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Accumulated losses in 87 PSUs touch Rs 37,970 cr

G. Srinivasan

NEW DELHI, May 1

EVEN as the Government is dithering over the disinvestment of equity in public sector companies with targeted receipts from this route remaining unfulfilled, the equity investment in 87 companies of the Government has been completely eroded by their accu mulated losses.

This is observed by the Comptroller and Auditor General of India (CAG) in its latest report on public sector undertakings (PSUs) for the year ended March 2000 out of a scrutiny of the accounts of 256 Government companies.

As a result, the aggregate networth of these companies has become negative to the extent of (-) Rs 31,841 crore as on March 31, 2000. Due to the negative networth, recovery of the loans given by the Government to these companies has also become

``doubtful''. The accumulated losses in these 87 PSUs has escalated by Rs 4,915 crore from Rs 33,055 crore in 1997-98 to Rs 37,970 crore in 1999-2000 or by 15 per cent.

Most worryingly, out of these 87 companies, 58 have already been referred to the BIFR. Out of these 58 companies, BIFR had approved revival packages for only 18 companies. Of these, action for revival as recommended by the BIFR has been initiated in 12 c ompanies.

Of the remaining 40 PSUs, cases in respect of 38 were outstanding with BIFR for more than five years and cases of two were similarly pending for more than three years.

An investment of Rs 6,162.92 crore in the equity capital of 87 companies under 19 Ministries covering such Ministries as Agriculture and Cooperation, Biotechnology, Chemicals and Petrochemicals, Civil Aviation, Fertilisers, Food Processing Industries, He avy Industry and Public Enterprises, Information Technology, Mines, Social Justice and Empowerment, Steel, Surface Transport, Textiles, Tourism and Urban Affairs and Employment and Water Resources have been made by the Government.

Taking a broader picture of PSUs, the CAG said the accounts of 327 PSUs/deemed Government companies -- 270 PSUs for current year and 57 PSUs for earlier years -- indicated that the Government of India had invested Rs 72,182 crore (this figure includes Rs 2,252 crore pertaining to the Food Corporation of India whose accounts, along with the accounts of other 10 Government companies are in arrears for more than three years) directly in the equity capital of only 262 PSUs.

The latter includes 257 Government Companies and five deemed Government companies.

Only 134 PSUs could earn profits during the year and 116 PSUs suffered losses. Out of the total profit of Rs 33,845 crore earned by 134 PSUs, only 32 PSUs in five sectors such as coal and lignite, insurance, telecommunications, petroleum and power contri buted as much as Rs 26,897 crore, i.e. 79 per cent of the overall profit earned by the PSUs.

What is particularly disquieting is that out of the 134 PSUs which earned profit, only 92 PSUs declared dividend for 1999-2000 amounting to Rs 5,663 crore and out of this Rs 5,103 crore were paid/payable to the Government of India.

The latter represents 7.07 per cent return on the total investment by the Government of India (Rs 72,135 crore) in all the PSUs. It needs to be noted that the guidelines issued by the Ministry of Finance in 1995 and 1996 envisaged that all profit-making PSUs, which were essentially commercial enterprises, would declare a minimum dividend of 20 per cent either on equity or on post-tax profit, whichever was higher.

Interestingly, out of the total dividend of Rs 5,663 crore declared by PSUs in 1999-2000, PSUs under the Ministry of Petroleum and Natural Gas, operating partially under the administered/regulated prices, contributed Rs 2,522 crore, representing the lion 's share of 44.54 per cent of the entire dividend declared by all Central Government companies.

Yet another barometer pertaining to the health of the PSUs is in the area of inventory management. Here, the CAG detected, that in 101 PSUs, the value of inventory was more than 33 per cent of their annual consumption; in 74 of the PSUs, it exceeded 50 p er cent of annual consumption. In 82 PSUs, finished goods held in stock were more than one month's sales.

The level of inventories was very high in sectors such as coal and lignite, minerals and metals, power, transport equipment and transportation services, which adversely affected the profitability of the PSUs, the CAG said.

It is small wonder that the country' infrastructure is bursting at the seams for lack of ploughback of profits by the PSUs into improvement of the rickety system even as the private sector involvement is stymied for lack of clarity in policy on various s ub-sectors.