DIMAPUR, SEPTEMBER 21: One of the major Public Sector Undertakings (PSUs) of Nagaland Government, the Kohima Smart City Development Limited (KSCDL), has not submitted its accounts since inception to the Comptroller and Auditor General (CAG) of India for analysis.
In its report for the year ended March 31, 2022, the CAG flags the non-submission of account by KSCDL (since inception on March 24, 2017) and two other PSUs namely, Nagaland State Mineral Development Corporation and Nagaland Hotels Limited, for the financial year 2021-22.
As of the period covered by the audit, there were seven PSUs in Nagaland out of which two were non-working. By definition, all the existing PSUs are Government companies.
The five working PSUs are Nagaland Industrial Development Corporation Limited, Nagaland State Mineral Development Corporation Limited, Nagaland Hotels Limited, Nagaland Handloom & Handicrafts Development Corporation Limited and Kohima Smart City Development Limited.
Nagaland Industrial Raw Materials Supply Corporation Limited and Nagaland Sugar Mill Company Limited are the 2 non-working PSUs.
Arrears in accounts finalisation
Citing the provisions of the Companies Act of 2013, the CAG maintained that the companies are required to finalise their financial statements within six months after the end of the financial year i.e. by September 30.
“Failure to do so may attract penal provisions under Section 99 of the Act. As per the Act, the SPSU and every officer of the SPSU who is at default shall be punishable with fine which may extend up to Rs 1 lakh and in the case of a continuing default, with a further fine which may extend up to Rs 5,000 for every day during which such default continues.
“Moreover, timely finalisation of accounts is important for the State Government to assess the financial health of the PSUs and to avoid financial misappropriation and mismanagement. Persistent delay in finalisation of accounts is fraught with the risk of fraud and leakage of public money going undetected apart from violation of the provision of the Companies Act, 2013”, it reminded.
According to the report, the arrears in accounts of the working PSUs had improved in the fiscal year 2021-22.
“The main reason for increase in arrears was due to non-submission of accounts by Kohima Smart City Development Limited (KSCDL) since its inception (24 March 2017). Further, two PSUs, namely Nagaland State Mineral Development Corporation and Nagaland Hotels Limited, did not submit any account during the year 2021-22.
“The administrative departments, which have the responsibility to oversee the activities of the PSUs, have to ensure that the PSUs finalise and adopt their accounts within the stipulated period. The Principal Accountant General (Audit), Nagaland, had been regularly pursuing the issue with the Chief Secretary of Nagaland and the administrative departments concerned for liquidating the arrears of accounts of PSUs. However, the State Government and the PSUs concerned could not address the issue to clear pendency of accounts of the PSUs in a time-bound manner”, it reported.
Red flags in Govt investment
The auditor also flagged a concern in the matter of Government investment in PSUs. It pointed out that about 30% (Rs 35.15 crore) of the total investment (Rs 118.59 crore) in PSUs was contributed by the State Government.
“However, there was no recorded information about the existence of any specific policy of the State Government regarding payment of minimum dividend by the PSUs. During 2021-22, out of five working PSUs, only one PSU (NSMDCL) recorded profit (Rs 2.50 crore) as per its latest finalised accounts (2018-19). However, no dividend was declared by this PSU”, it pointed out.
According to the report, Nagaland Government had invested Rs 4.28 crore in one PSU (Nagaland Industrial Development Corporation Limited) for which accounts were not finalised. “In the absence of finalisation of accounts and their subsequent audit, it could not be ensured whether the investments and expenditure incurred were properly accounted for and the purpose for which the amount was invested was achieved”, it stated.
Reconciliation with Finance Accounts
The auditor maintained that the PSUs’ figures in respect of equity, loans and guarantees outstanding should agree with those appearing in the Finance Accounts of the State. In case they do not agree, the Finance Department and the PSUs concerned should carry out reconciliation of differences.
However, as per its finding, there were unreconciled differences in the figures of equity (Rs 76.71 crore), and guarantees (Rs 40.62 crore in 2020-21 and Rs 39.75 crore in 2021-22).
“The differences for equity occurred in respect of all the PSUs while differences for guarantee relate to two PSUs. As regards Loan figures, the Finance Department of GoN disburses the loans to various Departments of GoN for different sectoral activities and books the amount sector-wise in the Finance Accounts.
“In turn, the Departments disburse these loans to respective PSUs functioning under their administrative control. Hence, figures of State Government loans provided to PSUs are not available in the State Finance Accounts”, it stated.
Though the Principal Secretary of Finance as well as the Management of the PSUs concerned were apprised regularly about the differences impressing upon the need for early reconciliation, no significant progress was noticed in this regard, it reported.
Debt-to-turnover ratio
The auditor found that in the five-year period between 2017 and 2022, the PSU debt in Nagaland had been more than 10 times of their turnover “indicating acute difficulties in repayment and servicing of debts by the PSUs”.
In the same period, PSU debts registered an overall increase of 6.92% (Rs 4.65 crore) while there was an overall decrease of 6.64% (Rs 0.43 crore) in PSU-turnover during the corresponding period.
It also found that the figures of interest payment by PSUs during 2019-20 to 2021-22 were not consistent with the PSU debts during the corresponding years.
“This was mainly due to non-payment and non-accounting of interest liability against long-term debts by one PSU (NIDCL) during these years. The unaccounted accumulated interest liability of NIDCL as per its latest finalised Accounts (2020-21) as of September 2022 stood at Rs 6.61 crore”, it stated.
(Page News Service)
