CAG tells Kerala to close down unsustainable PSUs

THIRUVANANTHAPURAM: The Comptroller and Auditor General of India (CAG) has directed the Kerala Government to close down public sector companies (PSUs) with unsustainable business models.

Burden on exchequer

CAG, in its recent report after examining the performance of the government-owned companies (FY22) said the state needs to decide on the business models of the loss-making PSUs in order to address the root cause of the losses.

“In case, the business model is not sustainable, then the Government should close the companies to avoid further straining of the public exchequer,” the report said.

The CAG is an independent authority responsible for auditing the accounts of the Central and State governments, as well as public sector organisations, and ensuring accountability and transparency in public financial management.

It’s a known fact that most state PSUs have historically been ‘bleeding’ and the burden of their poor financial performance continues to be shouldered by the state exchequer.

Equity & loans

Not only that the majority of these companies have been rolling out losses year after year, more seriously, the government is required to keep investing in these companies in the form of loans and equity injections in order to keep them afloat.

The most disheartening aspect, according to a corporate affairs expert, is that most companies never bother to practise coroporate governance, leading to inordinate delay in presenting financial reports.

But what’s the way ahead? It’s said to be against the policy of Left Government to privatise government owned companies. Talking to businessbenchmark.news, a former government secretary said, “It’s understandable that government should support public utility services even in the face of losses, but what about industrial ventures?”

Industries minister

In a recent interview to this writer, P Rajeev, the minister in charge of Industries portfolio in the state, has ruled out either privatisation or closure of any of the public sector (industrial) undertakings as a recourse to the continued loss-making by PSUs.

“We have chalked out and started focusing on initiatives to bring the loss-making entities on track by steering them towards a more successful performance; we are sure things are going in the right direction,” Rajeev had said in the interview.

Though the government keeps claiming that PSUs are being turned around, and more and more companies/entities have started generating profits, analysts talking to businessbenchmark.news have squarely dumped those arguments.

Huge losses

Out of the 131 working PSUs, 55 PSUs earned profit of Rs654.99 crore as per their finalised accounts submitted till September 2022.

While 63 PSUs incurred losses of Rs4,065.38 crore, four PSUs have incurred no profit/loss taking the effective combined losses to Rs3,410 crore for that year.

“There were nine PSUs which were yet to furnish their first accounts for CAG’s review,” the CAG noted.

Huge investments

As on March 31, 2022, the total investments made by the Government of Kerala (GoK) in 131 PSUs stand at Rs20,439.04 crore comprising equity share capital of Rs9,817.46 crore and long term loans to the tune of Rs10,621.58 crore.

During the financial year 2021-22 (FY22) alone, the government of Kerala (GoK) has infused Rs386.51 crore in the form of equity through 22 PSUs.