Not sure if HPCL was accurately evaluated when divested to ONGC: CAG

The Comptroller and Auditor General (CAG) of India has cast aspersions over the valuation of Hindustan Petroleum Corporation Limited (HPCL) when the centre was selling its stake to Oil and Natural Gas Corporation (ONGC) Limited.

The CAG has made this observation in the General Purpose Financial Report of Central Public Sector Enterprises (CPSEs). “From the replies of Department of Investment and Public Asset Management (DIPAM) and the Ministry of Petroleum and Natural Gas (MoPNG) and in absence of the supporting sheets (containing future estimations viz. free cash flow, debt inventory and estimation of refinery margins) provided by HPCL to the Technical Adviser for arriving at the price, audit could not derive an assurance that the price was correctly arrived at,” the CAG said.

“Scrutiny of the Pricing Analysis Report revealed that the Transaction Advisor had rectified some linking errors in the data provided by HPCL. Audit therefore, requested MoPNG to provide the relevant calculation/working sheet with regard to the price arrived at (while factoring free cash flow, debt inventory and estimation of refinery margins) and recommended by EC (Evaluation Committee) for the deal,” the CAG noted.

But the Petroleum Ministry said that the information/records sought by the CAG were not available in the Ministry. The CAG indicated that this is in contravention to DIPAM’s Guidance Note–III on Strategic Disinvestment. According to the note, records of deliberations by Advisors along with working sheets, supporting documents (in paper & electronic form records) should be kept for future reference by the Administrative Ministry.

According to the CAG, the Petroleum Ministry had subsequently replied that the Asset Valuer had informed that all workings, methodology/approach and assumptions had been incorporated in the Inception Repot and Valuation Report which had already been provided to Audit.

The CAG also said that over 40 per cent of the dividend proceeds to the exchequer from Public Sector Enterprises has been accrued from 14 government companies under the Ministry of Petroleum and Natural Gas. The CAG also noted that these 14 companies contributed ₹ 28,859 crore representing 40.90 per cent of the total dividend declared by all Government Companies and Corporations.

In toto there were 644 Central Government Public Sector Enterprises (CPSEs) under the audit jurisdiction of the Comptroller and Auditor General of India as on March 31, 2018. These included 450 Government Companies, 188 Government Controlled Other Companies and 6 Statutory Corporations. The CAG report dealt with 420 Government Companies and Corporations (including 6 Statutory Corporations) and 165 Government Controlled Other Companies.

In all, 101 Government Companies and Corporations declared dividend of ₹ 70,562 crore during 2017-2018. Out of this, dividend received/receivable by the centre stood at ₹ 42,229 crore. This represents an 11.83 per cent return on the total investment of ₹ 3, 57,064 crore in all Government Companies and Corporations.

The non-compliance to the government directive on declaration of dividend by 53 CPSEs has resulted in a shortfall of ₹ 9,417.75 crore in the payment of dividend to the exchequer for 2017-2018.

The report also said that 231 Government Companies and Corporations earned profit of ₹ 1,66,197 crore during 2017-2018 of which, 71.83 per cent (or ₹ 1,19,379 crore) was contributed by 52 Government Companies and Corporations in three sectors namely, Petroleum, Coal and Lignite, and Power.

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