LESCO faces Rs2.23 billion loss as government rejects subsidy claims

LAHORE: The Lahore Electric Supply Company (LESCO) suffered a loss of Rs2.23 billion after the government rejected some subsidy claims for zero-rated industrial rebate, official documents showed.

The Auditor-General of Pakistan (AGP) report for audit year 2022-23 showed the LESCO filed subsidy claims of Rs17.27 billion for the fiscal year 2021-22, but only received Rs15.04 billion from the finance ministry.

The audit report, which covered the accounts of the Power Division and its attached entities, said the reasons for the rejection were not disclosed or investigated.

The report blamed the loss on the non-compliance with the Public Sector Companies (Corporate Governance) Rules, which require the board of directors to establish a system of sound internal control and ensure probity, propriety, objectivity, integrity and honesty.

The matter of rejection of claims was taken up with the management in November, 2022 and reported to the ministry in December, 2022.

The LESCO said the discrepancy was due to two factors: a difference in the calculation of fuel price adjustment on the subsidy claims, and a lack of notification from the government for granting concessionary tariff to eligible customers of Sundar Industrial Estate, a special economic zone in Lahore. The company said it had followed the instructions of the Power Information Technology Company, a state-owned entity that provides IT solutions to the power sector.

The ECC of cabinet had already approved granting of concessionary tariff to eligible customers of Sundar Industrial Estate on December 10, 2021, but the mechanism was under finalization with the MoE.

The Departmental Accounts Committee (DAC) in its meeting held on December 31, 2022 directed the management to get record verified from audit. The audit, in its conclusion, recommends implementation of DAC’s decision.

The audit report also highlighted another case of loss of Rs244.25 million due to the non-reflection of the financial impact of credit adjustment on the industrial consumers who availed the industrial support package, a scheme that offers subsidized electricity rates to boost the manufacturing sector.

The report said the Gujranwala Electric Power Company, or GEPCO, did not withdraw the benefit of the package from the consumers who received credit adjustment notes for 20.423 million units of electricity.

"The financial impact of credit adjustment notes was not applied on the consumers who availed facility of industrial support package... The reduction of units in the billing of industrial consumers through credit adjustment notes was to be applied on the consumers who availed industrial support package. But it was not applied," the report said.

"The financial benefit availed through industrial support package-2 was not taken back from the consumers against whom credit adjustment notes were issued on the basis of excess billing. Resultantly GEPCO had sustained a loss of Rs244.25 million."

The matter was taken with the management of GPECO but no reply was submitted till finalization of the audit period.

The matter was taken up with the management in October, 2022 and reported to the ministry in December, 2022.

"The management stated that credit adjustment was processed in MIS through software and MIS had confirmed that financial impact of credit adjustment note was applied on the consumer who availed facility of industrial support package... The DAC in its meeting held on January 01, 2023 directed the management to get the record verified from the audit. Audit recommends implementation of DAC’s decision."