Criticising the Gujarat government for investing in “loss-making companies”, the country’s top most audit watch dog, the Comptroller and Auditor General of India (CAG), has pointed out that the average Return on Investment (ROI) made by the state was a meagre 0.12 per cent during the five years between 2015-20, while it continued to pay an average interest of 7.57 per cent on its borrowings during the same period.
In a report tabled in the Gujarat Assembly Tuesday, the CAG was particularly critical about government’s investments in Gujarat State Road Transport Corporation (GSRTC) which has been booking losses since 1973-74 and Sardar Sarovar Narmada Nigam Limited (SSNNL) which has been a loss-making entity since 2015-16.
“If the state government continues to make investments in loss-making government companies whose net worth is completely eroded, the chances of realising return on investments becomes remote. Similarly, experience has shown the inevitability of writing-off the loans given to loss-making corporations and other bodies such as sugar mills, financial corporation, etc. Requisite steps need to be taken to maintain transparency in such financial operations,” the CAG stated.
While state government’s investments in statutory corporations, rural banks, government companies, cooperative institutions and local bodies have risen by 41 per cent to Rs 99,919 crore during 2019-20, the government’s return on investments have fallen from 0.14 percent in 2015-16 to a paltry 0.09 percent in 2019-20.
Of the additional Rs 7,115 crore of investments made by Gujarat in 2019-20, Rs 3,345 crore was made in SSNNL, while almost Rs 260 crore was made in GSRTC.
“SSNNL has accumulated losses of Rs 5,128 crore at end of 2018-19, while GSRTC has accumulated losses of Rs 3,410 crore at end of 2016-17. The GSRTC reported negative net worth to the tune of Rs 775 crore as on its last balance sheet date,” the auditor observed.
Apart from GSRTC and SSNNL, the government also invested Rs 3,286 crore in Gujarat Urja Vikas Nigam Limited (GUVNL).
“The state government may consider future payments to these companies in the form of grants instead of share capital, so as to reduce the disparity in investment vis-a-vis return,” the CAG suggested.
The auditor also pointed out that there were differences with regard to investment figures as per records of State Public Sector Undertakings (SPSUs) and those appearing in the finance accounts. “The state government has been requested several times during 2019-20, to reconcile the differences. The reconciliation is awaited,” CAG stated.
Erosion of capital in govt companies
Of the 88 government companies and corporations, 35 companies registered accumulated losses of Rs 28,921 crore as on March 31, 2020. As many as 11 of these 35 SPSUs were either winding up or facing closure or liquidation, the report stated.
A total of 20 out of the 35 SPSUs reported negative net worth or Rs 6,151 crore against an equity investment of Rs 4191 crore, as on March 31, 2020.
“These 20 SPSUs whose capital had been completely eroded had an outstanding loan from Government of Gujarat amounting to Rs 4,281 crore,” it added.
Capital locked in incomplete projects
The CAG also pointed out that there were 123 projects in the state where Rs 5,810 crore has already been spent and are lying incomplete for durations spanning as long as six years. Of these 104 incomplete projects belonged to the Roads and Buildings Department, while 19 projects were from Narmada, Water Resources, Water Supply and Kalpsar department.
“Blocking of funds in incompete projects impinges negatively on the quality of expenditure and deprives the state of intended benefits for prolonged periods,” CAG stated.