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Tuesday, October 20, 2020

Gujarat: ‘Compliance of SPSUs with accounting standards deficient,’ states CAG report

Among the issues flagged are coal supply agreements not monitored simultaneously, violation of environment guidelines by utilising amount recovered from sale of fly ash for purposes not specified for.

By: Express News Service | Ahmedabad | Updated: September 26, 2020 3:32:40 pm
Comptroller and Auditor General, CAG report, habitation in Gujarat, water supply programme, Gujarat news, Indian express newsThe audit found that compliance of SPSUs with the accounting standards remained deficient as there were 35 instances of non-compliance in 19 financial statements.

Of the 87 State Public Sector Undertakings (SPSUs), the Comptroller and Auditor General (CAG) report pointed out irregularities in the Gujarat State Electricity Corporation Limited (GETCO).

Among the issues flagged are coal supply agreements not monitored simultaneously, violation of environment guidelines by utilising amount recovered from sale of fly ash for purposes not specified for, absence of information of critical and non-critical items and incorrect inventory-reporting. These issues were also detected in the audit of Gujarat State Electricity Corporation Limited, a subsidiary of Gujarat Urja Vikas Nigam Ltd (GUVNL), responsible for power generation.

GUVNL ended up paying an excess of Rs 716.09 crore in a span of nine years (2009-18) to GETCO as wheeling and transmission charges. While this was recovered during 2018-19 by GUVNL, the audit found that non-compliance with accounting standards resulted in understatement of retained earnings, as this recovered amount should have been classified under, and instead ended up being an overstatement of profit by Rs 716.09 crore.

The audit found that compliance of SPSUs with the accounting standards remained deficient as there were 35 instances of non-compliance in 19 financial statements.

Major differences in outstanding amounts with respect to equity, loans and guarantee in SPSUs’ records vis-a-vis Gujarat government’s finance accounts were found in the case of seven SPSUs. Ideally, the two records should correspond to each other. These include Gujarat State Petroleum Corporation Ltd (GSPC), Sardar Sarovar Narmada Nigam Ltd (SSNNL), Gujarat Metro Rail Corporation Ltd, GSPC LNG Ltd, Dholera Industrial City Development Ltd, Gujarat State Financial Corporation and Gujarat State Road Corporation Ltd.

Audit of Gujarat Mineral Development Corporation (GMDC) showed that the company had 24 mining leases as on March 31, 2019 of which nine were non-operational and among the nine, in the case of five leases, the company had neither submitted an application for extension nor undertook mining operations. GMDC could not also achieve “important goals of the sole business plan” and the audit found that neither a mechanism for monitoring achievement of business plan was in place nor a business plan was prepared for subsequent periods. Instances of non-achievement of production targets in the mine plan were observed, indicating a need for revision of mine plan.

Audit also observed that the company was yet to frame any policy regarding retention or sale of acquired private freehold land after mineral reserves are exhausted. Violations of environment clearance conditions related to corporate social responsibility expenditure were noted in two cases.

Moreover deficient monitoring of mining agreements showed that it resulted in an otherwise avoidable loss amounting to Rs 104.64 crore in 10 cases, undue benefit to contractor amounting to Rs 21.02 crore in two cases and arbitration claim of Rs 107.01 crore.

Deviation from such turnkey mining agreements also resulted in an extra expenditure of Rs 23.38 crore in one case, undue benefit of Rs 23.30 crore in another case and additional payment of Rs 1.48 crore in yet another case. GMDC audit also observed deficiencies in the system for tendering and awarding of turnkey mining contracts which resulted in avoidable loss of Rs 17.75 crore.

Overall it was found that of the remaining 77 SPSUs as on March 31, 2019, Gujarat government invested funds in 61 SPSUs in form of equity, loans and grant/subsidy and no funds were infused in remaining 16 SPSUs, which were joint ventures or subsidiaries of state government companies (SGCs).

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