G SRINIVASAN
IN the second full-fledged budget the NDA government announced in Parliament on February 29 this year, Union Finance Minister Arun Jaitley contended that “a new policy for management of government investment in public sector enterprises, including disinvestment and strategic sale, has been approved”. He further expatiated that the government must perforce have to leverage the assets of the central public sector enterprises for generation of resources for investment in new projects and that the government would goad CPSEs to divest individual assets like land, manufacturing units to unlock their asset value for making investment in new projects. Even as Jaitley reassured that the NITI Aayog would identify the CPSEs for strategic sale before long, nothing tangible or worthwhile appeared to have been zeroed in on till date. In order to convince that he meant business, Jaitley even set the budget estimate for disinvestment for the current fiscal at Rs 56,500 crore, comprising of Rs 36,000 crore as disinvestment receipts from CPSEs and Rs 20,500 crore from strategic sale of extant PSUs.
Disinvestment targets
It needs to be noted that since the dawn of this decade the target for disinvestment ranged between a low of Rs 30,000 crore for 2012-13 and to a high of Rs 43,245 crore for 2014-15, while the actual amount realized was a high of Rs 24,349 crore for 2014-15. Last year, the scaled down target of Rs 25,312 crore fetched an actual receipt of Rs 23, 947 crore! What this attests to is that the policy of disinvestment has become a convenient resource-raising tactics to cover the fiscal deficit with scarcely any focus on injecting market discipline or strategic objectives. The government gets confused over its strategic and non-strategic sectors in PSUs with no perspicuous clarity in its policy of disinvestment.
This is supervening at a time when successive governments at the Centre have seldom desisted from reinforcing the country’s temple of modernity as eloquently expressed by the first prime minister of India Jawaharlal Nehru to describe the commanding heights of the Indian economy that the public sector undertakings had come to justify and testify. Even after the advent of economic and trade policy reforms the Narashima Rao government set off in the early 1990s, the role and remit of the PSUs remained undefiled with the PSUs straddling across the real sectors of the economy ranging from manufacturing to services industries to ram home the point that they are too indispensable to be ignored. Yet today it is the PSUs that remain in limbo with the private sector none too zealous to test the waters by putting its money to generate employment and output for reigniting the growth engine that is trundling with steam fuel and not with rocket fuel!
Be that as it may, a report tabled in Parliament in the ongoing budget session, by the Comptroller and Auditor General of India on the grandly titled ‘General Purpose Financial Reports of Central Public Sector Enterprises – Compliance Audit’ does make a dim reading. As on end-March 2015, there were 570 central government public sector enterprises that included 390 government companies, 174 government controlled other companies and six statutory companies. The report CAG undertook to study covered as many as 365 government companies and corporations in which the government of India had an investment of Rs 2,65,499 crore in share capital with outstanding loans amounting to Rs 51,642 crore as on March 31,2015. Compared to the previous year i.e., the last year of the decade-long UPA government (2013-14), investment by the Government of India in equity of CPSEs registered a net increase of Rs 15,512 crore and loans given them decreased by Rs 3110 crore. So in the very first year of its quinquennial tenure, the NDA government pumped more investment into PSUs but reduced loan contracts modestly to make them conform to market realities. The NDA government under Prime Minister Narendra Modi did not disfavor PSUs in their scheme of economic development for the country.
In all the 365 government companies and corporations studied by the CAG, it was found that the total profit earned was by 205 firms which fetched Rs 1, 37,338 crore. Rather disconcertingly, as much as 66 per cent of the total profit i.e., Rs 90,901 crore was contributed by 48 government companies and corporations under three sectors namely, petroleum, coal and lignite and power. This shows the skewed pattern of development and reliance on a limited number of businesses to become profit centres as opposed to the idea of getting profits spread across the spectrum of activities to justify the continued patronage being bestowed upon PSUs by taxpayers’ money.
Out of the massive lot of 365 government companies and corporations studied, 112 government firms declared dividend of Rs 57,749 crore for 2014-15. Out of this dividend receivable by government of India amounted to Rs 33,771 crore which represented just 12.72 per cent return on the total investment of Rs 2,65,499 crore in all government companies and corporations money had been so massively funneled and sunk with meager returns! What is particularly noteworthy is that the government companies under the ministry of petroleum and natural gas contributed Rs 14667 crore representing 25.40 per cent of the total dividend declared by all government companies.
Networth erosion
Yet another depressing feature in the CAG study pertains to the networth erosion due to accumulated loss piled by PSUs over the years. Thus, out of 157 government companies and corporations with accumulated losses, the equity investment in 64 companies had been completely eroded by their piled up losses. As a consequence, the aggregate worth of these firms had become negative to the extent of Rs 74,100 crore as on end-March 2015. Only seen companies out of 64 companies earned profit of Rs 304 crore during 2014-15. It is a paradox that the public sector banks are being pummeled for not being able to recover the loans and advances they made out to private sector tycoons including the beer baron Vijay Mallya. On the other hand, these public sector banks too had a clientele of non-recoverable loans and advances from the perpetually loss-making PSUs which got periodically bailed out by members of state assemblies in the case of state-owned units and by members of Parliament in the case of national PSUs that fall in their constituencies under the alibi that they are too big to fail!
Considering the fact that the country’s banking industry has become the familiar ploy for the manifest misdeeds of units both in the public and private sectors, it is time that the implications of the CAG report are well understood by the authorities so that midcourse corrections can ensue to ensure that the taxpayers’ money is not squandered, policy wonks wryly say.