Government auditor CAG has pulledup steel makers RINL and SAIL for deviating from set practice for product sales and making unsound business investment leading to a total loss of Rs. 312 crore to the companies.
In a report, tabled in Parliament on Tuesday, the auditor has put the blame on the Rashtriya Ispat Nigam (RINL) management for causing Rs. 210.58 crore loss to the company by selling its products deviating from the "procedures, standard terms and conditions in normal sales".
SAIL has been hauled up for investing in an unutilised pipe-coating plant, commissioned at a cost of Rs 56.36 crore, without assessing market potential and giving Rs. 23.82 crore extra by placing orders for more oxygen even when demand could be met from the existing guaranteed off-take, among others.
"...deficiencies and irregularities (in RINL) resulted in a loss of Rs. 210.58 crore to the company during four years (2007-11). The company needs to address these deficiencies in order to optimise revenue," CAG said in the report.
Steel-maker RINL mostly sells its products from its lone three million tonne per annum plant at Vizag in Andhra Pradesh to the domestic market.
RINL has operational framework in place in the form of marketing manual, policies and procedures to regulate sales operations, except in the case of sale on negotiated basis for which there was no formal approved procedure.
"Audit, however, observed certain deviations from procedures, standard terms and conditions in normal sales. Some of these gaps were pointed out by Audit earlier during 2007 and despite ministry's assurance, these gaps still persist," it said.
On SAIL, CAG said, due to violation of standard purchase procedure in procurement activities and non-observance of the prudent practices, there was a loss of Rs. 4.4 crore, loss of margin of Rs. 13.41 crore and cash outflow of Rs. 42.03 lakh at four plants of the company's refractory units.
SAIL has also incurred an avoidable Rs. 23.82 crore loss in IISCO steel plant by placing orders for increased demand of oxygen "from the contractor's plant" even through the demand could be met from the existing guaranteed off-take.
"This resulted in payment of low demand charges for oxygen not lifted to the extent of Rs 23.82 crore," it said.
The pipe-coating facility, that SAIL had set up in its Rourkela Steel Plant, was commissioned at a cost of Rs. 56.36 crore to "meet substantial increase in demand accessed in a market survey conducted way back in 2003 failed to meet adequate orders for coated pipes" CAG said.
"Thus the project commissioned on the basis of the market survey of 2003 had failed to generate adequate orders and had not turned out to be essential to SAIL remaining competitive in the pipe market," it added.
The plant carried out coating on 510 tonnes between 2008 and 2010, of which SAIL could sell only 413.45 tonnes and the rest was lying in stock. During the year 2010-11 and 2011-12 (upto December 2011), there was no production and the plant remained unutilised, CAG said.