CAG report flags massive losses in UP PSUs; ₹32,393 cr losses, accounts pending up to 41 years

New Delhi/Lucknow: The Comptroller and Auditor General of India (CAG) report has flagged severe financial stress, governance lapses and chronic delays in accounts across State Public Sector Enterprises (SPSEs) in Uttar Pradesh, with 27 firms reporting losses of ₹32,393.08 crore and several operating with eroded net worth.

The report pertains to the functioning of SPSEs in UP for the period ended March 2023.

Losses concentrated in power sector

According to the audit, of the 68 functional SPSEs that submitted financial statements, 39 posted profits of ₹2,169.50 crore, while 27 incurred losses. The top five loss-making entities, Uttar Pradesh Power Corporation Limited, Purvanchal Vidyut Vitran Nigam Limited, Dakshinanchal Vidyut Vitran Nigam Limited, Madhyanchal Vidyut Vitran Nigam Limited and Uttar Pradesh Power Transmission Corporation Limited, accounted for 99.41% of the total losses.

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The net worth of 16 SPSEs has been completely wiped out due to accumulated losses. Dakshinanchal Vidyut Vitran Nigam alone reported a negative net worth exceeding ₹6,000 crore. The turnover (92,696.60 crore) of the 68 functional SPSEs (excluding four SPSEs that had not submitted their first financial statements), as per their latest finalised financial statements, was 4.10 per cent of the Gross State Domestic Product of Uttar Pradesh for the year 2022-23 (22,57,575 crore).

Weak liquidity, debt defaults

Twelve SPSEs had a current ratio below one, indicating insufficient short-term assets to meet liabilities, while six entities defaulted on debt servicing. Uttar Pradesh Jal Vidyut Nigam Limited accounted for the bulk of these defaults.

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Overall investment in 72 functional SPSEs stood at ₹4.12 lakh crore as of March 2023, with the state government contributing 42%. Budgetary support through grants and subsidies rose to ₹28,318.69 crore in 2022-23, while outstanding guarantees increased to ₹46,641.91 crore.

Accounts pending for decades

The audit highlighted a major breakdown in financial reporting. As of September 2023, accounts of 101 SPSEs were in arrears, with delays ranging from one to 41 years. Out of 113 SPSEs, only 10 submitted their financial statements for the 2022-23 period to the CAG within the required timeframe Despite these arrears, the Government of Uttar Pradesh (GoUP) provided ₹10,846.19 crore in budgetary support (equity, loans, grants, and subsidies) to 30 SPSEs, effectively keeping these massive public investments outside the scrutiny of the State Legislature.

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Four of six statutory corporations also failed to place 19 Separate Audit Reports before the State Legislature, some pending for up to six years.

Corporate governance lapses

The CAG noted widespread non-compliance with the Companies Act, 2013:

• 26 of 32 SPSEs had no independent directors
• 10 had no woman director
• 35 did not hold the mandatory four board meetings
• 28 failed to constitute a Nomination and Remuneration Committee
• 18 had improperly constituted audit committees

CSR obligations ignored

Six of nine SPSEs mandated to spend on Corporate Social Responsibility did not allocate or spend any funds, leaving ₹4.61 crore unutilised. None prepared an annual CSR action plan or ensured adequate disclosures.

UPRNNL audit flags financial irregularities

A performance audit of Uttar Pradesh Rajkiya Nirman Nigam Limited found multiple irregularities:

• Excess expenditure of ₹65.80 crore on 99 works
• Non-deposit of ₹641.45 crore interest earned on government funds into the treasury
• Payments of ₹31.72 crore for works not executed
• 34 projects started without technical sanction and 12 without environmental clearance
• Loss of tenders worth ₹1,354.11 crore due to blacklisting and poor documentation
• Work orders worth ₹1,047.67 crore issued through quotations instead of open tenders

Other lapses

The audit also cited undue favour by DMIC Integrated Industrial Township Greater Noida Limited in returning a ₹2 crore bank guarantee after cancelling a contract, and a ₹2.15 crore revenue loss to Uttar Pradesh State Road Transport Corporation due to failure to properly publish a tender.

Sectoral footprint

The turnover of SPSEs was ₹92,696.60 crore, about 4.1% of the state’s Gross State Domestic Product for 2022-23.