Worried over inordinate delay in revival of sick public sector undertakings, the official auditor CAG on Thursday asked the government to develop a new framework to deal with the issue of sickness and also closure of PSUs which cannot be revived.
"The government should consider formulating a new framework to address early identification of sickness in CPSEs and timely formulation of proposals for (their) revival/closure...," said the report of the Comptroller and Auditor General (CAG) which was tabled in Parliament on Thursday.
The new mechanism, it added, should also focus on ensuring better synergy between the various agencies involved in revival or closure exercise and effective monitoring of implementation of the scheme.
Referring to the delay in revival of PSUs the CAG said in certain cases the government has taken 18 years to approval of revival schemes.
"The revival schemes analysed in audit revealed that there were inordinate delays in approval of the schemes as no timeframe was fixed for approval. The delays ranged from one to 18 years," the CAG said.
The CAG also made a case for formulation of solvency laws and appropriate changes in the Companies Bill, 2011, to deal with sickness in the state-owned companies.
Commenting on the proposals in the Companies Bill, 2011, to deal with rehabilitation and closure of sick companies, it said "many policy gaps and legislative deficiencies remain in the restructuring and liquidation framework.
The new law, it suggested, should provide a comprehensive insolvency framework to effectively deal with sick or potentially sick enterprises, including CPSEs.
About 45 public sector companies with accumulated loss of Rs 63,828 crore were sick as on March 2010, according to Public Enterprise Survey.
The report further said that out of a total of 406 CPSEs, equity capital of 67 state-owned companies had been completely eroded by their accumulated losses. Such losses were of the order of Rs 82,477 crore against equity investment of Rs 14,660 crore as on March 31, 2011.