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Report of the Comptroller and Auditor General of India on Public Sector Undertakings for the year ended 31 March 2016 Government of Maharashtra Report No.2 of the year 2017 Report of the Comptroller and Auditor General of India on Public Sector Undertakings for the year ended 31 March 2016 Government of Maharashtra Report No.2 of the year 2017 TABLE OF CONTENTS Particulars Reference to Paragraph Page Preface iii Overview v-viii Chapter – I Functioning of State Public Sector Undertakings 1.1-1.27 1-13 Chapter – II Performance Audit of Government company Maharashtra Tourism Development Corporation 2.1-2.18 15-36 Limited Chapter – III Compliance Audit Paragraphs Government companies City and Industrial Development Corporation of Maharashtra Limited Appointment of IT Consultant 3.1 37-39 Construction of Exhibition Centre at Vashi, Navi Mumbai 3.2 39-43 Mahatma Phule Backward Class Development Corporation Limited, Vasantrao Naik Vimukta Jatis and Nomadic Tribes Development Corporation Limited and Sahitya Ratna Lokshahir Annabhau Sathe Development Corporation Limited Implementation of select schemes 3.3 43-61 Maharashtra Airport Development Company Limited Development of Airports 3.4 61-68 Maharashtra State Electricity Distribution Company Limited Management of R-APDRP related funds 3.5 68-71 Billing and Recovery of revenue 3.6 72-74 Avoidable extra expenditure on purchase of power 3.7 74-75 Maharashtra State Electricity Transmission Company Limited Procurement, repairs and maintenance of transformers 3.8 75-82 Maharashtra State Power Generation Company Limited IT Audit on the implementation of Fuel Management 3.9 82-101 Process Module under SAP-ERP System i Audit Report No.2 of PSUs for the year ended 31 March 2016 Particulars Reference to Chapter – III Paragraph Page Maharashtra State Road Development Corporation Limited Non-recovery of toll from Contractor 3.10 101-103 Cost overrun and wasteful expenditure on flyover project 3.11 103-104 Statutory corporations Maharashtra Industrial Development Corporation Change in purpose of allotment and subletting of plots 3.12 104-108 Undue favour 3.13 108-109 Maharashtra State Road Transport Corporation Loss of revenue 3.14 109-111 Annexures Statement showing investments made by State 1 Government in Public Sector Undertakings whose 1.11 113 accounts are in arrears. Summarised financial position and working results of Government companies and Statutory corporations as 2 1.15 114-119 per their latest finalised financial statements/ accounts. Statement showing the funds received, disbursed and 3 balance of funds in the three companies during the 3.3.3 120 six years period ending 31 March 2016. Statement showing targets and achievements for the 4 period 2010-11 to 2015-16 for MMS, TLS and MSS 3.3.4 121 by MPBCDCL, VNVJNTDCL and SRLABSDCL. Statement showing the subletting charges and penalty 5 recoverable in respect of unauthorised subletting of 3.12.5 122 Maharashtra Industrial Development Corporation. ii Preface This Report deals with the results of audit of 83 Government companies and four Statutory corporations for the year ended 31 March 2016 for submission to the Government of Maharashtra under Section 19 A of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971, as amended from time to time. 2. The accounts of Government companies (including companies deemed to be Government companies as per the provisions of the Companies Act) are audited by the Comptroller and Auditor General of India (CAG) under the provisions of Section 619 of the Companies Act, 1956 and Sections 139 and 143 of the Companies Act, 2013. 3. CAG is the sole Auditor for Maharashtra State Road Transport Corporation, a Statutory corporation and Maharashtra Electricity Regulatory Commission, a regulatory body. As per the State Financial Corporations (Amendment) Act, 2000, the CAG has the right to conduct the audit of accounts of Maharashtra State Financial Corporation in addition to the audit conducted by the Chartered Accountants, appointed by the Corporation from the panel of auditors approved by the Reserve Bank of India. In respect of Maharashtra State Warehousing Corporation, the CAG has the right to conduct the audit of their accounts in addition to the audit conducted by the Chartered Accountants, appointed by the State Government in consultation with the CAG. Audit of Maharashtra Industrial Development Corporation is entrusted to the CAG under Section 19(3) of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 and CAG is the sole Auditor. 4. The instances mentioned in this Report are those, which came to notice in the course of test audit for the period 2015-16 as well as those which came to notice in earlier years, but could not be reported in the previous Audit Reports; matters relating to the period subsequent to 31 March 2016 have also been included, wherever necessary. 5. The audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. iii Overview 1. Functioning of Government companies and Statutory corporations Audit of Government companies is governed by Sections 139 and 143 of the Companies Act, 2013. The accounts of Government companies are audited by Statutory Auditors appointed by Comptroller and Auditor General of India (CAG). These accounts are also subject to supplementary audit conducted by CAG. Audit of Statutory corporations is governed by their respective Legislations. The working results of 87 State Public Sector Undertakings (PSUs) comprising of 83 State Government companies and four Statutory corporations are discussed in this report. The turnover of 65 working PSUs was ` 91,397.69 crore in 2015-16 as per their latest finalised accounts. This turnover was equal to 4.64 per cent of the State Gross Domestic Product indicating the important role played by the State PSUs in the economy. The working PSUs incurred an overall loss of ` 6,734.61 crore in 2015-16 and they had accumulated losses of ` 18,027.42 crore as on 31 March 2016. (Paragraphs 1.1, 1.2, 1.3, 1.15 and 1.16) As on 31 March 2016, the investment (Capital and long term loans) in 87 PSUs was ` 1,75,321.42 crore. It grew by 123.78 per cent from ` 78,346.12 crore in 2011-12 mainly because of increase in investment in power sector. The Government contributed ` 4,157.01 crore towards equity, loans and grants/subsidies during 2015-16. (Paragraphs 1.6 and 1.8) Fifty seven working PSUs had arrears of 129 accounts as of September 2016. The extent of arrears was one to 17 years. There are 22 non-working companies of which two are under liquidation. (Paragraphs 1.10 and 1.12) During the year 2015-16, out of 65 working PSUs, 36 PSUs earned profit of ` 3,097.88 crore and 22 PSUs incurred loss of ` 9,832.49 crore. Three PSUs prepared their accounts on no profit no loss basis and four PSUs were under preparation and had not prepared profit and loss account. The major contributor to profit was Maharashtra State Electricity Transmission Company Limited (` 2,599.88 crore). Heavy losses were incurred by Maharashtra State Power Generation Company Limited (` 8,742.04 crore), Maharashtra State Electricity Distribution Company Limited (` 462.15 crore) and Maharashtra State Road Transport Corporation (` 391.01 crore). (Paragraph 1.16) During the year, the Statutory auditors had given unqualified certificates for 19 accounts, qualified certificates for 33 accounts and adverse certificates (which mean that accounts do not reflect a true and fair view) for one account. (Paragraph 1.20) v Audit Report No.2 of PSUs for the year ended 31 March 2016 2. Performance Audit of Government Company Performance Audit of Maharashtra Tourism Development Corporation Limited was conducted. Highlights of the Audit findings are given below: 2.1 Maharashtra Tourism Development Corporation Limited Executive Summary Maharashtra Tourism Development Corporation Limited (Company) was incorporated under the Companies Act, 1956 in January 1975 as a wholly owned Government Company to promote and develop tourism in the State of Maharashtra and to carry out commercial activities related to tourism. The Company receives financial assistance from the Government of India (GoI) and Government of Maharashtra (GoM) for implementing various schemes. As on 31st March 2016, the Company was operating 20 resorts, three restaurants, one scuba diving centre and one shopping centre. The Company had also leased out 91 units/properties (76 resorts and 15 restaurants). The Company handed over possession of properties on lease for which they had no proper title. As a result, they could not enter into lease agreements and suffered loss. The Company had not framed any criteria for fixation of base price for leasing the properties. As a result, lease rent received by the Company was not commensurate with the investment and revenue of the property. The Company leased out/operated the properties after considerable delay. Consequently, the facilities could not be offered to tourist in addition to the revenue loss of ` 3.53 crore. The Company incurred development expenditure without obtaining any commitment from the lessee for increase in lease rent. The Company may fix responsibility on officials for inaction/delay in operation/leasing of properties. As against the all India average of above 60 per cent during 2011-12 to 2015-16, the occupancy of the Company’s resorts ranged between 42 and 50 per cent. There was declining trend in the occupancy of resorts from 50 per cent in the year 2011-12 to 43 per cent in 2015-16. No rational basis was adopted in fixing/revising the tariff including periodicity. The factors like tariff charged by similar operators in the vicinity, occupancy of the facility, infrastructure available and operational costs were not being considered while fixing the tariff.