Sale, procurement of sugar, flour: USC suffers loss of Rs2.6 billion

ISLAMABAD: A team of the Auditor General of Pakistan (AGP) has found losses of over Rs2.6 billion in sale and procurement of sugar and flour (atta) in public funds of the Utility Stores Corporation (USC), an entity of the Ministry of Industries and Production.

According to auditors, the losses involved fraud, corruption, misappropriation, irregularities and mismanagement in 2019-2020 accounts of the USC. The Economic Coordination Committee approved a summary of the Ministry of Industries for a grant of Rs50 bn for the USC under the Prime Minister's Relief Package 2020, launched in the backdrop of COVID-19 pandemic and approved proposal with the direction to ensure availability of essential food items (atta, sugar, ghee/oil, pulses, rice, etc) in all Utility Stores across the country to facilitate public in the prevalent critical times as well as in the approaching month of Ramzan.

The AGP team has conducted a special audit of the USC, which according to auditors embraced an enormous decrease in sale proceeds of 845 stores of 22 regions. According to the auditors, the USC administrations witnessed an increase in expenditures where almost all stores registered heavy losses during this period.

The USC top officials, who were familiar with the development, told the Geo News on Sunday, that the report exposed different USC departments which according to the auditors were involved in massive corruption and mismanagement, having no subsidy for the poor.

The audit team, except losses and misappropriation, also found irregularities worth Rs14.8 bn in sales and purchase of two edible items i.e. sugar and flour (atta) in 2019-2020, according to the USC officials. The report revealed losses of Rs2 bn in dealings of sugar at the USC and Rs640m in proceeds of flour (atta) during this period. Irregularities of Rs9.4 bn were also found in sugar sale and purchase dealings and irregularities worth Rs3.4 bn were pointed in flour dealings at the USC. The audit team was of the view that Prime Minister Imran Khan launched a relief package for sugar subsidy as the country was facing Covid-19 pandemic by fixing a price of Rs68 per kg to throw its benefit to the maximum number of population. But non-utilization of subsidy as per the available stock resulted in wastage of subsidy and deprived the general public, according to the report's content, Geo News learnt on authority.

The report continued to reveal that the auditors collectively found that some Rs325m were either embezzled or misappropriated by the USC employees in the previous fiscal year. The report pointed out losses of Rs8.4m in non-initiation of risk and cost action against defaulter sugar mills. It also exposed the loss of Rs154m due to non-procurement of sugar from alternate sources on risk and cost of the defaulter sugar mills.

The corporation also met losses of Rs45m as it did not recover stamp duty from various sugar mills for the procurement of sugar. According to auditors, the management also met loss of Rs16m due to purchase of sugar on higher rates by splitting the demand. The management also suffered loss due to non recovery of insurance claims of Rs23.8m. Auditors revealed that the management of USC lost Rs101m due to purchase of sugar on higher rates than the prevailing market wholesale rates. The USC management recorded a huge loss of Rs1.3 bn due to irregular and ill-planned procurement of sugar and making payment of transportation charges in excess of open market rates, revealed the audit report.

The management lost Rs170m due to doubtful supply of sugar and its weight having no necessary allied record for verification. The report also pointed out that due to irregular supply of atta and sugar to stores, the general public remained deprived of the benefit of subsidy claim of atta and sugar amounting to Rs545m. Less procurement and unnecessary packing of sugar of 41,450 MT resulted in a sugar crisis and put a subsidy burden on the government worth millions, revealed the report. According to the report, the USC management embraced irregularities of Rs.2.3 bn due to black marketing of sugar, avoidable expenditure on transportation, poor recovery, excess quantity of sugar without ensuring complete weight, sugar supply without receipts, no claiming of rebate claims and unauthenticated sales, outstanding and unrealistic sugar supply of sugar in the USC.

Due to irregular acceptance of sugar without ensuring weight of sugar valued at Rs3.1 bn was also recorded by the auditors, who also found an unrealistic supply of sugar to the stores valued at Rs905m and less supply of sugar by the suppliers worth Rs445m. The auditors also exposed procurement of low quality sugar worth Rs2.3 bn, according to the audit report.

Fraud of 500MT in PASSCO wheat by the flour mills was also recorded by auditors with an embezzlement of Rs.17m. The report also pointed out bogus adjustment of atta with flour mills before lifting of the PASSCO wheat worth Rs158m. The corporation also witnessed a loss of Rs9m due to non-supply of wheat by the PASSCO from the nearest godown and poor management by PASSCO. Auditors recorded loss of Rs196m due to undue favour to the flour mills by alteration in flour specification and the USC also embraced losses worth Rs24m due to embezzlement of atta as well as hoarding of wheat, resulting in non-supply of atta. The corporation also witnessed a loss of Rs126m due to non-observance of prescribed flour specifications.

The AGP's report, according to the USC officials, pointed out irregularities of Rs3.4 bn in purchases and sales of atta in 2019 and 2020. These irregularities include excess payment due to higher rates and extra wheat worth Rs18m, unjustified higher allocation of sugar and atta worth Rs604m to smaller regions, unjustified payment of flour worth Rs.82m to the flour mills without lab test of quality and quantity, unjustified lifting of atta worth Rs179m from flour mills without considering extraction ratio, unjustified payment of Rs6.6m to warehouse in-charge, non-conducting of ratio analysis lab test of atta valuing Rs735m and unrealistic supply of atta worth Rs671m to the stores.

The auditors also witnessed bogus enlistment of flour mills in the record of USC, substandard atta, irregular procurement of flour (atta), non recovery of cost of jute bags from flour mills, non provision of deposit record of empty sugar and rice bags, non clearing of outstanding amounts of flour mills, non recovery of services and sample cost from the flour mills, non-conducting of periodical lab tests to ensure quality of atta, non-execution of insurance of PASSCO wheat, irregular contract and business with blacklisted flour mill, non imposition of penalty on flour mills not complying with standard specification as per agreement, interrupted supply of atta by flour mills resulting in non-recovery of atta bags, non conducting lab test to ensure quality of atta supplied to the USC, purchase of defective flour (atta) without laboratory test reports and failure to sell atta on subsidized rates and this list goes on. These irregularities cost over Rs950m to the USC.