Internal Audit Report – Rajasthan Project Report No. … Audit Report of RP- Q1 / FY 2014-15 Page...

Internal Audit Report of RP- Q1 / FY 2014-15

Internal Audit Report – Rajasthan Project

Report No. IA/RP/FY-2014-15/Q1

Period Covered – April’ 2014 to June’ 2014

Report date: 05.12.2014


OIL INDIA LIMITEDINTERNAL AUDIT DEPARTMENT

(For Internal Use Only)Executive Director (Rajasthan Project)OIL, Jodhpur

Sub: Internal Audit Report for the period April ’14 to June’14 (Q1) of Rajasthan Project

1.0 The Internal Audit Department has conducted the audit of RP for the period from Apil’14 to June’14. The audit areas, whichhave been covered during the audit, have been enclosed herewith (Chapter 2). The audit has been conducted on the basis ofgenerally accepted audit standards in India.

2.0 The audit observations, based on the documents produced and the explanations received, are shown in Chapter 3 with theManagement‘s views duly incorporated against therein.

3.0 Implementations of the recommendations of the audit should be completed as early as possible but not beyond theimplementation timeline specified in Chapter-3.

4.0 The Internal Audit Team is pleased to acknowledge the cooperation received from the concerned sectional Heads & theirrepresentatives in conducting the Internal Audit.

5.0 The delay in finalisation of the report is primarily attributed to the delay in receipt of replies from the Project and Corporateoffice.

Date: 05.12.2014

Bontu Hari ShankarChief Manager (IA)For GM (RM& Audit)CC: CMD / D (E&D)/ D (HR&BD)/ D(F) /GGM(F&A) /Head (Services)-(RP) /CM(RE-BD)/Sr. Manager (F&A)(RP).


Report No. IA/RP/2014-15/01

CONTENTS:-

Chapter 1 Introduction ……………………………………………………..................................... 4

Chapter 2 Scopes & Road Map of Audit……………………………………................................ 10

Chapter 3(a) Executive Summary ……………………….......................................................... 11

Chapter 3(b) Detailed Audit Observation........................................................................... 13

Chapter 4 Follow up Status of Previous Internal Audit observation …………………………. 47

Annexure…………………………………………………………………………………………..


Chapter 1

1.0 Introduction:1.0 Oil India Limited (OIL) has one project in North-Western Region i.e. Rajasthan Project, with project office located at Jodhpur.Oil India Limited (OIL) is presently producing natural gas from the state of Rajasthan contributing about 9% of the company’sannual total gas production in the country. Presently, OIL is operating two (2) New Exploration Licensing Policy (NELP) blocks inthe state and 2 Mining Leases (ML) which are as follows:

Present Areas of operations in Rajasthan

Sr. No Block Type

1. RJ-ONN-2004/2 NELP-VI

2. RJ-ONN-2005/2 NELP-VII

3. GK-OSN-2010/1 NELP-IX (Non-operator)

3. Jaisalmer ML Nominated

4. Baghewala ML Nominated

2.0 The Dandewala gas field of Oil India Limited was discovered in 1990 when well DND-1 struck gas in the Pariwar reservoir ofLower Cretaceous. This is in the Jaisalmer ML. The gas is being produced from Dandewala, Tanot and Bagitibba fields in Jaisalmerdistrict. Gas produced from these fields is supplied to M/s. GAIL (India) Limited who transports it through its pipeline to RamgarhPower Plant of Rajasthan Rajya Vidyut Utpadan Nigam Limited (RRVUNL).


3.0 Gas production during the past few years from OIL’s Rajasthan Project is tabulated below:-

Natural Gas Production (MMSCM) from Rajasthan Project

State / Basin 2009-10 2010-11 2011-12 2012-13 2013-14Rajasthan /JaisalmerBasin

205.260 157.361 223.366 195.34 198.26

To increase gas production, OIL is planning to drill few development wells and to carry out work over in a few sick wells in itsRajasthan assets.

4.0 Heavy Oil:

Heavy oil was first discovered in the year 1991 in Baghewala well No.1 in the Baghewala structure of Bikaner - Nagaur Basinwithin Jodhpur sandstone.

In the recent exploration efforts made by OIL in NELP regime, heavy oil was stuck in the 3RD well (Well Punam-1) drilled in theblock RJ-ONN-2004/2 (NELP-VI) followed by another discovery at well TVW-2 of Baghewala ML during the year 2012.

Since in-house expertise for production of such type of heavy oil was not available, OIL engaged M/S Alberta Research Council(ARC), Canada in 1992 to carry out a feasibility study for exploitation of heavy oil using cyclic steam stimulation (CSS) and bottomhole heater (BHH). In the year 2002, a detail feasibility study was carried out in collaboration with M/s PDVSA, Venezuela under acontract agreement signed. However, both the two attempt for steam injection could not be succeeded commercially.

Presently OIL floated an Expression of Interest (EOI) for consultancy services seeking interest from companies having adequateknowledge base and past experience in the field of Heavy Oil Production. Depending on the success of the Project a comprehensivefield development plan will be formulated for commercial production of the heavy oil.


RJ-ONN-2004/2 (NELP-VI)

In 2012, exploratory well Punam-1(NELP-VI Block) was drilled in Punam structure and encountered heavy oil in JodhpurFormation.

First phase of experimental production testing in Punam well no. -1, through chemical (Condensate) stimulation process, is beingcarried out since 18.03.2014. The well is on production, on artificial lift assistance, since 4.04.2014 at an average rate of 5-6bbls/day with 40% water cut. Cumulative production achieved till 10.11.2014 is 1202 bbls. Second phase of experimentalproduction testing through chemical stimulation with Xylene would be started from 3rd week of Nov’14.

5.0 Exploration & Development Activity: Presently, Oil India Limited (OIL) is operating two (2) New Exploration LicensingPolicy (NELP) blocks and two ML areas in the Northern state of Rajasthan. Details are given below:

A. PML Area:

Name of PEL/MLArea

(Sq. Km)OtherPartners Present Status as on

Jaisalmer ML 250 - Gas is producing from Dandewala and Bagittiba field as perconsumer demand. Committed volume of gas supply is 0.7MMSCMD.

Baghewala ML 210 - To produce Baghewala #4 and Tavriwala #2 throughchemical stimulation and artificial lift assistance.

Hiring of consultancy services for detailed reservoirstudy, selection of best suited technology and monitoringduring implementation phase.


1. Jaisalmer PML:

(i) Drilling Program: Five (5) locations (Loc. RJBF, RJBG, RJBH, RJBI and RJBJ) and one (1) Water Disposal Well (Loc. F) havebeen released for drilling.

(ii) Work Over Program: Total of 20 work over wells have been planned in the Jaisalmer PML area including one plug setting jobfor the well Rachan-1 (Loc. RBAE) block RJ-ONN-2004/3 (NELP-VI)

2. Baghewala PML:

(i) 4 development wells (2 vertical and 2 horizontal) have been planned for experimental production of heavy oil by drilling inthe Baghewala Structure. Two vertical exploratory wells have also been planned for delineation of the Punam Structure inthe PML area.

(ii) Presently, OIL floated a Tender for hiring of consultancy services for exploitation of heavy oil.

B. NELP Area:

Name of PEL/MLArea(Sq.Km)

OtherPartners(PI%)

Present Status

RJ-ONN-2004/2(NELP-VI)AS OPERATOR(Charanwala)

2196OIL (75)GGR (25)

Initial phase of exploration. Two wells drilled and abandoned due to poor hydrocarbonprospects. Drilling of 3rd well, Punam-1 (Loc. RBAO) completed & heavy oil discoveryhas been notified. The well is on production, on artificial lift assistance, since 4.04.2014at an average rate of 5-6bbls/day with 40% water cut. Cumulative production achievedtill 10.11.2014 is 1202 bbls. Second phase of experimental production testing throughchemical stimulation with Xylene would be started from 3rd week of Nov’14. BDCmeeting held on 21.10.2013 at Corporate Office in connection with PI transfer for M/sGGR. BDC approved the proposal. Board note sent to Corporate Office on 05.11.2013.Board approved the same. Further action is in progress in this regard.


Name of PEL/MLArea(Sq.Km)

OtherPartners(PI%)

Present Status

RJ-ONN-2005/2(NELP-VII)AS OPERATOR(Kalibar)

1518OIL (60)HMEL (20)HOEC (20)

Processing of Seismic data completed on 17.06.2013. 3D Seismic Interpretation(outsourcing) is in progress. The drilling contract is awarded in Nov’14. As per the MWP,total nine (9) wells are being planned in this block. However as on the date of thisreport, drilling has not yet commenced.MC approval obtained for Phase-I extension for six (6) months w.e.f. 13.07.2013 i.e. upto12.01.2014. MC meeting held on 09.12.2013 for further course of action in the block. Aletter submitted to DGH along with MCR on 12.12.2013 pertaining to Excusable delays(526 days) for the block for un-interrupted exploration to complete the remaining MWP.

GK-OSN-2010/1(NELP-IX)

(As Non- Operator)

1361 ONGC(60%) (O)OIL (30%)GAIL (10%)

3D Seismic Survey : Seismic Data acquisition completed on 30.03.2014. Cumulativeproduction is 1369.07 SQKM. Processing job is in progress & likely to be completed byNovember, 2014.

Drilling locations will be identified based on 3D API.

C. Relinquished blocks shown by the Project:

Sl.No. Name of PEL NELP

Round Operator JV Partners

1 RJ-ONN-2000/1 NELP-II OIL (60%) SUNTERA (40%) -

2 RJ-ONN-2001/1 NELP-III OIL (40%) ONGCL (30%) SUNETRA (30%)

3 RJ-ONN-2002/1 NELP-IV OIL (60%) ONGCL (40%) -4 RJ-ONN-2004/3 NELP-VI OIL (60%) GGR (25%) HPCL (15%)


2.0 Background of conducting Internal Audit:

The Internal Audit of Rajasthan Project, for the period from April ’14 to June’14 of financial year 2014-15, has been conducted byInternal Audit Department. The Audit has been conducted based on the audit areas as approved by competent authorities. A teamcomprised of Shri B. Hari Shankar CM (IA), Jyotirmoy Bhattacharya, Sr. Manager (IA), Shri A.K Pathak, Sr. (IAO) conducted theaudit.

The audit for the aforesaid period has been conducted within 6 working days between 11th Aug ’14 to 16th Aug’14, at the Jodhpuroffice.

The Audit Report includes observations and recommendation of Team Internal Audit, related risk, and the correspondingmanagement’s comments received against thereon. The audit also includes, review of the compliance of the previous audit reports.

3.0 Objectives:

The basic objectives of the internal audit were to review the overall accuracy and adequacy of the Internal control Systemand the compliances with the laid down procedure of the company.

4.0 Date of Management’s Comment received –The last lag of management’s comment against the audit observations from the projects were received on 07.11.2014.


Chapter 2Scopes & Road Map of Audit

2.01 Scope and Approach2.01.1 Scopes: The internal audit was conducted for the period April’ 2014 to June’ 2014 and covered the following

audit areas/ functions:a) Review of Wind Energy Projectb) Operational review of 100 kw Solar power plantc) Contract / Purchase reviewd) Scrutiny of GLs

2.01.2 Approach: Approach to the internal audit commenced with an overview of activities and documentation of theexisting systems and procedures. The adequacy, efficiency and effectiveness of internal controls have been evaluated &tested by checking samples of transactions for the period covered by the audit. Adherence to the laid down standard policiesand procedures (wherever applicable) for each of the audit areas have been examined.

2.02 Risk Based Internal Audit

The concept of Risk based audit has been followed considering the following areas of risks:

1) Financial Risk: An event is recognised as a financial risk if there is any possibility of occurrence of financial loss to theCompany due to that event or transaction.

2) Compliance Risk: A risk is identified as compliance risk if there is any deviation in legal or procedural obligations.3) Operational Risk: A risk is identified as operational risk if any technical operation of a system is not done as per the

norms or standard rules of operation


Chapter 3 (Part a)Executive Summary of Observations

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Observation Recommendation ImplementationResponsibility /Timeline

1 Fixed Assets lying open in the Office Space-–

The furniture & fixture, Desktops, ACs,& other office stationery items etcshifted from old office to the New office are lying idle/ open in the officecampus.

Immediate action needs to be takenbased on the approved Write-off &Disposable Procedure & Policy todispose of items.

Head (Admin)

Immediate compliance

2 Review of 13.6 MW WIND ENERGY PROJECT at Ludarwa, Jodhpur

a. No manual register maintained for recording of Daily generation data ofeach grid which is required to know the production figures in case offailure of SCADA system.

b. Compliances of the various provisions of the contract.

Daily generation data should berecorded manually in the register toverify the same with the DGR.

b. The project is requested to ensurethe compliances of the variousprovision of the contract and also totake necessary action with regard tofurther Audit remarks given.

Head (TS) /CE(Electrical), RP


3 Review of 54 MW WIND ENERGY PROJECT at Dangri , Jaiselmer

The project is requested to provide the Compliances of the variousprovisions of the contract.

The project is requested to ensure thecompliances of the various provision ofthe contract and also to take necessaryaction with regard to further Auditremarks given.

Head (TS) / CE(Electrical), RP


4 Visit of Team IA at 100 kw Solar Energy Project at Tanot Village

Although the project is commissioned, but the contractor has escaped thejob and site has not be completed in full respect and some civil jobs arestill pending. Further, O&M services of the site also needs to be takencare of.

All the endeavours should be made tocomplete the pending civil works jobimmediately. Further, necessary actionalso needs to be taken regarding theO&M of the project site

Head (TS) /CE(Electrical), RP



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Observation Recommendation ImplementationResponsibility /Timeline

5 Superscription of Fixed Assets and report on assets verified

Superscription of fixed assets has not done in the Rajasthan office. Reporton list of fixed assets generated form SAP is incomplete.

Superscription of asset needs to bedone on top priority basis.ERP should be consulted to modify theformat of the report generated fromSAP.

Head (Admin) /SM(F&A), RP /Head ERP,DuliajanImmediate compliance

6 Review of GR/IR-CAPITAL GOODS (GL-220002)-

GRN was raised and assets were capitalized & also deactivated, howeverLIV is still pending in the system.

The PO needs to be scrutinized andnecessary action needs to be taken toreconcile the same immediately.

SM (F&A), RP


7 Review of Stock and Non Stock Items as on 12.08.2014-Stock Items value of Rs. 25.86 crore and Non-stock items value of Rs. 3.13crore are lying in Storage locations. Further, stock items value of Rs. 6.42crore (out of Rs. 25.86 crore) are lying for more than 3 years.

The project is requested to provide thecertificate for physical verification ofStock and Non-Stock items lying at thedifferent Storage locations of the projectalong with the reasons for holding suchitems since F.Y 2006-07. Time boundaction plan for review of old items andadjustment be carried out.

ED (RP) /Head(Services), RP



Chapter 3 (Part b)Audit Observations of Rajasthan Sphere for Q1

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Observations Risk Recommendations Management Comments/Implementation Timeline &Responsibility

1 Fixed Assets lying open in the office-

The Rajasthan project was shifted its office to its new ownbuilding in the month of Nov’12 from leased office. The audit hasobserved that while shifting the office from leased building to newbuilding a number of fixed assets like office furniture, AirConditioner, Fridge, Desktop, Almirah, Xerox machines, officemachine have been shifted. However, most of these items likewooden furniture have been kept lying open in the top roof of thenew building, as well as desktops along with accessories arelying behind the office building in the ground floor in open space(within campus) and further Air conditioners, Fridges, otherOffice machines are lying open in the basement of the buildingsince then.

Further, it is also observed that assets kept in open space aregetting destroyed due to rain and are in a very bad condition.Efforts should be made to identify such assets which are of nouse in future to write off those assets and dispose- off actionshould be taken as per the company policy so that open spacecan be made available for other office purpose. This would alsohelp to avoid water logging in top floor which if continued forlonger time may damage the roof of the building.

Financial Risk Immediate action todispose of the oldassets to be takenbased on Policy onWrite-off &DisposableProcedure.

a) Management comment-

Action for write off of the itemswas initiated vide CBC note no.CBC/RP/578 dated04/03/2014. However,CA(C&P) vide letter no. OIL62/14/240 dated 02/09/2014has intimated that the matterwas taken up by CBC during its435th meeting held on04/07/2014. CBC did not agreeto the proposal and advisedthat a Policy on the write-offand disposal Procedure hasbeen approved by CBC and thegoods to be disposed as per theapproved Policy for which theProject to get in touch withHead (TA) who will circulate theapproved Policy.

The approved Write-off &Disposable Procedure & Policy


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Further, it was apprised to the audit that a note was put up tothe Corporate Business Committee on dated 04.03.2014 forapproval of Write off/Disposal of Oil furniture & Scrap material,however no decision has been received yet.

has been received and as perthe Policy Disposable ItemsIdentification (DII) section hasbeen created at RP. The DII willtake action for write off of theitems and thereafter disposalwill be done as per theapproved Policy.

Meantime the items which werelying in the open have beenshifted to covered place.

Further audit comment-

Time bound action plan forwrite off /Disposal mayplease be furnished to audit.

The same will be reviewed asper action plan in next audit.

b) Implementation Timeline:Immediate compliancec) Implementationresponsibility:Head Admin / SM (F&A)


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2 13.6 MW WIND ENERGY PROJECT

Contract between : OIL INDIA LTD and Gamesha WindTurbines Pvt ltd

Visit of Team IA at 13.6 MW Wind Energy Project-

A contract was awarded to M/S Gamesha Wind Turbine Pvt ltdfor the operation and maintenance of 13.6 MW wind energyproject at Ludarwa, Jodhpur and there are total 16 grids set upunder the project and each one is capacity of 0.86 MW. All thegrids are connected to the SCADA System for online monitoringand updating of Energy production.

i. Team IA visited the site on 15th Aug’14, it was found and toldthat 8 grids were in operation out of 16 grids due to load shadingby DISCOM. Further, on review of the SCADA system at site, itwas found that generation figure of 1 (one) grid i.e. Grid no.-40(out of 8 grid) was not displaying and it was told that there is acommunication failure from the particular grid to SCADA system.

It was also told that concerned person from contractor ( M/SGamesha Wind Turbine Pvt ltd) use to visit the each grid torecord the daily generation figure of each grid and input thesame for Daily Generation Report (DGR) maintained in excelsheet and send the same to OIL for MIS purpose.

However, no such manual register found at site wherein dailygeneration figure of each grid are recorded/maintained. It wastold that such figure recorded are directly put in to the excel

Financial /

Compliance /

Operational

Risk

Daily generationdata of each gridshould be recordedmanually in theregister to verify thesame with the DGRsent to Oil in future.This will help tofurnish correctreport in DGR incase of failure ofSCADA SYSTEM.


i. Daily Generation Report isrecorded by Gamesha and sentto OIL through e-mail.[ Annexure I enclosed]

The Generation of individualturbines are automaticallyrecorded in the built in metersattached with each WindTurbine.As recommended, Gamesha hasnow been asked to maintain aphysical register mentioning thedaily generation for all theTurbines of OIL at site.The SCADA system isoperational round the clock.

However there are occasionaloccurrences of communication


Sl.No.


sheet and send the same to OIL in the form of DGR.

Therefore, audit is of the opinion that there may be a chances ofwrong feeding of generation data in excel sheet and may not bereconciled with the SCADA system in case of communicationfailure particularly in case of grids where generation figure arenot updating in SCADA due to communication failure and alsomay not cross check with the manual register in the absence ofmaintaining the generation figure in the manual register.Further, Contractor is maintaining 64 grids for total in respectivesite.Project is requested to furnish the details since when the systemwas not working through SCADA due to communication failure.Steps taken and action plan to restore the same be provided. Thereason of SCADA is not working.

ii. As per clause 6.2 of the Contract with contractor is requiredto make a Annual operating plan and operation and maintenancemanual and schedule and send it to Oil , however the operatorhas shown the plan for the six months till sept’14 (which wasnot signed by either of the party.)

A copy plan duly signed by both the parties be furnished to audit

failure to some specific turbinewhich is attended to fromGamesha ‘s end on case specificbasis. This incident is onaccount of the difficult andtough terrain where the windfarm is operational.However even when the SCADAsystem does not display thereading of a particular turbinefor a particular time period, theelectricity generated andtransmitted by the turbine isrecorded by the Main Meter .

Moreover, SCADA is amonitoring system only. It’snon-availability does not affectthe generation.

ii. Gamesha has prepared theMaintenance schedule in linewith clause 6.2 of the Contractand the maintenance is carriedout as per the scheduleprepared. MaintenanceSchedule attached asAnnexure-2. The dailymaintenance logs are also


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for review.

2. As per the terms of the contract, the contractor (Operator) isrequired to be complying and fulfil the following provisions of thecontract. Therefore, Project is requested to appraise the auditregarding the compliance of the following provisions of thecontract as mentioned below for review of the audit please.

I. BATTERY LIMIT (CLAUSE 6.2)

a. POWER EVACUATION SYSTEM UPTO THE POINT OFINTERCONNECTION – Technical people should certify thatthe same is there and also provide the number of cases ofrestoration due to faulty line taken up with Transco/ Discom.

The project isrequested to ensurethe compliances ofthe variousprovision of thecontract and also totake necessaryaction with regardto further Auditremarks given.

maintained by Games withintheir records.Further Audit remarks-

Maintenance schedule asreferred in Annexure 2 is notduly signed by Contractor aswell as representatives fromOIL. The same may befurnished to audit forverification.

2. I. a. Power evacuationpermission from the relevantstatutory authorities, up to thepoint of Interconnection, hasbeen obtained and a Copythereof is enclosed as Annexure3.

Evacuation constraints faced bythe Wind Farm have beenapprised to the concernedauthorities for addressal. Copyof letter enclosed as Annexure 4

Further Audit remarks-Status of the issue addressedto authority may beappraised.


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b. Whether the entire list of spare parts along with material isavailable for operational, repairs/ replacement as per O&Mmanual?

c. Copies of the following along with confirmation onsufficiency as per the operating manual should be provided toaudit : Log sheet/ record for operational detail ; deployment of staff for continuous operations andqualified engineers for supervisions of operation &maintenance(O&M) ; deployment of security personnel,

d. Copy of Annual Operating Plan and Operation &Maintenance manual and their respective schedules/ actualwith deviation, if any, with reasons including regularmaintenance jobs should be provided to audit.

II. SCOPE OF WORK (CLAUSE 6.3)

a. Concerned Engineer In charge should confirm that thecontractor is abiding the all applicable laws of the landincluding environmental protection, pollution, sanitary,employment and safety laws are complied with.

b. Necessary spares / parts arebeing stored by the serviceprovider (Gamesa) at site. List ofspares maintained at site isattached as Annexure-5.

c. Log sheets, details ofdeployment of engineers andsecurity personnel ismaintained by the serviceprovider.Samples enclosed asAnnexure 6, Annexure-7 ,Annexure- 8 & Annexure 9.

d. These are being assimilatedand shall be made available tothe Audit Team by the end ofDec 2014.

Further Audit remarks-A copy of the same mayplease be sent to audit withinthe time frame as mentioned.

II. a. All requisite normsrelated to environment, safety,sanitation etc. are beingfollowed by the O&M serviceprovider.


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b. Please confirm whether a No Objection / Clearance certificatefrom the respective statutory authorities has been obtainedand if so, copy of the same may please be provided to Audit.

III. Prudent Utility Practice (Clause 6.4)The contractor is required to carry out the following obligationprior to taking over the O& M activity:- Prepare the mobilization plan in consultation with the owner Provide the services and personnel set forth in the

mobilization plan Prepare in consultation with the owner , initial Annual

operating plan Develop and implement the plans and procedure including

those for fire fighting , maintenance planning, procuring andinventory control of stores and spares , plan to meetemergencies , plant safety and security and such other

b. Requisite permission forsetting up of the Wind Projecthas been obtained by the EPCcum O&M service provider fromthe relevant statutoryauthorities with regard to land,evacuation plan etc

Further Audit remarks-

Engineer in charge toconfirm the physicalverification of thesedocuments as mentioned inpoint a.

III. Post project commissioning,the O&M activities includingthe Maintenance (Breakdown/Preventive etc), deployment ofO&M personnel, provisioningfor spares etc is beingundertaken by the O&M serviceprovider.Copies of Annexure 2, 7,8,9may be referred to for the same.


Sl.No.


facility and systems as may be necessary to commenceoperator’s ongoing responsibilities.

Copy of Annual Operating Plan and Operation & Maintenancemanual and their respective schedules/ actual with deviation,if any, with reasons including regular maintenance jobsshould be provided to audit.

Audit Remarks- A copy of the above along with the complianceto each item may be provided to audit. Deviations, if any, mayplease be furnished with reasons.

IV. PERSONNEL- (Clause 6.5)

The operator shall employ adequately qualified and experiencedpersonnel for operating and maintaining the wind energy project.The operator shall ensure that such personnel remain on duty atthe plant at all times, 24 hours a day and 7 days a week soonafter commissioning of the first WEG.

Audit Remarks- Therefore, the project is requested to providedthe compliance of the above clause and also provide the numberof the personnel deployed by the contractor in all the Gridsunder the project and whether any attendance record for thesame has been maintained. Whether the number of personnel tobe deployed has been agreed with OIL Management as per therequirement of O&M manual?

V. Power Factor-(Clause-6.7.1)Operator to maintain the power factor of the wind farm not less


Analysis /comments made bythe department and put up tomanagement on the Annualperformance report may beprovided to audit, if any.

IV. The service provider hasdeployed operational manpoweron a 24x7 basis. Detailsenclosed as Annexure-7,Annexure-9.

Point is now settled.

V. As of now, the power supplyhas been maintained at levels


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than minimum requirement of TRANSCO/Discoms so as tominimize Reactive power drawl from State Grid system.

Audit Remarks- Project is requested to provide no. of caseswhere power factor is less than the requirement ofTRANSCO/Discoms and charges /penalty recovered fromoperator in case of such default as per the contract.Reactive Power-(Clause-6.7.2)

The operator shall ensure that maximum reactive power drawncumutavely by WEGSs annually shall not exceed 5 %of thegeneration of the power by WEGs.

Audit Remarks-Project is requested to provide no. of cases where the annualreactive power is more than the guaranteed percentage of thetotal generated power by all the WEGs cumutavely and the Oilhave to pay TRANSCO/Discoms for the excess over theguaranteed percentage and financially compensated by Operatorfor such excess power drawn.

VI. Machine Availability (Clause-6.8)

Te operator shall pay to the Owner Pre –determined MutuallyAgreed Compensation for lower machine availability, drawl ofReactive power in excess of 5% Transmission loss exceeding 5%in the manner in the contract.

Audit Remarks-The project is requested to provide the break-up of the

above the minimumrequirements of RRVPNL. Nopenalty has been levied on OILunder clause 6.7.1.


As of now, the maximumreactive power drawn has beenkept below the maximumceiling of 5% of the generationof the power by WEGs as perRRVPNL’s requirements.

No penalty has been levied onOIL under clause 6.7.2.


VI. As of now, there has notbeen any instance where theMachine Availability has beenless than the minimumrequirement.

Accordingly, no penalty hasbeen levied on the Serviceprovider as of now.


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penalty/amount compensated by operator to OIL on account ofmachine availability, Reactive power and Transmission loss withthe calculation.

VII. INSURANCE (Clause 6.11)

Operator shall provide or obtain and maintain in forcethroughout the period of O&M the following insurance coverage-

1. Insurance to cover Third Party Liability of appropriate valuealong with an undertaking indemnifying Oil India from any suchclaim.

2. Workmen compensation and /or group personal accidentsinsurance policy covering all its employee including of the sub-operator, Pilferage, theft etc.

Further, OIL will also take the insurance against the Fired andallied perils including earthquake, flood, storms, cyclone andtempest regularly immediately after the commissioning.

Audit Remarks- Therefore, the project is requested to providethe compliance of the above clause and details of the insurancetaken by the Operator and OIL with the amounts and period.


VII. Operator has obtainedInsurance Coverage in terms ofthe contract. Copy of Insurancepolicy attached as Annexure-10.


1. Insurance taken bycontractor for Third PartyLiability & workmeninsurance etc with thevalidity of agreement,Insured amount and copy ofindemnifying OIL may befurnished.

2. Insurance for Fire Buildingand Burglary has taken in thename of “M/s. Gamesa Windturbines Pvt Ltd A/c Oil IndiaLimited”.

Since the assets are in thename of OIL, it should be inthe name of OIL. Please


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VIII. Metering System (Clause-6.12)

The operator shall maintain the metering system and it will bedesigned and installed conforming to requirement of State utilityso as to measure outgoing energy and power delivered by WEG tothe state grid to the delivery point i.e. point of inter connectionand also for the import of energy for any purpose. Meteringequipment shall comply the requirement of State utility boardGrid code but shall not inferior to 0.2 accuracy class. Meterreading will be done jointly with the Power utility manager onmonthly basis or at mutually agreed time interval.

Audit remarks- The project is requested to confirm thecompliance of the above mentioned clause. Further, also confirmwhether Oil carry out any inspections of the metering systemfrom time to time to check the meter accuracy and a inspectionreport on the same if any, as per clause 6.12.2.

The project is also requested to confirm the no. of cases whereany inaccuracy in the metering system found as the case may be,if any and whether any joint inspection and testing fromTRANSCO/DISCOM /OR other agency have been done.

furnish the comment.

3. Detail and basis of theinsurable value may befurnished for insurance takenfor Fire Building and Burglary.

VIII. Metering System hasbeen implemented in line withthe requirements of thecontract.

Each month, a Joint MeterReading (JMR) , signed by therepresentative of the officials ofDiscom. and officials ofRRVPNL and the ServiceProvider (being authorized tosign JMR on OIL’s behalf), isprepared.

Sample copy enclosed asAnnexure 11



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IX. O&M Charges (Clause 6.13)

The operator shall be responsible for comprehensive O&M forperiod of 20 years from the date of Stabilization of the last WEGin the wind farm. Payment will be made inclusive of all cost so asto give 95% machine availability.

Audit remarks-

The project is requested to provide any amount paid by OIL tooperator or expenses incurred by OIL directly in O&M periodother than O&M charges, if any, with the nature of expenses.

X. Submission of Daily & Monthly generation dataStatement-(Clause 6.15)

Audit Remarks- The project is requested to confirm thewhether daily reports as per the requirement of the clause issubmitted by the operator. Further, monthly generation datastatement for the net energy delivered to the utility duly certifiedby their official are furnished by operator to OIL not later than10th of the following month .

XI. OPERATOR’S OFFICE AT SITE (Clause 6.16 )

The operator shall ensure that a Plant Manager with authorityto take decision to be available at Site and operator shallmaintain an office at Site for accommodation of the agents andstaff.

Audit Remarks- On review of the site, it was found that the

IX. Till date no amount hasbeen paid to theoperator(service provider) ,during the O&M period , forissues other than those beingprocessed against thestipulated O&M expenses asper contract.


X. Daily and MonthlyGeneration report is submittedto OIL in compliance with thecontract clauses. Please refer toAnnexure-1 for sample of DailyGeneration Report andAnnexure-11 for sample ofMonthly JMR


XI. The office set up at site is wellequipped to handle the specificrequirements of OIL as well asthe shared facilities of the otherstakeholders in the wind farm.


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operator has maintained an office at site from where the it looksafter the wind energy project of other 4 companies alsoincluding OIL. Also two desktops are maintained at site which isconnected to the SCADA system for online monitoring ofprojects of all companies including Oil There is no suchseparate office maintained for OIL.

XII. Approach Road (Clause 7.4.3)

The Approach road may be on sharing basis but the bidder willprovide the documentary proof showing that Land for suchapproach road belong to OIL ? (Whether the land cost is sharingor repairs & maintenance cost is sharing ? and Land istransferred in the name of OIL(copy of the title deed required)

Audit Remarks- The project is requested to provide the status ofApproach road and documentary proof for the same

This is an industry practice.


XII. Only the footprints of theindividual wind turbinegenerator installations havebeen sub leased to OIL.

Ownership of the approachroads would not be in OIL'sname as these are sharedfacilities for all stakeholderswhich are maintained by theO&M service provider.


b) Implementation Timeline:Immediate compliance

c) Implementationresponsibility:

Head (TS) /CE (Electrical), RP


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3. 54 MW WIND ENERGY PROJECT at Dangri , Jaiselmer

Contract between : OIL INDIA LTD and INOX WIND LIMITED

As per the terms of the contract, the contractor (Operator) isrequired to comply and fulfil the following provisions of thecontract. Therefore, Project was requested to apprise the auditregarding the compliance of the following provisions of thecontract as mentioned below for review of the audit please –

I. BATTERY LIMIT (CLAUSE 6.2)

a. POWER EVACUATION SYSTEM UPTO THE POINT OFINTERCONNECTION – Technical people should certify thatthe same is there and also provide the number of cases ofrestoration due to faulty line taken up with Transco/ Discom.b. Whether the entire list of spare parts along with materialis available for operational, repairs/ replacement as per O&Mmanual?c. Copies of the following along with confirmation onsufficiency as per the operating manual should be provided toaudit :

. Log sheet/ record for operational detail ;

. deployment of staff for continuous operations andqualified engineers for supervisions of operation &maintenance(O&M) ; deployment of security personnel,

d. Copy of Annual Operating Plan and Operation &Maintenance manual and their respective schedules/ actualwith deviation, if any, with reasons including regular

Financial /

Compliance /

Operational

Risk

The project isrequested to ensurethe compliances ofthe variousprovision of thecontract and also totake necessaryaction with regardto further Auditremarks given.


I. a. Power evacuationpermission from the relevantstatutory authorities, upto thepoint of Interconnection, hasbeen obtained and a Copythereof is enclosed as Annexure12.

b Necessary spares / parts arebeing stored by the serviceprovider (Inox) at site. List ofspares maintained at site isattached as Annexure-13.

c. Log sheets, details ofdeployment of engineers andsecurity personnel ismaintained by the serviceprovider.

Please refer to Annexure-14( A,B & C) for sample O&M LogSheet/ Permit/Service Report

Please refer to Annexure-15 for


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maintenance jobs should be provided to audit.

II. SCOPE OF WORK (CLAUSE 6.3)

a.Concerned Engineer In charge should confirm that thecontractor is abiding the all applicable laws of the landincluding environmental protection, pollution, sanitary,employment and safety laws are complied with.

b.Please confirm whether a No Objection / Clearance certificatefrom the respective statutory authorities has been obtained andif so, copy of the same may please be provided to Audit.

details of Service Engineersand Security Personneldeployed by the Service Providerat site.

d. These are being assimilatedand shall be made available tothe Audit Team by the end ofDEC 2014.Further Audit remarks-Annual operation andmaintenance manual, planand schedules should havebeen readily available sincethese are prepared for futureaction plan.A copy of the same mayplease be furnished to auditwithin the time frame asmentioned.

II. a. All requisite norms relatedto environment, safety,sanitation etc. are being followedby the O&M service provider.

b. Requisite permission forsetting up of the Wind Projecthas been obtained by the EPCcum O&M service provider fromthe relevant statutory


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III. Prudent Utility Practice (Clause 6.4)

The contractor is required to carry out the following obligationprior to taking over the O& M activity:-

Prepare the mobilization plan in consultation with the owner Provide the services and personnel set forth in the mobilization

plan Prepare in consultation with the owner , initial Annual

operating plan Copy of Annual Operating Plan and Operation & Maintenance

manual and their respective schedules/ actual with deviation,if any, with reasons including regular maintenance jobs shouldbe provided to audit.

Develop and implement the plans and procedure includingthose for fire fighting , maintenance planning, procuring andinventory control of stores and spares , plan to meetemergencies , plant safety and security and such other facilityand systems as may be necessary to commence operator’songoing responsibilities.

Audit Remarks- A copy of the above along with the complianceto each item may be provided to audit. Deviations, if any, mayplease be furnished with reasons.

authorities with regard to land,evacuation plan etc.


Engineer in charge isrequired to confirm thephysical verification of thesedocuments as mentioned inpoint a.

III. Post project commissioning,the O&M activities includingthe Maintenance (Breakdown/Preventive etc ), deployment ofO&M personnel , provisioningfor spares etc is beingundertaken by the O&M serviceprovider.

Copy of Annexure 16 may bereferred to for the same.

Further audit comment :

PM schedule as attached inannexure is till for May’14.PM Schedule for 2014-15 maybe provided


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IV. PERSONNEL- (Clause 6.5)

The operator shall employ adequately qualified and experiencedpersonnel for operating and maintaining the wind energy project.The operator shall ensure that such personnel remain on duty atthe plant at all times, 24 hours a day and 7 days a week soonafter commissioning of the first WEG.

Audit Remarks- Therefore, the project is requested to providedthe compliance of the above clause and also provide the numberof the personnel deployed by the contractor in all the Gridsunder the project and whether any attendance record for thesame has been maintained. Whether the number of personnel tobe deployed has been agreed with OIL Management as per therequirement of O&M manual?

V. Power Factor-(Clause-6.7.1)

Operator to maintain the power factor of the wind farm not lessthan minimum requirement of TRANSCO/Discoms so as tominimize Reactive power drawl from State Grid system.

Audit Remarks- Project is requested to provide no. of caseswhere power factor is less than the requirement ofTRANSCO/Discoms and charges /penalty recovered fromoperator in case of such default as per the contract.

VI. Reactive Power-(Clause-6.7.2)

The operator shall ensure that maximum reactive power drawncumulatively by WEGSs annually shall not exceed 5 %of the

IV. The service provider hasdeployed Service Engineers andSecurity Personnel for the O&Mof the Project at site as per thecontract provisions.

Please refer to Annexure 15 fordetails of Service Engineers andSecurity Personnel deployed bythe Service Provider at site.


V. As of now, the power supplyhas been maintained at levelsabove the minimumrequirements of RRVPNL.


VI. As of now, the maximumreactive power drawn has beenkept below the maximumceiling of 5% of the generationof the power by WEGs as per


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generation of the power by WEGs.

Audit Remarks- Project is requested to provide no. of caseswhere the annual reactive power is more than the guaranteedpercentage of the total generated power by all the WEGscumulatively and the Oil have to pay TRANSCO/Discoms for theexcess over the guaranteed percentage and financiallycompensated by Operator for such excess power drawn.

VII. Machine Availability (Clause-6.8)

Te operator shall pay to the Owner Pre –determined MutuallyAgreed Compensation for lower machine availability, drawl ofReactive power in excess of 5% Transmission loss exceeding 5%in the manner in the contract.

Audit Remarks- The project is requested to provide the break-upof the penalty/amount compensated by operator to OIL onaccount of machine availability, Reactive power andTransmission loss with the calculation.

RRVPNL’s requirements



VII. INOX has provided OILrequisite compensation for lossof generation on account ofMachine Availability for theperiod June to Aug 2013. Thesame is being regularizedthrough a proposal put up tothe Competent Authority atCorporate Office.

Compensation for the periodSept 2013 to April 2014 , onaccount of low MachineAvailability , as per contractprovisions , is also beingworked out by the RE cellofficials at Corporate Office .

Further Audit Comment:Status of realization of theclaim for Sept 2013 to April2014 may please be providedto Audit.


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VIII. INSURANCE (Clause 6.11)

Operator shall provide or obtain and maintain in forcethroughout the period of O&M the following insurance coverage-

1. Insurance to cover Third Party Liability of appropriate valuealong with an undertaking indemnifying Oil India from any suchclaim.

2. Workmen compensation and /or group personal accidentsinsurance policy covering all its employee including of the sub-operator, Pilferage, theft etc.

Further, OIL will also take the insurance against the Fired andallied perils including earthquake, flood, storms, cyclone andtempest regularly immediately after the commissioning.

Audit Remarks- Therefore, the project is requested to providethe compliance of the above clause and details of the insurancetaken by the Operator and OIL with the amounts and period.

VIII. Operator has obtainedInsurance Coverage in terms ofthe. Copy of Insurance policyattached as Annexure 17

Further Audit Comment:1. Insurance taken bycontractor for Third PartyLiability & workmeninsurance etc with thevalidity of agreement,Insured amount and copy ofindemnifying OIL may befurnished.

2. Copy of Insurance (Machinebreak down) provided inAnnexure is already expiredon 05.05.2014, Hence, policyfor the 2014-15 may please beprovided.

3. A copy of Currentinsurance policy taken forFire Building and Burglary inthe name of OIL be providedalong with detail and basis ofthe insurable value may befurnished.


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IX. Metering System (Clause-6.12)

The operator shall maintain the metering system and it will bedesigned and installed conforming to requirement of State utilityso as to measure outgoing energy and power delivered by WEG tothe state grid t the delivery point i.e. point of inter connectionand also for the import of energy for any purpose. Meteringequipment shall comply the requirement of State utility boardGrid code but shall not inferior to 0.2 accuracy class. Meterreading will be done jointly with the Power utility manager onmonthly basis or at mutually agreed time interval.

Audit remarks- The project is requested to confirm thecompliance of the above mentioned clause. Further, also confirmwhether Oil carry out any inspections of the metering systemfrom time to time to check the meter accuracy and a inspectionreport on the same if any, as per clause 6.12.2.

The project is also requested to confirm the no. of cases whereany inaccuracy in the metering system found as the case may be,if any and whether any joint inspection and testing fromTRANSCO/DISCOM /OR other agency have been done.

X. O&M Charges (Clause 6.13)

The operator shall be responsible for comprehensive O&M forperiod of 20 years from the date of Stabilization of the last WEGin the wind farm. Payment will be made inclusive of all cost so asto give 95% machine availability.

IX. Metering System has beenimplemented in line with therequirements of the contract.

Each month, a Joint MeterReading (JMR) is carried out bythe representative of the ServiceProvider (being authorized tosign JMR on OIL’s behalf),officials of Discom. and officialsof RRVPNL.

Monthly billing is done basedon this JMR only.

Sample copy of JMR is attachedas Annexure 18.

Point is settled.

X. O&M is carried out by theService Provider strictly interms of the Contract. OIL hasnot directly incurred anyexpenditure on O&M (otherthan O&M charges payable toService Provider) and has also


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Audit remarks- The project is requested to provide any amountpaid by OIL to operator or expenses incurred by OIL directly inO&M period other than O&M charges, if any with the nature ofexpenses.

XI. Submission of Daily & Monthly generation dataStatement-(Clause 6.15)

Audit Remarks- The project is requested to confirm thewhether daily reports as per the requirement of the clause issubmitted by the operator. Further, monthly generation datastatement for the net energy delivered to the utility duly certifiedby their official are furnished by operator to OIL not later than10th of the following month.

XII. OPERATOR’S OFFICE AT SITE (Clause 6.16 )

The operator shall ensure that a Plant Manager with authorityto take decision to be available at Site and operator shallmaintain an office at Site for accommodation of the agents andstaff.

Audit Remarks- The project is requested to provide thecompliance of the above clause by the operator as per contract.

not reimbursed the ServiceProvider for any expendituretowards O&M of the Plant otherthan O&M charges beingpayable to Service Provider.


XI. Daily and MonthlyGeneration report is submittedto OIL in compliance with thecontract clause. Sample copy ofDaily Generation report isattached as Annexure-19 andMonthly JMR is attached asAnnexure-18.


XII. The office set up at site iswell equipped to handle thespecific requirements of OIL aswell as the shared facilities ofthe other stakeholders in the264 MW wind farm.This is an industry practice.

Point is now settled


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XIII. Approach Road (Clause 7.4.3)The Approach road may be on sharing basis but the bidder willprovide the documentary proof showing that Land for suchapproach road belong to OIL ? (Whether the land cost is sharingor repairs & maintenance cost is sharing ? and Land istransferred in the name of OIL(copy of the title deed required)

Audit Remarks- The project is requested to provide the status ofApproach road and documentary proof of land for approach road.

XIII. Only the footprints of theindividual wind turbinegenerator installations havebeen sub leased to OIL.

Ownership of the approachroads would not be in OIL'sname as these are sharedfacilities for all stakeholderswhich are maintained by theO&M service provider.

Point is now settled




4 Visit of Team IA at 100 kw Solar Energy Project at TanotVillage-

Team IA visited the 100kw Solar Energy Project at Tanot Village,Rajasthan and reviewed the site. Purchase order was awarded on30.11.2012 and the project was commissioned in Mar’13.

On review of the site it was found that the project site wassurrounded by the wall however no gate wasconstructed/attached at the main entrance leaving the entrance

Operational /Financial

All the endeavoursshould be made tocomplete thepending civil worksjob immediately.Further, necessaryaction also needs tobe taken regardingthe O&M of the


The 100 KW Solar EnergyProject at TVC wascommissioned on 15th March2013 after completion of majorjobs by the contractor pertainingto power generation & plantoperation.


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open hence anyone can access to the site and damage themachine/site. Further, rooms constructed within the site werealso not fully constructed and no doors & windows attached tothe rooms. Further fencing at the wall is also not done and toldthat contractor escaped and left the job incomplete breaching theterms of the contract.

Audit is of the opinion that the project was commissioned in themonth of March’13 but even after the gap of more than one yearno main gate has been erected at the entrance of the site. Fewincomplete jobs like office building, internal roads etc arepending. The Contractor is required to maintain the operationwork for 25 years as per W.O.

Action taken by Project against the contractor and steps taken tocomplete the job be provided to audit.

Project is also requested to apprise the audit that , how theoperation and maintenance of the project is presently being donesince the contractor has left the project who was supposed to domaintenance job. Future plan of operation & maintenance of theproject be appraised. Further, the project is requested to apprisethe audit regarding the total amount of payment made to vendorin this regard since vendor line item is not reconciled.

The review of the above project was not in the scope of Q1 audit;hence the review of the entire project will be done in next audit.

project site. The plant has been operatingsatisfactorily with desiredoutput. The power generatedhas been taken to captive use atTVC.Execution of ancillary jobs formain gate, doors & windows ofthe constructed buildings arehowever yet to be carried out bythe contractor.

Action against the contractorhas been initiated as per thecontract provisions, since thecontract was not executed in fullby the contractor.

The operation & maintenance ofthe 100 KW Solar PowerPlant is being carried out by OILwith its own limited resources. Ithas been planned to deploy anew service provider after finalsettlement of the currentcontract.

The Payment towards theexecuted jobs have since beenreleased as per milestonesindicated the contract.


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Further Audit comment :Issue is serious in nature.

1. Project is operational sinceMarch’13, however projectactivities related to safety &securities have not beencompleted even after lapse ofmore than one & half yearand department has also notfurnished any time boundaction plan on this importantpart of project.

2. Please provide the detailsof the amount with held onaccount of balance activitiespending along with the BG &security deposit with OIL ofthe defaulter contractor.

3. Time bound Action plan fortaking action againstdefaulting contractor alongwith the completion scheduleof balance activities.

b) Implementation Timeline:Immediate compliancec) Implementationresponsibility:



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5 Superscription of Fixed Assets and report on assets verifiedSuperscription of fixed assets has not been done in theRajasthan office.

Further, list of assets lying in sphere and also number of assetsverified can be checked/ generated through the physicalverification report generated from the T. code ZAMQUERY1.However, report generated from above T. code doesn’t contain thefollowing particulars-

a. Name of the user department

b. Custodian of the asset

c. Person verified the asset

d. Date of Verification

Further, Report generated contains a column namely ‘’Locationof the asset’’, however, it was found that the same has not beenproperly filled up or left it as blank due to which it is difficult tofind out the exact location of the asset.

It may be noted that under the mentioned T. code, RajasthanOffice has been treated as a single department irrespective of theexistence of different user department Hence, if the location ofthe asset is not filled up properly than exact location of the assetwill not be traced out.

Action taken reporton the following befurnished forverification.

a. Superscription ofasset needs to bedone on top prioritybasis.

b. ERP should beconsulted to modifythe format of thereport generatedfrom T. codeZAMQUERY1 byinserting therelevant particularsas mentioned theobservation.

c. Location of theasset should beproperly filled byuser department toidentify the exactlocation of asset.


We have initiated the job ofsuperscription of assetsnumbers. We are in touch withERP FICO team for inclusion ofcertain particulars suggested byInternal Audit in T. codeZAMQUERY1 Report and alsowritten to ERP team for divisionof Rajasthan project indepartments to capture Assets,department wise in Assetsmaster.

Further Audit comments :

Time bound action plan forcompleting the activities maybe furnished to audit.

b) Implementation Timeline:Immediate compliancec) Implementationresponsibility:

Head (Admin) /SM (F&A), RP/Head ERP, Duliajan


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6 Review of GR/IR-CAPITAL GOODS (GL-220002)-

i. PO-7902383 Vendor-207112 (Thermax Ltd.) Value-58.22lakhsGRN was raised on 29.02.2008 for Rs.60.55 lakh against the POand the assets was capitalized on 30.11.2007 under the Assetno- 4060019593 and further asset was also deactivated on01.04.2013. Copy of the approval note for deactivation maybe furnished to audit.However, it was observed that no LIV for the same has been donein the system and also in the vendor account no such payment isappearing.

ii. PO-7901974 Vendor-207112 (Thermax Ltd.) Value-7.87croreGRN was raised on 15.03.2007 for Rs.7.87 crore against the POand the assets was capitalized on 31.03.2007 with effective from22.01.2007 under the Asset no- 4060019205 and further assetwas also deactivated on 01.04.2014. Copy of the approval notefor deactivation may be furnished to audit.However, it was observed that no LIV for the same has been donein the system and also in the vendor account no such payment isappearing.

iii. PO-7902006 Vendor- 200265 TRACTOR ENGINEERS LTD.Value-Rs.10.29 lakhLIV was made for Rs.10.29 lakh and payment made on12.09.2007, however till date no GRN raised in the system tocapitalize the asset.

Financial Risk/Wring MIS

The PO needs to bescrutinized andnecessary action betaken to reconcilethe same.


i. & ii. Assets no. 4060019593and 4060019205 is regroupedunder production facilities newno. is 7300003837 and4310000021 respectively.

we have initiated the action forrectification

Further audit comment:

Details of rectification afterreconciliation be provided toaudit along with approvalnote for deactivation asdesired in audit observation.

b) Implementation Timeline:



SM (F&A), RP


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7 Review of Purchase Order (PO) & Contracts

(i) PO No. 7509261 dated 09.04.2014 issued to M/s BotilTools India Pvt Ltd for Rs. 47,71,987/- for procurement ofRetainer Packer Assembly.

Quotation received from one bidder. In the proposal note we findthat this item is a new item and no LPP was available. Leadingtime for placing the order was Ten (10) months.

Observations:a. Order was placed without price justification.b. Lead time is very high.c. Effort for Price reduction could have been made.d. LPP for this item could have been taken from other spheres.

Financial Risk

a) Management Commenti. The tender was issuedthrough press advertisementand attention was drawn to 14bidders who are enlisted withOIL for similar items. Only asingle offer was received evenafter extension of bid closingdate by two weeks as per thePurchase policy of OIL. Being afirst time procurement, no lastprocurement price wasavailable. However, the pricewas found to be higher by9.76% compared to PR estimatewhich was around one year old.Approval was accorded by LMCof RP considering all the aboveaspects. Normally, pricenegotiation is not allowedexcept in specialcircumstances. Variousactivities involved inprocurement of normalrequirements take time and thedetails of time taken for variousactivities are explained in thepurchase proposal. However,


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(ii) PO No. 7509405 dated 10.06.2014 placed on EmeconControl Pvt Ltd for Rs. 12,63,273/- for procurement ofWave Radar Level Transmitter.

From the Purchase Proposal we find that enquiry was addressedto four (4) bidders and quotation received from two(2) bidders.The quoted rates of L1 bidder was compared with the budgetedrates as the procurement was made for the first time and no LPPwas available.OBSERVATIONS :

Though the project is procuring the items for the first time, theLPP rate of items could have been taken from the other spheres /SAP system to verify the reasonable of the rate.

(iii) PO No. 7115236 dated 17.06.2014 placed on M/sLacier Industries for Rs. 4,43,838/-

Quotations received from Four (4) Bidders. Order placed with L1bidder. The rate of L1 bidder is higher by 18.60% over the lastpurchase price. We invite ref to the circular of GM (Commercial)No GM (COM):02/02-269 dated 16.08.2013 regarding negotiationwith L1 bidder wherein it is stated that negotiation can becarried out based on merit and only on recommendation fromappropriate committee.

special care is taken forprocurement of urgentrequirements in shortestpossible time.

ii. The enquiry was addressedto four (4) bidders and offerswere received from 2 parties.Order was placed on L-1 bidderand the rate of L-1 bidder wasfound to be lower than PRestimate.

iii. Offers were received from 4parties and order placed on theL-1 bidder. There is no systemof negotiation when there isproper response against atender.


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OBSERVATIONS :Negotiation would have been carried out to reduce the price inview of the high variation over LPP.

(iv) PO No. 7509422 dated 13.06.2014 issued to M/s BotilTools India Pvt Ltd for Rs. 12,90,361/- for procurement ofRetainer Packer Assembly.

Quotation received from one bidder. In the proposal note we findthat this item is a new item and no LPP was available. Pricecompared with budgetary offer. Leading time for placing theorder was Nine (9) months.

Observations:a. Order was placed without price justification.b. Lead time is very high.c. Effort for Price reduction could have been made.d. LPP for this item could have been taken from other

spheres.

(v) PO No. 7906558 dated 17.04.2014 placed on M/s Test &Measurement Co for Rs. 6,71,517/- and P.O no 7906559dated 17.04.14 placed on M/s Wikia Instruments India PvtLtd for Rs. 4,86,897/- .

Quoted rates of L1 bidder was compared with the budgeted ratesas the procurement was made for the first time and no LPP wasavailable.

iv. The enquiry was addressedto 12 parties and offer wasreceived from a single bidder.Various issues raised byInternal Audit were consideredby the LMC as per note dated09/06/2014 (copy enclosed asAnnexure-20) before issue oforder to M/s. Botil Tools India.

v. Contract was awarded to M/sTest & Measurement Co & M/sWikia Instruments India Pvt Ltdon L-1 basis.


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OBSERVATIONS :

Though the project is procuring the items for the first time, theLPP rate of items could have been taken from the other spheres /SAP system to verify the reasonable of the rates.

Review of Work Orders (WO) -

(i) WO No. 6108148 dated 02.05.2014 placed on M/s LGElectronics India Pvt Ltd for Rs.8,42,925/- for AMC ofHVAC.

Contract awarded on propriety basis.

OBSERVATIONS :

Price justification not mentioned in the purchase proposal.

(ii) WO No. 6108231 dated 09.06.2014 placed on M/s GTCOIL Field Services for Rs. 8.50 Crores for Hire of 1 no.Workover Rig.

PR for procurement of hiring of Rig was raised on 12.07.12. Twoparties quoted. The offer of M/s Shiva Vani was rejected as theparty was debarred by OIL. Contract awarded on single offerbasis. Contract awarded on 09.06.2014.

OBSERVATIONS :

Lead time from raising of PR to placement of order is 2 years.Reasons of long delay in finalization of order be informed to

i. Contract was awarded to onM/s LG Electronics onpropriety basis as per PRstipulations. Approval wasaccorded by LMC of RPconsidering pricereasonableness.

ii. Details of various activitiesinvolved in procurement ofabove services were indicated inthe CBC Note No. 585 dated23/05/2014 (copy enclosed asAnnexure 21).

General Comments:It has been mentioned in thereport at number of places that:

i) Rate was higher as comparedto last purchase order and


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audit. negotiation should have beencarried out.

ii) Last purchase details couldhave been obtained.

We would like to quote thecircular from Vigilance on thesubject of price negotiation:

Quote:“As post tender negotiationscould often be a source ofcorruption. It is directed thatthere should be no post tendernegotiation with L-1 except incertain exceptional situations.”

Unquote:Accordingly, we are avoidingnegotiations except in fewspecial cases where it ispossible to conclude that ratesquoted are high and some basisis available to compare thequoted price and negotiate withthe bidder.There is no meaning ofnegotiation without having abase price.


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Further, as regards to obtainingprice details from other spheresfor an item, it is clarified thatthere is no standardspecification for non-stockitems and materials of differentspecifications are procuredunder same mat code.

We shall be glad if a suitablepolicy is formulated on theabove issues.

In view of above this may betreated as settled.

8 Review of Stock Items as on 08.08.2014-

Stock items value of Rs. 25.86 crore is lying open in the systemas on 08.08.2014 under the Rajasthan sphere. A year-wisemovement analysis is given below-

Year Wise Total (Rs. in Lakh)2005-2006 178.742006-2007 60.442007-2008 91.642008-2009 69.10

Financial Risk-Blockage ofFund

The project isrequested to providephysical verificationcertificates alongwith reasons forholding oldinventories.


Physical Verification Certificatefor Stock and Non-Stock Itemsas at 31.07.2014 is attached asAnnexure-22.

Further, concerned departmentsare reviewing the old items lyingin stock for further necessaryaction in this regard.



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2009-2010 69.712010-2011 172.632011-2012 703.232012-2013 1076.732013-2014 72.972014-2015 90.54Grand Total 2585.74

It is observed form the above that items value of Rs. 6.42 coresare lying from more than 3 years (up to year 2010-11) where nomovements in the items has taken place.

Further, it is also observed that out of Rs. 25.86 crore, itemsvalue of Rs. 25.10 crore is lying in the Hamira Godown at Storagelocation (JE01 and JN01) and Rs.6.34 crore are lying more thanthree years at Hamira Godown (up to 2010-11).

The issue has been addressedin earlier audit report also. Atime bound action plan forreview of old items andadjustment be carried out befurnished to audit.



Head (Services), RP

9 Review of Non-Stock Items as on 12.08.2014-

Non-Stock items value of Rs. 3.13 crore is lying open in the SAPsystem under the different storage location of Rajasthan Project.A year wise analysis of the same is given below-

F.Y Total (Rs. in Lakh)2006-07 14.602007-08 0.092009-10 10.042010-11 18.73

Financial Risk -Blockage ofFund

The project isrequested to providephysical verificationcertificates alongwith reasons forholding oldinventories. Timebound action planfor review of olditems andadjustment be

a) Management comment-Physical Verification Certificatefor Stock and Non-Stock Itemsas at 31.07.2014 is attached asAnnexure-22.Further, concerned departmentsare reviewing the old items lyingin stock for further necessaryaction in this regard.



Sl.No.


2011-12 21.412012-13 60.532013-14 94.752014-15 92.88

Grand Total 313.04

It is observed from the above that out of Rs. 3.13 crore, itemsvalue of Rs. 43.47 lakh are lying from more than 3 years (up toyear 2010-11), where no movements in the items has takenplace.

carried out. The issue has been addressedin earlier audit report also. Atime bound action plan forreview of old items andadjustment be carried out befurnished to audit.

b) Implementation Timeline:Immediate compliancec)Implementationresponsibility:

ED (RP) /Head (Services), RP


Chapter 3 (Part b)

Follow-up of the previous Internal Audit Observations up to Q4 of F.Y 2013-14

The Follow-up of the Internal Audit Observations up to Q4 of F.Y 2013-14 will be incorporated in thesubsequent audit report after discussion with the Project since no Report has been received regarding the ActionTaken by the Project on the past outstanding Audit Paras during the period of audit.

Internal Audit Report – Rajasthan Project Report No. … Audit Report of RP- Q1 / FY 2014-15 Page...

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