Accounts of state PSUs in shambles

Even as the UPA dithers on a disinvestment blueprint for central public sector units,there is a bigger crisis brewing in the states. An FE analysis of 1,100-odd enterprises and statutory bodies under the states domain reveals that almost two out of every three of them have not filed their accounts for yearsin one case,for as long as 37 years! Worse,when the comptroller amp; auditor general of India last tried to audit the accounts of these entities in 2006-07 and 2007-08,it could only find accounting records for a..

Even as the UPA dithers on a disinvestment blueprint for central public sector units,there is a bigger crisis brewing in the states. An FE analysis of 1,100-odd enterprises and statutory bodies under the states domain reveals that almost two out of every three of them have not filed their accounts for yearsin one case,for as long as 37 years!

Worse,when the comptroller amp; auditor general of India CAG last tried to audit the accounts of these entities in 2006-07 and 2007-08,it could only find accounting records for a quarter of them. Kerala is the worst offender: 92 companies in the state have irregular financial accounts,followed by Uttar Pradesh 87,Maharashtra 66,Orissa 62 and Assam 49.

Of these 1,100 entities,around 250 are no longer operational. States and Union territories have invested nearly Rs 3.35 lakh crore 5.6 of GDP in 837 firms that are still operational. Even as most firms have struggled to put their books in order,states have continued to throw good money after bad. In firms that CAG managed to audit,Rs 72,465.57 crore was pumped in via grants and subsidies in the three years preceding the audit.

During his visit to the states,13 th Finance Commission chairman Vijay Kelkar had flagged the huge backlog in the audit of accounts of state PSUs,which receive substantial support as grants in aid,as a disturbing problem that could derail the states move to accrual-based accounting.

In one state,the audit of PSUs are pending from as early as 1992-93. We have come across a PSU whose accounts have not been finalised for the past 37 years. The malaise is widespread across states,with only a handful of them having PSUs with updated and certified accounts. Such a position is extremely detrimental to financial accountability as well as fiscal transparency, Kelkar recently said.

Board for Reconstruction of Public Enterprises chairman Nitish Sengupta expressed alarm at the findings. The cases should be studied and,if they cannot get their accounts in order,they should be shut. For those that are in operation,but still don8217;t file accounts,the respective departments should take action. Stopping the annual grants may be a good idea, he told FE.

When contacted,Kerala industries minister Elamaram Kareem claimed that the state was only infusing money into state PSUs to meet its commitments towards employees and lenders. We have 111 PSUs handled by various departments. The accounts of 42 companies under the industries ministry are up-to-date. We are trying to revive companies that have not been operational for several years. At the same time,we will use the land and other assets of unviable companies for other units, Kareem said.

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The worst performing enterprises are: Orissas Mayurbhanj Textiles,which hasnt filed accounts since 1971; Nagaland Sugar Mills Company and Uttar Pradeshs Gandak Samadesh Kshetriya Vikas Nigam last accounts filed in 1978; Assam Tanneries Ltd and Manipur Tribal Development Corporation Ltd havent filed accounts since 1982.

Comparing the dead weight of pending accounts to Sisyphus perennially rolling the boulder up the hill,Kelkar suggested physical audit of PSUs whose accounts are in arrears. Those PSUs that are working will then at least have their future transactions embodied within a regular framework of accounts. Non-working companies could be wound up. The knotty problem of how to address the missing account years will,however,remain, he added. While the Finance Commission has asked CAG to guide states on resolving this situation,the constitutional panel is considering creating incentives for states to ensure that these companies comply with their statutory obligations in future.

R Bandyopadhyay,former secretary in the department of public enterprises said the countrys slow liquidation process might be to blame. Some companies are in the process of liquidation or merger,while some have technically been closed, he said.