REPORT of the COMPTROLLER and AUDITOR GENERAL of INDIA on PUBLIC SECTOR UNDERTAKINGS for the Year Ended 31 March 2015
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REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA on PUBLIC SECTOR UNDERTAKINGS for the year ended 31 March 2015 Government of Kerala Report No. 3 of the year 2016 REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA on PUBLIC SECTOR UNDERTAKINGS for the year ended 31 March 2015 Government of Kerala Report No. 3 of the year 2016 http://www.saiindia.gov.in TABLE OF CONTENTS Reference to Particulars Paragraph Page(s) PREFACE … v OVERVIEW … vii-xii CHAPTER I FUNCTIONING OF STATE PUBLIC SECTOR UNDERTAKINGS Introduction 1.1 1 Accountability framework 1.2 1-2 Statutory Audit 1.3 2 Role of Government and Legislature 1.4 2-3 Stake of Government of Kerala 1.5 3 Investment in PSUs 1.6 3-4 Sector-wise investment in PSUs 1.7 4-5 Special support and returns during the year 1.8 5-7 Reconciliation with Finance Accounts 1.9 7-8 Arrears in finalisation of accounts 1.10-1.12 8-9 Placement of Separate Audit Reports 1.13 9 Impact of non-finalisation of accounts 1.14 10 Performance of PSUs as per their latest finalised accounts 1.15-1.18 10-12 Winding up of non-working PSUs 1.19-1.20 12 Accounts Comments 1.21-1.22 13-14 Response of the Government to Audit 1.23 14 Follow up action on Audit Reports 1.24-1.26 14-16 CHAPTER II PERFORMANCE AUDITS RELATING TO GOVERNMENT COMPANIES 2.1 RAISING FOREST PLANTATIONS AND IMPLEMENTATION OF ECOTOURISM PROJECTS BY KERALA FOREST DEVELOPMENT CORPORATION LIMITED Executive Summary ... 17 Introduction 2.1.1 18 Organisational Set up 2.1.2 18 Audit Objectives 2.1.3 18 i Audit Report No. 3 (PSUs) for the year ended 31 March 2015 Reference to Particulars Paragraph Page(s) Scope of Audit 2.1.4 18 Audit Methodology 2.1.5 19 Audit Criteria 2.1.6 19 Audit Findings 2.1.7-2.1.35 19-44 Share of the Company in meeting demand for 2.1.8 19-20 pulpwood and teakwood in the State Land Management 2.1.9-2.1.11 20-22 Plantation activities 2.1.12-2.1.13 22-23 Replanting activities 2.1.14-2.1.17 23-26 Harvesting activities 2.1.18-2.1.23 26-31 Maintenance activities 2.1.24-2.1.27 31-34 Cash crops 2.1.28-2.1.32 35-40 Ecotourism activities 2.1.33-2.1.35 41-44 Conclusion 44 2.2 MATERIAL MANAGEMENT BY KERALA STATE ELECTRICITY BOARD LIMITED Executive Summary … 45 Introduction 2.2.1 46 Organisational set up 2.2.2 47 Scope of Audit 2.2.3 47 Audit Objective 2.2.4 47 Audit Criteria, Methodology and Scope 2.2.5 48 Acknowledgement 2.2.6 49 Audit findings 2.2.7-2.2.20 49-71 Planning for procurement of material 2.2.8-2.2.11 49-54 Procurement of material 2.2.12-2.2.18 54-68 Utilisation of material 2.2.19-2.2.20 68-71 Conclusion 71 2.3 IMPLEMENTATION OF RESTRUCTURED ACCELERATED POWER DEVELOPMENT AND REFORMS PROGRAMME BY KERALA STATE ELECTRICITY BOARD LIMITED Executive Summary … 72 Introduction 2.3.1 73-74 Scope of Audit 2.3.2 74 Audit Objectives 2.3.3 74 Audit Criteria 2.3.4 74 Audit Methodology 2.3.5 74-75 Audit findings 2.3.6-2.3.30 75-95 Physical progress of projects 2.3.7 75-76 Policy formulation and planning 2.3.8-2.3.11 76-78 Fund Management 2.3.12-2.3.14 78-80 ii Table of contents Reference to Particulars Paragraph Page(s) Implementation of projects 2.3.15 80 Execution of Part A projects 2.3.16-2.3.23 80-87 Execution of Part B projects 2.3.24-2.3.30 87-95 Conclusion 96 CHAPTER III COMPLIANCE AUDIT OBSERVATIONS Government Companies Implementation of Greenfield Projects by five PSUs 3.1 97-108 Material procurement in Kerala Agro Machinery 3.2 108-121 Corporation Limited Compliance of Public Sector Undertakings to the provisions 3.3 121-125 of Income Tax Act, 1961 Kerala State Coastal Area Development Corporation Limited 3.4 125-127 Avoidable payment of corporate tax Malabar Cements Limited 3.5 127-129 Avoidable extra expenditure Kerala State Civil Supplies Corporation Limited 3.6 129-131 Avoidable committed liability Kerala State Mineral Development Corporation Limited 3.7 131-133 Loss of revenue Kerala State Electricity Board Limited Loss due to undue favour to cable TV operators 3.8 133-135 Avoidable expenditure 3.9 135-136 Avoidable expenditure 3.10 136-137 Kerala State Beverages (Manufacturing & Marketing) Corporation Limited 3.11 137-138 Avoidable expenditure Statutory Corporations Kerala State Road Transport Corporation 3.12 138-139 Irregular payment of performance allowance iii Audit Report No. 3 (PSUs) for the year ended 31 March 2015 APPENDICES Sl. Reference to Particulars No. Paragraph Page(s) Statement showing investments made by State 1. 1.11 141-146 Government to PSUs whose accounts are in arrear Statement showing financial position and working results of Government Companies and Statutory 2. 1.15 147-159 Corporations as per their latest finalised financial statements/accounts Statement showing list of matured plantations which 3. 2.1.23 160 are not included in the schedule of harvesting 2.1.29, Statement showing loss due to lower productivity of 2.1.30, 4. 161 cash crop plantations 2.1.31 and 2.1.32 5. Statement showing faulty preparation of DPR 2.3.9 162 6. Statement showing deviation from approved DPR 2.3.28 163 Statement showing envisaged benefit on completion of 7. 2.3.30 164-165 the project Statement showing interest paid due to delay in filing 8. 3.3 166 tax return Statement showing interest paid due to shortage in 9. 3.3 167 payment of advance tax Statement showing payment of interest due to non- 10. 3.3 168 payment of quarterly instalments of advance tax iv Preface This Report deals with the results of audit of Government companies and Statutory corporations for the year ended 31 March 2015 and has been prepared for submission to the Government of Kerala under 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. The accounts certified by the Statutory Auditors (Chartered Accountants) appointed by the CAG under the Companies Act are subject to supplementary audit by the officers of the CAG and the CAG gives his comments or supplements the reports of the Statutory Auditors. In addition, these companies are also subject to test audit by the CAG. 3. CAG also conducts audit of Kerala State Road Transport Corporation, Kerala Industrial Infrastructure Development Corporation, Kerala State Warehousing Corporation and Kerala Financial Corporation as per their respective Legislations. 4. The instances mentioned in this Report are those, which came to notice in the course of audit during the year 2014-15 as well as those which came to notice in earlier years but could not be reported in the previous Audit Reports. The matters relating to the period subsequent to 2014-15 have also been included, wherever felt necessary. 5. The audit has been conducted in conformity with the Auditing Standards issued by the CAG. v Overview OVERVIEW 1. Overview of State Public Sector Undertakings The State Public Sector Undertakings (PSUs), consisting of State Government companies and Statutory corporations, are established to carry out activities of a commercial nature, while keeping in view the welfare of the people. Audit of Government companies is governed by Section 619 of the Companies Act, 1956 and Sections 139 and 143 of the Companies Act, 2013. The accounts of the State Government companies are audited by Statutory Auditors, who are appointed by CAG as per the provisions of Section 139 (5) or (7) of the Companies Act, 2013. These accounts are also subject to supplementary audit conducted by CAG, as per the provisions of Section 143(6) of the Companies Act, 2013. Audit of Statutory corporations is governed by their respective legislations. As on 31 March 2015, the State of Kerala had 111 working PSUs (107 companies and 4 Statutory corporations) and 15 non-working PSUs (including five under liquidation), which employed 1.28 lakh employees. The working PSUs registered a turnover of `19194.06 crore as per their latest finalised accounts. This turnover was equal to 4.25 per cent of State GDP indicating the important role played by State PSUs in the economy. The working PSUs had accumulated loss of `198.94 crore as per their latest finalised accounts. Investment in PSUs As on 31 March 2015, the total investment (capital and long term loans) in 126 PSUs was `19933.20 crore. Arrears in accounts 94 working PSUs had arrears of 239 accounts as of 30 September 2015. The extent of arrears was 1 to 19 years. Performance of PSUs An analysis of the latest finalised accounts of all working PSUs in the State revealed that 50 PSUs earned profit of `498.47 crore, 53 PSUs incurred loss of `889.89 crore and four working PSUs had no profit or loss. Five working PSUs have not yet (September 2015) finalised any of their accounts.