The Comptroller and Auditor General of India (CAG) has asked the state government to consider disinvesting and privatising public sector units that cause losses to the exchequer.
The CAG, in its report on state finances for the year ended on March 2015, revealed that the average return on investment in such public sector units is not more than 0.05% in the past three years while the government paid an average interest of nearly 7.81% on borrowings.
The report, which was tabled in the state legislature on Wednesday, pointed out that as of March 31, 2015, the state government had invested Rs1,10,672 crore in statutory corporations, rural banks, joint stock companies and co-operatives. The average return on this investment was just 0.04% in the past five years, while the government paid average interest rate of 7.55% on its borrowings during 2010-15.
This might be the first instance when the auditing body has made such suggestions to the government. This assumes significance in the wake of the CID probe on misappropriation of funds worth Rs132 crore in Lokshahir Annabhau Sathe Magasvargiya Vikas Mahamandal (Annabhau Sathe Backward Development Corporation) by its chairman, Ramesh Kadam. The corporation was made to provide financing to the members of other backward class (OBC) community.
“There is an immediate need to reduce number of state public sector units as the large number of such enterprises not only engages the productive assets of the government but also promotes inefficiency due to lack of proper monitoring by the state government. Disinvestment and privatization of them should also be considered and actively pursued,” said the report.
The report also showed how the government suffered huge losses by making futile investments worth crores. As of March 31, 2015, the government had invested Rs27,103.15 crore in 21 companies with its share capital of Rs19,889.17 crore and loans worth Rs7,213.98 crore. But these companies are incurring huge losses and by September last year their net accumulated loss amounted to more than Rs17,161.21 crore, it said.
The CAG also suggested that the government should take steps to ensure better value for money in investments. “The working of the state public sector undertakings which are incurring huge losses should be reviewed and a strategy should be worked out to make them viable,” the report pointed out.