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BSNL overstated profits, says CAG

G. Rambabu

New Delhi , Jan. 5

BHARAT Sanchar Nigam Ltd (BSNL) has been pulled up by the Comptroller and Auditor General (CAG) for overstating its profits by close to 41 per cent for fiscal year 2002-03.

As against the stated net profit of Rs 1,444.45 crore, as cleared at the AGM of the company last month, the actual record should read Rs 857.07 crore, an overstatement of Rs 587.38 crore, the CAG has said.In effect this would mean that the company has actually suffered a decline in profits by 86 per cent during the year as against the earlier stated 77 per cent decline. In the previous year, the company had managed to record an impressive profit of Rs 6,312 crore.

The CAG in its report has pointed out that the major chunk of this "overstatement" comes from its disputed interconnection charges amounting to Rs 413.92 crore recoverable from Mahanagar Telephone Nigam Ltd (MTNL) pertaining to the previous year, which has been accounted in the year 2002-03 accounts as income.

"The company has considered this disputed amount as income without any documentary evidence of acceptance of the same by MTNL but on the basis of disclosure of the same as liabilities in MTNL's previous years account (2001-02) prepared in US GAAP. It has also been noticed that the above income has been included in the aggregate gross revenue (AGR) of the company and licence fee of Rs 62.09 crore payable to DoT on this income has been provided for in the accounts," the CAG has stated.

However, it is noticed that neither the dispute between MTNL and the company on payment of interconnection charges has been resolved nor the liability accepted by MTNL so far. Besides, MTNL in its accounts prepared under Indian GAAP for the year 2001-02 has not shown this disputed amount of Rs 413.92 crore as payable to the company. Thus, the recognition of the disputed amount of interconnection charges as income and providing licence fee for the same is not correct, the report notes.

Further, it states that contrary to the Government's guidelines, BSNL has declared dividend at the rate of 10 per cent of equity of Rs 5,000 crore after availing itself of 50 per cent waiver, which works out to Rs 250 crore instead of giving a minimum dividend of 30 per cent.

The CAG has also said that BSNL has overstated its income from services due to excess/wrong accounting procedures. This also resulted in understatement of claims payable to DoT, current liabilities and prior period income, besides overstatement of sundry debtors, licence fee and profit after tax. Moreover, the provision for tax liability has been wrongly calculated based on income tax rates applicable for assessment year 2004-05 instead of 2002-03.

That is not all, the company has also understated its profits to some extent in many of the accounting provisions to the extent of Rs 28.82 crore, so while the overall overstatement has been to the tune of Rs 616.20 crore, the net impact works out to Rs 587.38 crore, the CAG has said.

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