Govt investment in PSUs rise, returns plunge; get a graphic view

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Updated: June 18, 2016 8:29:18 AM

While central government investment, by way of equity, in PSUs has risen to Rs 2,65,499 crore in FY15 from Rs 2,49,987 crore in FY14, as the latest CAG report shows...

Indian rupee vs US dollarWhile central government investment, by way of equity, in PSUs has risen to Rs 2,65,499 crore in FY15 from Rs 2,49,987 crore in FY14, as the latest CAG report shows, returns have fallen from Rs 1,54,484 crore to Rs 1,37,338 crore. (Reuters)

While central government investment, by way of equity, in PSUs has risen to Rs 2,65,499 crore in FY15 from Rs 2,49,987 crore in FY14, as the latest CAG report shows, returns have fallen from Rs 1,54,484 crore to Rs 1,37,338 crore.

This profit still looks quite healthy, but over two-third comes from three areas (petroleum, coal and lignite, and power) where PSUs are a monopoly. For instance, 28.58% of profits come from the petroleum sector where there are no private players at the retail end. Another 20.61% comes from coal. More important, as the CAG points out, 135 companies have a loss of Rs 30,341 crore.Sixty-four of these have completely wiped out their capital with the accumulated losses, leading to a net worth of negative Rs 74,100 crore.

Though the government plans to revive several of these PSUs, most are irremediable. In the case of MTNL, for instance, over 80% of its sales are eaten up by salaries as compared to around 5% in most private sector firms. Another 79 firms, the CAG says, have an interest cover ratio (EBIT to interest expenses) less than 1.

Gr4

Apart from poor financials, a total of 49 PSUs did not even meet corporate governance standards set out by SEBI.

Twenty-nine don’t have the required number of independent directors, 16 don’t have any. Eighteen don’t have the required number of non-executive directors. Other undertakings lacked in other provisions, such as audit committees, training facilities and whistle-blower mechanisms.

It is clear that the situation of these CPSEs is dire, and that it is essential for both, the boards of these undertakings and the supervisory ministry, to work together in a distinct direction; one with a greater emphasis on production efficiency and guideline compliance, to ensure that the production of such enervating results is discontinued.

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