CAG also hauled up the state-owned firm for its failure to recover Rs 29.78 crore from Reliance Industries in penalties for over-drawing gas for one month.
GAIL was also criticised for failure to check subsidised gas being used by fertiliser companies for manufacturing non-fertiliser products.
The official auditor, in its report tabled in Parliament today, said GAIL supplied natural gas at subsidised rates -- in deviation of the Oil Ministry`s directives -- to ineligible consumers generating and supplying electricity to their consumers at commercial rates.
The APM or government administered gas was meant only for power companies generating electricity for supply to the Grid for distribution through public utilities.
GAIL supplying APM gas to power generating companies which supplied to consumers at commercial rates in 2006 "led to under recovery of Rs 246.16 crore in Gas Pool Account, undue benefit to such producers to that extent and depriving eligible consumers of subsidised/APM gas," CAG said in the report for the fiscal 2010-11.
CAG said GAIL also failed to evolve a suitable system to ascertain the quantity of natural gas utilised by fertiliser companies for manufacturing non-fertiliser products and its billing at market price instead of subsidised price.
"This led to non-implementation of Ministry`s directives and consequent substantial under recovery in Gas Pool Account besides extra avoidable burden on Government subsidy towards fertiliser production," the auditor`s report stated.
The gas used for non-fertiliser products was to be charged at market price from January 1, 2009.