The financial rot in the public sector undertakings (PSUs) in Kerala is much more than it appears to be as the combined accumulated losses of these entities have swelled past unrealistic levels with their networth reducing substantially despite huge funds having been poured into them in the form of equity and loans in the past several years.
While the PSUs are ideally intended to support the state exchequer by generating profit, they have proved to be a perennial financial burden to the state government. A close look at the way many of the large PSUs, such as KSRTC and KSEBL function, makes one wonder whether these companies will be able to taste profit in the foreseeable future.
The total capital invested into the scores of fund guzzling PSUs in 2016-17 alone was Rs50,927 crore – up 17.55 per cent. While Rs15,517.23 crore has been invested as share capital, Rs35,409.82 crore found its way into these companies in the form of long-term loans (an increase of 33.45 per cent over the previous year)
However, the state government share in this was only Rs12,997.54 crore (slight increase), the rest being equity such as loan from financial institutions and internal cash accruals.
Despite this unrestricted flow of funding, where do these PSUs stand now?
The combined networth has contracted by almost 37 per cent in 2016-17 from Rs6,635.01 crore to Rs4,195.41 crore. And in turn, these companies could offer only a miniscule dividend of Rs2.02 crore to the government compared with Rs19.97 crore during the previous year.
Government claim wrong
In fact, the government claim that the PSU performance has improved in 2016-17 could prove to be misleading if one looks at the real picture.
The government representatives have been flaunting the case of profit making companies whose number has grown from 41 to 44 during 2016-17 – the last financials available for these companies.
But they closed their eyes against the fact that during the same period the number of loss making companies has grown from 49 to 53. Worse, while the improvement in the profit quantum was just Rs46.83 crore – from Rs557.64 crore to Rs604.47 crore, the surge in loss was to the tune of Rs1,891.63 crore – from Rs2,568 crore to Rs4,459.64 crore during 2016-17.
And the net effect was that the aggregate loss in 2016-17 increased from Rs2,010.36 crore to Rs3,855.17 crore – a growth of 91.77 per cent during the year under review.
The accumulated losses incurred by 51 loss making companies have now reached Rs19,647 crore from Rs15,392 crore a year ago. While the largest loss was contributed by KSRTC at Rs1,770.61 crore for 2016-17, it was followed by KSEBL at Rs1,652.45 crore and Kerala Water Authority (KWA) at Rs589.39 crore, whereas the highest profit was recorded by Kerala Financial Enterprises (KSFE) at Rs262.57 crore.