Chennai, Sep 9 (PTI) Widespread financial mismanagement, tender irregularities and governance deficits across Tamil Nadu’s State Public Sector Enterprises resulted in compliance-related financial implications of Rs 3,298.75 crore, a CAG report has revealed.
The Comptroller and Auditor General of India, in its Compliance Audit Report on Commercial Enterprises for the year ended March 31, 2023, noted that 22 public sector undertakings had suffered complete erosion of capital.
The report was tabled in the State Legislative Assembly on September 8.
The report primarily covers the accounts of SPSEs for the financial year 2022-23. It also includes observations relating to earlier years that could not be reported previously.
According to the report, the combined
net worth of the 22 enterprises was negative at Rs 1,93,132.98 crore against an equity capital of Rs 33,263.46 crore, while the accumulated losses of 36 government companies had crossed Rs 2.26 lakh crore.
The single largest financial irregularity was detected in the Tamil Nadu Civil Supplies Corporation, which incurred a direct revenue loss of Rs 2,518.55 crore and suffered a shortfall in Central subsidy receipts of Rs 218.38 crore, taking the total financial impact to Rs 2,736.93 crore.
Audit scrutiny revealed that TNCSC had violated Government of India directives issued in May 2019 on the appointment of transport contractors for paddy and Custom Milled Rice.
Instead of floating district-wise e-tenders for two years covering five distance slabs, TNCSC floated a single state-level manual tender for five years, covering 21 slabs for distances of up to 750 kilometres.
In January 2020, the contracts were awarded to two wholesale food commodity dealers—Zinc Food Products Private Limited and Arnica Enterprises Private Limited—which did not possess the required turnover and manpower credentials.
The firms qualified solely on the credentials of two directors who held a negligible 0.2 per cent stake in the companies and had resigned from their directorships in December 2019, before the contracts were awarded.
When the five-year contracts were foreclosed in February 2023 following arbitration proceedings, TNCSC resumed departmental movement of commodities at an average rate of Rs 417 per metric tonne for distances of up to 80 kilometres.
This was significantly lower than the contracted rate of Rs 1,392.40 per metric tonne, which was 233 per cent higher and resulted in avoidable transport expenditure of Rs 2,015.53 crore.
TNCSC fixed railway wagon handling charges at Rs 800 per metric tonne against the prevailing average rate of Rs 265.63, resulting in a further financial impact of Rs 503.02 crore.
As TNCSC had not followed the Central guidelines, the State Level Committee failed to fix the Schedule of Rates, prompting the union government to freeze subsidy claims at 2018-19 base levels and resulting in a subsidy shortfall of Rs 218.38 crore.
The state power utility, Tamil Nadu Generation and Distribution Corporation Limited, incurred multi-crore losses due to lapses in billing and procurement, it said.
TANGEDCO incurred an avoidable revenue loss of Rs 385.53 crore between 2020-21 and 2022-23 by short-billing 553 High Tension consumers.
The utility recorded consumption for dedicated feeders at the consumer end instead of at the feeding substations, resulting in 592.34 million units of distribution losses being absorbed by the utility instead of being borne by the consumers.
The power utility incurred avoidable expenditure of Rs 48.94 crore due to delays by its Board Level Tender Committee in finalising a January 2021 tender for AAA Rabbit conductors (distribution cable).
The committee repeatedly deferred proposals at the lowest negotiated rate of Rs 35,341 per kilometre, allowing the tender validity to lapse even as raw material prices rose by 32 per cent. This forced TANGEDCO to re-tender in 2022 at an enhanced price of Rs 67,968 per kilometre.
Additionally, TANGEDCO headquarters officials overpaid Rs 21.49 crore for polymer pin insulators. They procured 11 KV and 22 KV insulators at negotiated unit prices of Rs 256.06 and Rs 516, respectively, despite their regional offices in Tirunelveli and Udumalpet having recently procured the same materials at Rs 147.97 and Rs 442 per unit, respectively.
Treasury and fund management inefficiencies also resulted in additional interest liabilities of Rs 36.30 crore for TNCSC due to unbenchmarked floating interest resets, unsynchronised loan repayments and the drawing of lump-sum loan tranches that remained idle in non-interest-bearing current accounts.
Across other state enterprises, the failure to mandate or monitor auto-sweep facilities resulted in forgone interest of Rs 45.05 crore on idle balances averaging Rs 648.90 crore.
Inadequate term-deposit management resulted in another Rs 21.52 crore in financial impact, including Rs 11.71 crore in avoidable penalties due to premature withdrawals and Rs 6.96 crore in forgone interest from the failure to invest surplus funds in higher-yielding State NBFCs.
Highlighting unviable capital expenditure, the CAG noted that the Tamil Nadu Salt Corporation Limited incurred an unfruitful expenditure of Rs 2.99 crore on procuring a 100-tonne-per-hour salt washery in 2017 without conducting a feasibility study.
The plant operated for barely two-and-a-half months before remaining idle for five years, with its rusted parts subsequently being auctioned as scrap.
Analysing the overall financial health of 73 functioning SPSEs, the report noted that total state investment stood at Rs 50,131.13 crore.
While 37 enterprises earned a combined profit of Rs 2,060.28 crore, 32 incurred combined losses of Rs 16,045.21 crore.
TANGEDCO alone reported losses of Rs 9,192.25 crore, followed by eight state transport undertakings with combined losses of Rs 6,077.86 crore. The power utility’s long-term borrowings of Rs 1,04,165.16 crore accounted for 67.85 per cent of the total debt liabilities of SPSEs.
The audit also highlighted significant corporate governance lapses. PTI JR SSK
