According to the audit report on the accounts of Public Sector Enterprises 2004-05, the irregularities worth more than Rs 1.67 billion have been detected in the affairs of national flag carrier.
The report says that eight General Electric engines were purchased in 2002 for newly inducted aircraft B-777-220ER at exorbitant rates with high maintenance cost while option for cheaper engines of Pratt & Whitney (PW) with less maintenance cost was available, resulting in extra expenditure of $24.896 million (Rs 1.493 billion).
There were three options available with the authorities either to purchase Rolls Royce, Pratt and Whitney or General Electric engines. The overall reliability of PW, as a result of the study, was judged better, superior and more economical.
Contrary to this, eight GE engines were purchased from the General Electric Company, USA, at a total cost of $141.6 million ($17.7 million per engine). Whereas, the authorities had option to purchase PW engines with similar power and better performance with less maintenance cost, at the rate of $15.20 million per engine. The total cost of eight PW engines was around $121.600 million. But the management opted to purchase GE engines at a higher cost of $141.600 million that resulted into an extra payment of $20 million (Rs 1.200 billion).
The national kitty suffered a loss of Rs 76.013 million due to launching of a special Umrah scheme in collaboration with the Allied Bank Limited (ABL) without conducting a proper feasibility study.
The PIAC management approved a special Umrah scheme on rebated/discounted tickets in collaboration with the ABL for movement of approximately 30,000 passengers who could not afford to incur lump-sum expenses between the period of October 2002 and November 2003.
The Auditor General of Pakistan believes there was no need of launching a scheme on rebated/discounted tickets that caused a loss of Rs 76.013 million. The report also says that Rs 60.986 million of PIAC was held in an Iraqi bank - Masraf-al-Rashid - since 1990 due to Gulf war and sanctions imposed by USA/UN.
The matter was pointed to the PIAC management in January 2004 and to the ministry in April 2004, as the management intimated that under the prevailing situation in Iraq over the years and in the presence of UN sanctions it did not have any access to the bank and the concerned officials in Iraq.
However, PIA had lodged claim with the UN for compensation of loss in Iraq, including its held-up funds and it was expected that PIA would get compensation in case of any settlement. But the departmental accounts committee, held in 2005 and 2006, observed that no progress had been achieved.
The authorities also failed to recover outstanding amounts from defaulting agents within a period of 30 days as per its credit policy causing a loss of Rs 18.812 million.
The PIAC purchased plots in 1987 and 1991 in Gilgit and Sukkur, respectively for construction of sales office buildings. As the construction could not be started/completed, the management had to pay rental charges of nearly Rs 5.885 million on hired buildings.
In other case, the authorities placed an order for the procurement of spare-parts in excess of actual requirements and without observing laid down procedure. On cancellation of 50 percent ordered quantity, they had to pay a penalty $13,150 (Rs756,914).