Public Funds Squandering Undertakings-Losses Rs 1 lakh crore |
Even as the Government has been in a denial mode on disinvestment of public sector undertakings (PSUs) since July 2005 and is proceeding on this in a halting manner, a report of the Comptroller & Auditor General of India (CAG) has highlighted complete capital erosion in 72 Government companies. |
‘Financial Reporting by Public Sector Undertakings’, tabled in Parliament 9th July, said out of the 281 Government companies and corporations, the equity investment in 72 PSUs had been completely eroded by their accumulated losses. |
Their accumulated losses were Rs 94,428.27 crore against equity investment of Rs 15,762.83 crore as on March 31, 2008, making their combined net worth negative at Rs 78,665.44 crore. This included six listed companies whose accumulated losses were Rs 11,349.84 crore against equity investment of Rs 1,451.22 As the capital of 46 companies (out of 72 whose capital was fully eroded) as on March 31, 2008, the recovery of loans amounting to Rs 49,926.32 crore became “doubtful”, the CAG said. Recovery of loan of Rs 2,755.22 crore disbursed by the Government companies to their 14 subsidiaries (included in the 72 PSUs the equity capital of which had fully eroded) also became “doubtful”, the report added. |
Out of the 281 Government companies and corporations where data had been scanned by the audit, 185 PSUs earned profits in 2007-08, amounting to Rs 97,919 crore of which as much as 76.03 per cent (Rs 74,446 crore) was made by 48 companies in five sectors viz., petroleum, power, coal and lignite, steel and minerals and metals. |
The CAG also pointed out that the equity of 72 out of 413 audited PSEs has been completely eroded as they accumulated losses of Rs 94,428 crore by the end of 2007-08. The report stated the 72 companies had a negative net worth ofRs 78,665 crore. |
Fudging Accounts |
i.The report called ‘Financial Reporting by Public Sector Undertakings’ pointed out that thermal power producer NTPC had overstated profits by Rs 938.3 crore during 2007-08
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ii.While HMT Watches understated its loss by around Rs 10 crore, NTC did it to the tune of Rs 203 crore.
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iii.Oil & Natural Gas Corporation had made an extra expenditure of Rs 194 crore in 2004 by ignoring the prevailing crude oil price for evaluation of an offer that led rejection of that offer and consequent re-tendering in 2005. |
iv.Neyveli Lignite Corporation procured unnecessary equipment for Rs 26 crore. |
v.Bhel awarded a contract worth more than Rs 26 crore to a firm that was banned in 2006 by Heavy Power Equipment Plant, a unit of Bhel, for all business dealings. The heavy engineering behemoth also could not adhere to the delivery schedule and incurred an avoidable expenditure of Rs 27 crore from January 2003 to February 2006. |
vi.Nacil is expected to have suffered a loss of Rs 4,000 crore in 2008-09, almost double of that in the previous year |
Managerial laxity |
The CAG found several PSUs operating with “managerial inefficiencies” anomalies like undue payment to employees, wasteful expenditure, non-compliance to law, idle investment and blocking of funds irregularities which added up to a whopping Rs 1,847 crore in just their 2007-08 accounts |
Managerial inefficiencies in PSUs added up to a whopping Rs 1,847 crore in just their 2007-08 accounts |
There was an understatement of liabilities to the tune of Rs 34 crore in the case of MTNL, while BSNL had overstated its assets by Rs 213 crore. |
| ONGC had made an extra expenditure of Rs 194 crore in 2004 by ignoring the prevailing crude oil prices. Neyveli Lignite Corporation procured unnecessary equipment for Rs 26 crore |
Nacil made avoidable expenses of about Rs 13 crore on account of expensive catering services and buying additional electricity load |
The CAG audit has revealed that a total of Rs 916 crore was paid in an irregular manner to the public sector employees on account of ex-gratia and incentives, and companies such as Hindustan Aeronautics, IOC and ONGC had unauthorised incentive schemes. |
Irregular payment of incentives by Air India to its to employees has been seen as the reason for the national carrier’s present financial crisis. The report has also found deficiencies in the implementation of technology projects of nine PSUs, including Coal India and ONGC.ET100709 |
The New India Assurance Co was reprimanded for delay in shifting a divisional office to its own building in Mumbai incurring an avoidable expenditure of Rs 4.11 crore on rent and taxes during February 2003 to April 2008. BL/FE-100709 |
NOTE: Year after year CAG submits reports of mal- functioning of Public Sector Undertakings. The report is submitted to the parliament. The parliamentarians pay scan attention to the same. And Government’s inaction emboldens the Public Undertakings to squander more public funds. Why is this happening? Because politicians and bureaucrats use these PSUs as to aggrandize themselves and with out them and they cannot dispense favours to their minions. The only way out is to follow the sane advice given in the Economic Survey: |
| Decontrol petrol and diesel prices; end Govt monopoly in railways, coal and nuclear energy |
| Revitalise disinvestment programme to generate Rs 25,000 crore annually, list all PSUs and auction those beyond revival |
Complete the process of selling 5-10 per cent equity in identified profit-making non-'Navratna' PSUs |
| List all unlisted PSUs and sell a minimum 10 per cent equity to public. |
| Auction all loss-making PSUs that cannot be revived |
| In PSUs with zero networth, allow negative bidding in the form of debt write-off |
