OVERVIEW

I    Introduction

As on 31 March 2001, there were 368 Central Government Public Sector Undertakings (PSU) under the audit jurisdiction of the Comptroller and Auditor General of India, 7 more than the previous year. These included 271 Government Companies, 86 Deemed Government Companies, 6 Statutory Corporations and 5 General Insurance Companies. The overall coverage under this report and the nature of these PSUs is indicated below:

#     Accounts of 15 PSUs are in arrears for three years or more; 10 are under liquidation and accounts of 10 PSUs have not yet become due. Data in respect of 2 companies (HMT Chinar Watches Limited and HMT Tractors Limited) have not been incorporated due to their information being incomplete.

[Paragraph 1.1]

II    Government Investments

The accounts of 331 PSUs/deemed Government Companies (277 PSUs for current year and 54 PSUs for earlier years) indicated that the Government of India had invested Rs.79,080.60 crore (The figure of Rs. 79080.60 crore includes Rs.2252.10 crore pertaining to the Food Corporation of India whose accounts are in arrears for more than 3 years) directly in the equity capital of only 265 PSUs. Out of these, 121 PSUs had also received from the Government of India loans amounting to Rs. 43,259.50 crore as on 31 March 2001. Compared to the previous year, investment in equity of PSUs by the Government of India has registered a net increase of Rs.5,739.98 crore and loans given to them have increased by Rs.4,176.85 crore. During 2000-2001, the Government of India also supported PSUs by providing subsidy (related to administered prices) amounting to Rs.16,394 crore. Besides, loans and interest thereon to the extent of Rs.1,831 crore were waived by the Government of India and guarantees to the extent of Rs.14,651 crore were provided to the PSUs for repayment of their loans.

[Paragraphs 1.2 to 1.6]

III    Return on Investment

Only 142 PSUs could earn profits during the year and 115 PSUs suffered losses. Out of the total profit of Rs. 38,815.75 crore earned by 142 PSUs, only 26 PSUs in 4 sectors viz., Coal & Lignite, Telecommunications, Petroleum and Power contributed as much as Rs.30,822.82 crore, i.e. 79 per cent of the overall profit earned by the PSUs.

[Paragraphs 2.2 and 2.5]

Out of the 142 PSUs which earned profit, only 90 PSUs declared dividend for the year 2000-01 amounting to Rs.8,448.64 crore and out of this Rs.6,742.69 crore were paid/ payable to the Government of India. The latter represented 8.53 per cent return on the total investment by the Government of India (i.e. Rs.79,080.53 crore) in all the PSUs.

[Paragraphs 2.3(ii)]

Out of the total dividend of Rs.8,448.64 crore declared by PSUs in 2000-01, PSUs under the Ministry of Petroleum and Natural Gas, operating partially under the administered/ regulated prices, contributed Rs.3,503.21 crore representing 41.46 per cent of the entire dividend declared by all Central Government Companies.

[Paragraph 2.3(iv)]

IV    Net Worth/Accumulated Loss

Out of 263 Government Companies the accounts of which were reviewed by audit, the equity investment in 93 Companies has been completely eroded by their accumulated losses. As a result, the aggregate net worth of these companies has become negative to the extent of Rs.41,958.66 crore as on 31 March 2001. Due to the negative net worth, recovery of the loans given by the Government to these companies has also become doubtful. The accumulated losses in these 93 PSUs has increased by Rs.8,601.39 crore, from Rs.45,585.55 crore in 1998-99 to Rs.54,186.94 crore in 2000-01 (i.e. by 18.87 per cent). Out of these 93 companies, 61 have already been referred to the BIFR.

[Paragraphs 2.6]

V    Inventory Management and Marketing

In 150 PSUs, the value of inventory (stores and spares) was more than 33 per cent of their annual consumption; in 136 of these PSUs, it exceeded 50 per cent of annual consumption. In 82 PSUs, finished goods held in stock were more than one month’s sales.

Sundry debtors constitute a high proportion of sales in sectors such as Power, Contract & Construction Services and Heavy Industry indicating lack of prudent credit policy and an effective mechanism for realization of dues.

In 112 PSUs, value of surplus, obsolete and non-moving stores was Rs. 2,145.62 crore. In Fertiliser sector, stores/spares worth Rs. 19.09 crore were procured without any requirement.

In most of the PSUs, a high degree of dependence on orders from the Government Departments/ other Government Companies persisted during the year as almost 44.51 per cent of their net sales were made to the Government Departments/ PSUs.

[Paragraphs 3.3 to 3.8]

VI    Capacity Utilisation

Capacity utilisation in the major PSUs showed widespread variation in all sectors. Even within the same PSUs, the capacity utilisation varied substantially from product to product and from year to year. Capacity utilisation was generally good in the Petroleum, Mines and Minerals and Power sectors.

The reasons for low capacity utilisation in PSUs in other sectors were working capital constraints, sickness or potential sickness of the companies, lack of orders, production bottlenecks, non-availability of raw materials, break down of plants etc.

[Paragraphs 4.2 to 4.4]

VII    General Insurance

As on 31 March 2001, the equity capital of five Insurance Companies was Rs.615 crore and their net worth was Rs.8,889.25 crore. During the year, the volume of business of these Companies increased by Rs.686.59 crore (7.25 per cent) over the previous year’s business of Rs. 9,469.57 crore.

[Paragraph 5.1]

Core business in Insurance Companies continues to be non-profit making. While in business segments like fire, marine and theft insurance, insurance PSUs made profits of Rs.492.82 crore during the year, in other business segments like motor vehicle insurance and other miscellaneous insurance, heavy losses amounting to Rs.2,215.06 crore were incurred. These companies, however, earned a net income of Rs.2,452.42 crore from their non-insurance business in the form of interest, dividend and rent from properties resulting in an overall aggregate profit of Rs.584.93 crore by all the insurance PSUs.

[Paragraph 5.2]

VIII    Variations in the financial results of listed PSUs

Wide variations were noticed in the financial results published by some of the listed PSUs between their audited figures for 2000-01 and the figures published in Quarterly Financial Results due to adverse impact of decrease in interest income on fixed deposits, interest payable to contractors as per arbitration award and increase in employees’ remuneration and wages in the audited accounts. Similarly, non inclusion of (i) earnings on account of subsidy and (ii) expenses relating to recovery on account of commercial sale of ammonia which were not included in the quarterly financial statement led to lower profits in the audited accounts.

[Paragraph 7.2.]

IX    Market Capitalisation of Shares

The market value of shares of 28 listed Government Companies as per prices prevailing in stock markets on 31 March 2001 stood at Rs. 86,595.84 crore. This did not compare favourably with the total book value of their shares of Rs.1,00,500.55 crore. Consequently, market value of shares held by Government of India in these companies stood at Rs.63,336.44 crore as on 31 March 2001 as compared with the book value of Rs.75,136.23 crore indicating an erosion of Rs.11,799.79 crore in the value of investment in these companies.

[Paragraph 7.3]