The Hindu Business Line : Complete capital erosion in 72 PSUs: CAG

New Delhi, July 9 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 today, 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 crore, making their combined net worth negative at Rs 9,898.62 crore.

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.

Out of the 185 profit-making companies, 117 PSUs declared dividend for 2007-08 amounting to Rs 29,308 crore. Out of this Rs 20,761 crore were paid/payable to the Government of India, representing 14.12 per cent return on the total investments made by the Government (i.e., Rs 1,47,033 crore) in all Government companies and corporations.

Government companies under the Ministry of Petroleum & Natural Gas operating partially under the administered/regulated prices, contributed Rs 10,015 crore, signifying 34.17 per cent of the total dividend declared by all Government companies.

CAG said that comments issued by the audit as a result of supplementary audit of Government companies brought out overstatement of assets by Rs 411.98 crore in four companies and profit by Rs 1,129.40 crore in 11 companies.

Listed PSUs

While shares of 51 Government companies were listed on the various stock exchanges, these include 40 Government companies, six subsidiaries of Government companies and five deemed government companies. In respect of 35 listed Government companies, the shares of which were traded during 2007-08, the total market value of their equity share as on March 31, 2008 stood at Rs 1,03,808.92 crore as compared to the total book value of Rs 3,07,000.64 crore.

The report pointed out that even as the total market value of shares in these companies had gone up by Rs 4,03,889.88 crore as on March 31, 2008 as compared to March 31, 2007, the total market value of these companies as on December 1, 2008 had gone down to Rs 6,00,714.79 crore. Though the audit committee existed in all listed companies, the composition of the committee in eleven listed companies was not as per Clause 49 of the Listing Agreements.

The audit committee of nine companies was not chaired by the independent auditor, while the Chairman of the Audit Committee of 8 companies did not attend annual general meeting of the respective company, the CAG said.

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