Financial Daily from THE HINDU group of publications
Monday, Jul 01, 2002
Financial Daily from THE HINDU group of publications Monday, Jul 01, 2002 |
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Corporate
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Auditing Auditors qualify SPIC accounts Our Bureau
CHENNAI, June 30 AUDITORS A.F. Ferguson & Co have qualified SPIC accounts on three counts — capitalisation of the cost of borrowings made for investing in a subsidiary company (Rs 48.46 crore), and non-recognition of an interim downward revision of consumption norms for urea (Rs 201.88 crore) and investments in SPIC Petrochemicals Ltd. The first is a `routine' qualification. Even last year, SPIC had capitalised the interest charges it incurred on the borrowings made for investing in the Dubai urea project, whose fate is contingent upon the Dubai authorities giving natural gas for urea production. The project has been hanging fire for the last six years. If SPIC has not capitalised the interest cost, its net loss for the year 2001-02 would have been Rs 263.96 crore, instead of Rs 215.55 crore. As regards, non-recognition of the financial effect of the interim downward revision of consumption norms for urea production, SPIC has explained that since "the implementation and quantification of these policy parameters/norms is yet to be finalised", the company has not recognised the Rs 201.88-crore liability. On the investments in SPIC Petrochemicals, the auditors have said: "An amount of Rs 537.33 crore is shown under `loans and advances' representing advances against equity of Rs 150.70 crore, inter-corporate deposits of Rs 80.52 crore and interest of Rs 306.09 crore accrued on both, invested in SPIC Petrochemicals Ltd, a project (sic) promoted by the company in 1994-95. "The company is hoping that no loss will arise out of the above investment. We are unable to express an opinion in the matter." In its response to the auditors' remarks, SPIC has said that a Lenders' Committee had appointed Tata Consulting Engineers to assess the revised project cost and the viability of the project. "TCE have completed their study and submitted their report to IDBI and IDBI is examining the report." (It must be mentioned here that TCE had submitted its report in February itself.) SPIC has reiterated its stand that once the financial institutions "release the required funds (estimated at around Rs 250 crore) and compensation paid to Chennai Petroleum Corporation Ltd", the stay on the SPC project would get vacated; whereupon SPIC would be able to find a strategic partner to invest in the project. The financial institutions are still "examining" the viability of the project. Many teams, such as one from CPCL and another from Engineers India Ltd, had gone into the viability of the project, but IDBI (which, incidentally, had declined to implead itself in the SPIC-CPCL case) wanted yet another consultant, TCE, to look into it again. Although the auditors have not mentioned what they expected the company to do with the Rs 537.33-crore of investment, they have pointed out that while SPIC "is hoping that no loss will arise out of this investment, we are unable to express an opinion in the matter". Experts say that SPIC may have to write off the amount in its books.
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