million were found in employee-related irregularities. Rs602.78 million procurement-related irregularities were found during the audit. Similarly, Rs4,750.83 million irregularities pertaining to violation of regulatory law and regulations, Rs2.,586 billion recoveries were pointed out by audit but not recovered.

However, a PESCO spokesman said the main reason for an increase in losses was due to increase in the cost of sales by Rs5.46 per unit (Rs90.4 billion annual impact) during FY 2021-22 without a corresponding increase in sales price which increased by only Rs1.21 per unit (Rs12.5 billion annual impact), although Power purchase cost was supposed to be pass-through for PESCO. “Secondly, the revision in T&D loss target by 10.5pc by NEPRA in one go, is another reason,” he said.

Regarding the audit observations, he said mainly Rs60.6 billion was the difference in treatment of post-retirement cost, between the regulator and the international financial reporting standards, being followed for true and fair presentation of financial statements, hence may not be categorised as observation pertaining to the irregularity. Further, supplemental charges of Rs99.5 billion is a cost that has not been allowed by NEPRA in tariff, hence shown as qualification in the auditor’s report.