Accumulation of huge losses by SPSEs has eroded public wealth: CAG

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The state government has been recommended to review the working of the State Public Sector Enterprises (SPSEs) to either improve their profitability or close their operations.

The Comptroller and Auditor General of India (CAG) in its State Finance Audit Report said that accumulation of huge losses by these SPSEs had eroded public wealth, which is a cause of concern.

 

“The state government needs to review the working of these SPSEs to either improve their profitability or close their operations,” it said.

 

The report said the aggregate paid-up capital and accumulated losses of 16 working state public sector enterprises (SPSEs) as per their latest finalized accounts as on September 30, 2020 were Rs 4,605.73 crore and (-) Rs 2,747.35 crore respectively.

 

Analysis of investment and accumulated losses of these SPSEs revealed that the accumulated losses of seven working SPSEs (Rs 2,159.69 crore) had completely eroded their paid-up capital (Rs 1,147.33 crore).

 

The SPSEs include Meghalaya Government Construction Corporation Limited (MGCCL), Meghalaya Handloom & Handicraft Development Corporation Limited (MHHDCL), Meghalaya Tourism Development Corporation Limited (MTDCL), Meghalaya Transport Corporation (MTC), Mawmluh Cherra Cements Limited (MCCL) and Meghalaya Power Distribution Corporation Limited (MePDCL).

 

Out of the total eroded paid-up capital of Rs 1,147.33 crore, the major portion pertained to MePDCL (73.58 percent) followed by MCCL (17.21 percent) and MTC (8.11 percent).

 

The reasons for under performance of these SPSEs had been highlighted in the previous audit reports.

 

MePDCL had accumulated huge losses because of low revenue realized against the sale of power which was not sufficient to meet even the power purchase cost (including transmission/wheeling charges) mainly due to poor billing and collection efficiency and high power purchase cost.

 

Similarly, despite major capital investment in the MCCL, the company could achieve only 22 percent capacity utilization against the projected capacity utilization of 60 to 75 percent which was mainly on account of excessive machine stoppages, idling of machineries/ equipment and absence of skilled staff.

 

On the other hand, the MTC failed to grow as a major operator in the state public transport system and could not compete with the private players in the state on account of several reasons like, absence of a well thought state transport policy and long term planning for gradual and systematic increase in its share in the state public transport, inability to increase the fleet strength due to the financial constraints, operational inefficiencies and high cost of operations leading to continuous operational losses etc.