After the Comptroller & Auditor General of India?s (CAG) startling revelation about mis-statement of accounts and non-compliance of corporate governance norms by central public sector enterprises (CPSEs), the ministry of heavy industries is now in damage control mode. It has threatened action against non-complying CPSEs, including cuts in budgetary allocations and lowering ratings of navratna and mini-ratna units.
Talking to FE, minister of state for heavy industries and public enterprises ArunYadav said, ?We have issued strict instructions to all CPSEs that they should adhere to the norms and the memorandum of understanding on their performance. If they don?t do this, budgetary allocations to them may be affected. We may also downgrade mini-ratna and navratna companies in case of irregularities in their functioning.? Navratna and mini-ratna CPSEs do not on government hand outs and downgrading their ratings will affect their ability to raise funds.
In three voluminous reports tabled in Parliament on July 9, CAG had reported irregularities to the tune of more than Rs 1,800 crore in the accounts of CPSEs, including navratnas like NTPC, for year 2007-08. It also found at least 25 companies had either fewer independent directors in the audit committee or the panel held lower number of meetings, contrary to Sebi listing norms and department of public enterprises guidelines on corporate governance.
CPSEs however have washed their hands off the charges made by the CAG and have instead thrown the ball in the government?s court.
?Certain things are beyond our control. For example, appointment of independent directors is done by the government and not by us. How can we be held responsible for government?s inaction? As far as accounts are concerned, we are cautious that no errors happen,? Standing Conference of Public Enterprises (SCOPE) chairman Arup Roy Choudhury said.
Navratna CPSE Coal India Limited (CIL) questioned the irregularities pointed out by CAG. ?All the transactions carried out by CPSEs are checked by the delegated authority and the errors cannot come in the books without passing through them. Whether the irregularities found by CAG are breach of norms could be a matter of debate. Also, why will the management of a public enterprise deviate from norms? It will not get anything by doing so. I can only say that at this point of time, the government action is uncalled for,? CIL chairman Partha S Bhattacharyya said.
Talking about the norms, he said even unlisted CPSEs have to follow the strict guidelines set by DPE. ?We have to submit quarterly report on corporate governance. The chairman of even an unlisted company like us has to be present at all the meetings of the audit committee. This shows that DPE guidelines are tight,? Bhattacharyya said.
In one of its reports, entitled ?Financial Reporting by Public Sector Undertakings?, CAG said NTPC, Mahanagar Telephone Nigam Limited (MTNL), Bharat Sanchar Nigam Limited and sick firms like HMT Watches and National Textiles Corporation had either overstated or understated their books.