CAG report indicts three Maharashtra corporations

Of the three, the Maharashtra State Electricity Board (MSEB) is in an unenviable number one position, having lost Rs 419.68 crore, while the Maharashtra State Road Transport Corporation (MSRTC) lost Rs 394.09 crore and the Maharashtra State Financial Corporation (MSFC) squandered Rs 192.17 crore. Taken together, their losses are Rs 1005.94 crore, a whopping amount for a State Government that is in the throes of a financial crisis.

Finance Department bureaucrats merely said they had taken note of the CAG report.

In a glaring case of mismanagement, the MSEB suffered aloss of over Rs 400 crore in only two projects — the replacement of electrostatic precipitators in thermal power stations and the waste heat recovery plant at Uran. The electrostatic precipitators are meant to reduce the dust concentration from exhaust gases and the MSEB was legally bound by pollution control norms of the Maharashtra Pollution Control Board to augment and/or replace them in thermal power stations. Mere delays in augmenting them and failure to recover penalty from the designated company for forced shutdowns lead to a loss of power generation worth nearly Rs 82 crore.

It was the same story of delay leading to a loss in the waste heat recovery plants at the Uran power station. The two-year delay in completing two of these units resulted in the project cost increasing by Rs 230 crore. The initial cost estimate was Rs 910 crore. However, equally galling is the lackadaisical attitude of Siemens, contracted to supply the imported equipment. “Failure to hold Siemens responsible for delay incompletion of the project on account of reasons attributable to it resulted in the waiver of liquidated damages of Rs 74.38 crore by MSEB,” states the CAG report.

In the case of MSRTC, the largest chunk of loss — Rs 378.90 crore — came from the Government’s own delay in tariff and fare revision. The formulae for revised tariff had been worked out in October 1995 but did not get the State Government’s approval till April 1997. “Consequently, fare revision proposed in 1996 was approved only in April 1997, resulting in an avoidable loss of revenue of Rs 197.41 crore,” points out the CAG.

Similarly, the Government’s non-approval of a fare revision proposal in October 1997 lead to a revenue loss of Rs 181.49 crore to the MSRTC.

The MSFC presents a laughable picture of financial management.

Under its bill discounting scheme, the MSFC had to recover Rs 88.16 crore on disbursals made in 1995 and 1996. Worse, as the CAG points out, the MSFC “operated the scheme for non capital goods in violation ofprovisions of State Financial Corporations Act… bills for Rs 25.52 crore were discounted even after the Industrial Development Bank of India’s clarification on this issue”.

The lack of adequate security against loans meant that the MSFC could not recover dues from clients. Though Rs 41 crore was overdue from 13 companies, the market value of their securities added up to a mere Rs 8.5 crore. For reasons best known to its management, the MSFC showed special concern to two private companies — Orkay Industries, for which the CAG remarks that the corporation “continued discounting bills without regard to recoveries… the amount overdue was Rs 19.7 crore as principal and Rs 10.98 crore in penal discount charges”, while the Lok Housing and Construction Limited could get bills discounted though it was “engaged in housing activities and was therefore not eligible for any form of finance from MSFC”. The Lok group dues stood at Rs 3.72 crore.

The CAG brings to light a case of utter carelessness where theMSFC disbursed Rs 2 crore to one company but obtained post-dated cheques of repayment from another company. Both companies disclaimed liability and the amount due in March 1998 was Rs 3.17 crore. That’s roughly the amount demanded by government-run or aided schools in rural areas for children with disabilities to keep their institutions functioning.

Losses quantified

MSEB: 419.68 crore

MSRTC: 394.09 crore

MSFC: 192.17 crore