The Hindu Business Line : Networth of 88 PSUs completely eroded, says CAG report

This may not be the proper time to talk about disinvestment as the national bourses have been on a listless mood with scrips cruising on roller coaster ride in value. But the disinvestment drive of the public sector undertakings (PSUs), which suffered momentum in the last couple of years, would have reason to slow down further in the light of gratuitous erosion in the networth of a substantial part of PSUs.

A latest report by the Comptroller and Auditor General (CAG) on review of accounts of commercial undertakings said the Government had realised Rs 47,646.43 crore during the period from 1991-02 to 2004-05 from disinvestments of its shares in PSUs. The report highlights how out of the 276 Government companies/corporations, the equity investment in 88 companies under 20 Ministries/Departments has been completely eroded by their accumulated losses.

The accumulated losses in these 88 PSUs has increased by Rs 6,700 crore from Rs 75,302 crore in 2003-04 to Rs 82,002 crore in 2004-05 or by 9 per cent.

Of these 88 companies, 31 are under the Ministry of Heavy Industry and Public Enterprises, 16 are under the Ministry of Textiles, six are under the Ministry of Chemicals and Fertilizers, five are under the Ministry of Steel and five under the Ministry of Tourism.

In the face of the accumulated losses which made their networth negative, the recovery of loans given by the Union Government to 58 companies and other agencies has become `doubtful', the CAG noted adding that the total Central Government loans outstanding against these companies as on end-March 2005 amounted to Rs 34,295.01 crore.

The total loans remaining unpaid on due dates amounted to Rs 7,957.69 crore (28 PSUs) and penal interest leviable for non-payment of loans on due dates amounted to Rs 8,378.29 crore (18 PSUs).

Of the 88 companies, 52 have been referred to the BIFR, which recommended closure/winding up/sale in the case of 19 companies, while approving revival package in respect of 14 companies. Nineteen cases are under various stages of processing. The CAG report further states that out of the 276 PSUs where data has been analysed in audit, only 164 PSUs could earn profits during 2004-05 and 101 PSUs suffered losses excluding the Food Corporation of India (FCI) where the Centre reimburses the shortfall by way of subsidy. Remaining 10 companies were in construction stage.

Out of the total profit of Rs 76, 233 crore earned by 164 PSUs, the major contribution came from only 44 PSUs in five sectors viz., petroleum, telecommunications, power, steel and coal and lignite which contributed as much as Rs 63,618 crore, i.e., 83.45 per cent of the overall profit earned by the PSUs.

Out of the profit-making PSUs numbering 164, only 105 PSUs declared dividend for 2004-05 amounting to Rs 20,689 crore and out of this Rs 14,881 crore were paid/payable to the Government of India.

The dividend paid to the Government represented 13.11 per cent return on the total investment by the Government of India (i.e., Rs 1, 13,476 crore) in all the PSUs. The report bluntly puts it that a large group of PSUs "significant both in number and investment, are today beset with serious problems like slow growth, low productivity, inefficient management, inadequate emphasis on R&D, inadequate or unfocused marketing, shortage of working capital."

The challenges facing these PSUs were to cut costs, increase productivity, market their products and services aggressively, increase profitability and to generate surplus, the CAG said adding that all these parameters ultimately "hinged upon the degree of asset utilisation, technological innovation and human resource management."

More Stories on : PSU | Performance | Regulatory Bodies & Rulings

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page