MUMBAI: Unbelievable, but one in every two state Public Sector Units (PSUs) across the southern states and Odisha that submitted financial accounts to CAG are in losses.
Worse, nearly a quarter of the total state-run firms are defunct, including some firms in Andhra Pradesh that are undergoing liquidation for as far back as 27 years, while those in Kerala have been non-functioning for – hold your breath – 32 years!
In all, there are 434 working state PSUs in the five southern states, plus Odisha, but only 292 submitted latest financials to CAG. Of this, a staggering 140 (48 per cent) reported a combined loss of Rs 27,433 crore as on March 2017 (Tamil Nadu and Kerala’s accounts are as on FY16).
The huge amount of losses aggregating approximately $4 billion is nothing but the erosion of public wealth, which the government auditor termed “a serious concern.”
An Express analysis based on latest CAG reports also shows that 19 per cent of all PSUs, or 105 companies to be precise, are non-functioning across the six states, involving an investment of Rs 1,341 crore. This, CAG noted, is a critical area, as investments in non-working companies do not contribute to economic growth. Also, about 100-odd companies have either delayed finalisation of accounts or have no such practice to begin with.
For instance, 11 PSUs in AP haven’t submitted even the first accounts since their inception! This is not only in violation of the provisions of relevant statutes, but also prevents identification of PSUs’ contribution to the state exchequer and GDP. Worryingly, CAG believes, this may result in risk of fraud and leakage of public money.
Of the total 543 PSUs (working and non-working) just four firms are listed on exchanges, implying that the potential for states to monetise or raise capital is high. But such a move will involve greater transparency and accountability including disclosure of financials from time to time.
The number of loss-making PSUs shows an increasing trend, particularly in the power sector. In AP and Telangana, power sector losses accounted for a massive 99.54 and 99.88 per cent of the total losses incurred by working PSUs respectively in FY17.
This was due to excess expenditure on power purchase agreements in comparison to the revenue realised, besides increasing employee costs and operational expenditure.
Lastly, of the total investments by states in PSUs, just about 8-12 per cent includes capital, while the rest is via long-term loans, which PSUs raise from banks and public financial institutions with guarantees from respective state governments.
As such, the guarantee commitments for all states shot up sharply in the past few years, implying that in the event of continuous losses, state finances may come under severe stress.