Do or die, CAG tells 12 PSUs in Gujarat

In what is a telling observation on the way public sector units (PSUs) in the state continue to function, the latest report of the Comptroller and Auditor General of India (CAG) on the companies owned by the Gujarat government for the year ended March 31, 2006, has recommended that the government should review and improve the performance of 12 of its PSUs or consider their closure. CAG Gujarat released the report last week.

The companies that have come under the CAG's hammer include Gujarat Sheep and Wool Development Corporation Ltd, Gujarat State Road Development Corporation Ltd, Gujarat State Rural Development Corporation Ltd, Gujarat Growth Centres Development Corporation Ltd, Gujarat Urban Development Company Ltd, Gujarat Minorities Finances and Development Corporation Ltd and Gujarat Rural Industries Marketing Corporation Ltd.

The government's statutory corporations that made the caution list include Gujarat State Land Development Corporation Ltd, Gujarat State Handloom and Handicraft Development Corporation Ltd, Tourism Corporation of Gujarat Ltd, Gujarat State Finance Corporation and Gujarat State Warehousing Corporation.

On March 31, 2006, Gujarat had 56 public sector undertakings (PSUs) comprising 52 government companies and four statutory corporations against 51 PSUs comprising 46 government companies and five statutory corporations on March 31, 2005. Of the 52 government companies, 39 were working and 13 were non-working companies.

The total investment in the 12 non-working PSUs was Rs 840.61 crore against Rs 805.44 crore in 10 non-working PSUs on March 31, 2005.

According to the report, 25 working PSUs (23 government companies and two statutory corporations) earned aggregate profits of Rs 683.63 crore, of which only two working government companies and one statutory corporation declared dividend of Rs 8.08 crore to the state government. Against this, nine working PSUs (seven state government companies and two statutory corporations) incurred aggregate losses of Rs 150.95 crore.

Out of the loss incurred by working government companies, four companies had accumulated losses aggregating Rs 162.54 crore which was more than four times their aggregate paid-up capital of Rs 35.70 crore.

The two loss incurring statutory corporations have accumulated losses aggregating Rs 2,126.63 crore which was more than two times of their aggregate paid-up capital of Rs 715.63 crore.

Even after being in existence for five years, the individual turnover of seven working government companies had remained less than Rs 5 crore in each of the preceding five years.

Further, five public sector undertakings (three working companies and two working statutory corporations) had been incurring losses for five consecutive years according to their latest accounts, leading to negative net worth.

In its analysis of government companies, the report stated that between 2000-2005, the Gujarat Urja Vikas Nigam Ltd (formerly known as Gujarat Electricity Board) had raised total funds of Rs 12,446 crore from different sources, of which substantial funds of Rs 6,347 crore were utilised for financing the revenue deficit of the Board.

The Board also sustained revenue losses of Rs 351.15 crore due to the non-implementation of tariff award in the agricultural sector.

It has also mentioned that the deficiency in the gas transmission arrangement agreement, entered with Gujarat Gas Company Ltd by Gujarat State Petronet Ltd, has led to an avoidable payment of Rs 30.12 crore and that the Gujarat State Petroleum Corporation Ltd did not recover minimum charges of Rs 1.80 crore in violation of an agreement.

It has also found that the performance of the Gujarat Water Infrastructure Ltd in the implementation of bulk water transmission project is deficient in areas such as project planning, financing, implementation, pricing of water and internal control.