THIRUVANANTHAPURAM: The Comptroller and Auditor General (CAG) of India's latest report on Kerala’s State Public Sector Enterprises (SPSEs) for the financial year ending March 2023 has revealed a significant improvement in profitability.
The combined profits of SPSEs more than doubled to Rs 1,368 crore, up from Rs 654 crore in 2022. The report also highlighted a reduction in losses, which dropped from Rs 4,065 crore in 2022 to Rs 1,873 crore in 2023.
Among the profit-making enterprises, Kerala State Electricity Board Limited (KSEB) recorded the highest profit of Rs 736 crore, accounting for 53.79 per cent of the total sectoral profit. This marks a major turnaround for KSEB, which had reported a net loss of Rs 1,822 crore in the previous year.
Kerala State Financial Enterprises Limited (KSFE) followed with a profit of Rs 105 crore, contributing 7.71 per cent to the overall profit. Three previously loss-making enterprises, Kerala Forest Development Corporation Limited, Oil Palm India Limited, and KSEB, became profitable, signalling a positive shift in financial health.
The Return on Equity (ROE) for 58 SPSEs stood at 32.37 per cent in 2023, a notable rise from 10.32 per cent in the previous year. This increase was driven by profit growth, which surged from Rs 654 crore in 2022 to Rs 1,368 crore in 2023.
Additionally, for the first time in three years, the Return on Capital Employed (ROCE), a key measure of profitability and capital efficiency, turned positive.
However, despite the overall financial improvement, 66 SPSEs continued to report losses, amounting to Rs 1,873 crore. This was a decrease from the Rs 4,065 crore loss recorded by 63 SPSEs in 2022.
Two entities, Kerala State Road Transport Corporation (KSRTC) and Supplyco, accounted for the majority of the losses, contributing Rs 1,327 crore to the total deficit.
The losses reported for these entities were based on financial audits dating back to 2015-16 for KSRTC and 2017-18 for Supplyco. KSRTC, in particular, has a significant backlog, with its accounts pending from 2016-17 to 2022-23.
While the turnover of SPSEs grew from Rs 34,769 crore in 2020-21 to Rs 38,781 crore in 2022-23, this growth lagged behind the state's Gross State Domestic Product (GSDP), which rose from Rs 7.71 lakh crore to Rs 10.46 lakh crore over the same period. As a result, the percentage of SPSE turnover to GSDP declined from 4.51 per cent to 3.71 per cent.
As of 2022-23, 56 SPSEs had outstanding state government loans amounting to Rs 12,302 crore, up from Rs 10,621 crore in 2021-22. During the fiscal year, the government disbursed fresh loans of Rs 1,696 crore to 25 SPSEs.
Additionally, 77 of the 131 operational SPSEs had accumulated losses totalling Rs 18,026 crore, highlighting continued financial strain across several entities.
The CAG has urged the state government to expedite the winding-up of defunct SPSEs, particularly those that have remained non-operational or in various stages of liquidation since 1986-87.
The report recommends a review of the business models of loss-making SPSEs to identify the root causes of financial distress. If found unsustainable, the government should consider shutting down or divesting its stake in these enterprises, especially those whose net worth has been entirely eroded.
Report highlights:
Profit growth: Profits for 58 SPSEs more than doubled, reaching Rs 1,368 crore in 2023, compared to Rs 654 crore in 2022.
Loss reduction: SPSE losses declined from Rs 4,065 crore in 2022 to Rs 1,873 crore in 2023.
Top performer: Kerala State Electricity Board posted a record profit of Rs 736 crore, contributing 53.79 per cent of total profits.
Major loss-makers: KSRTC and Supplyco, with a combined loss of Rs 1,327 crore.
Total SPSEs: 149 (131 operational, 18 non-operational).
Government investment: Rs 20,439 crore as of March 2022, rising to Rs 22,318 crore by March 2023.
Financial distress: 77 working SPSEs had accumulated losses of Rs 18,026.49 crore.
Eroded net worth: 44 SPSEs have completely lost their net worth.