Report of the Comptroller and Auditor General of India on Public Sector Undertakings for the year ended March 2016 Government of Tamil Nadu Report No.7 of 2016 Report of the Comptroller and Auditor General of India on Public Sector Undertakings for the year ended March 2016 Government of Tamil Nadu Report No.7 of 2016 TABLE OF CONTENTS Particulars Reference to Paragraph Page Preface (v) Overview (vii) – (xii) CHAPTER-I Functioning of State Public Sector Undertakings Introduction 1.1 1 Accountability frame work 1.2 - 1.4 2-3 Stake of Government of Tamil Nadu 1.5 3 Investment in State PSUs 1.6 - 1.7 3-5 Special support and returns during the year 1.8 5-7 Reconciliation with Finance Accounts 1.9 7 Arrears in finalisation of accounts 1.10 - 1.12 7-8 Impact of non-finalisation of accounts 1.13 9 Performance of PSUs as per their latest finalised 1.14 - 1.17 9-12 accounts Winding up of non-working PSUs 1.18 12 Comments on Accounts 1.19-1.20 12-13 Response of the Government to Audit 1.21 13 Follow-up action on Audit Reports 1.22 - 1.24 14-16 Coverage of this Report 1.25 16 Disinvestment, Restructuring and Privatisation of 1.26 - 1.27 16-17 PSUs and any reforms in power sector CHAPTER-II Performance Audit relating to Government Company Performance Audit on Industrial Development 2.1 21 Activities of Tamil Nadu Industrial Investment Corporation Limited Executive Summary 21-22 Introduction 2.1.1 - 2.1.2 23 Organisational setup 2.1.3 23 Scope and Audit methodology 2.1.4 23-24 i Audit Report (Public Sector Undertakings) for the year ended 31 March 2016 Particulars Reference to Paragraph Page Audit objectives 2.1.5 24 Audit criteria 2.1.6 24 Audit findings 2.1.7 - 2.1.35 24-43 Planning 2.1.7 – 2.1.8 25 Mobilisation of funds 2.1.9 – 2.1.13 25-28 Sanction and disbursement of loan 2.1.14 – 2.1.25 28-36 Monitoring of assisted units 2.1.26 – 2.1.29 36-38 Recovery performance 2.1.30 – 2.1.33 38-42 Internal control and Internal audit 2.1.34 – 2.1.35 42-43 Acknowledgement 43 Conclusion 43 Recommendations 44 Follow-up IT Audit on the Computerisation of 2.2 45 Tamil Nadu State Marketing Corporation Limited Executive Summary 45-46 Introduction 2.2.1 46 Organisational set up and business process 2.2.2 46 Computerisation 2.2.3 46-47 Previous Audit Coverage 2.2.4 47 Recommendations of the earlier review 2.2.5 47-48 Scope and methodology 2.2.6 48 Audit findings 2.2.7 – 2.2.13 48-57 Conclusion 57-58 CHAPTER-III Compliance Audit Observations 3 Tamil Nadu Industrial Development Corporation Limited Loss of revenue 3.1 61-62 Tamil Nadu Civil Supplies Corporation Diversion of PDS paddy 3.2 62-64 ii Table of contents Particulars Reference to Paragraph Page Tamil Nadu State Transport Corporation (Coimbatore) Limited Avoidable loss of revenue 3.3 64-65 IT Expressway Limited Avoidable expenditure 3.4 66-67 Tamil Nadu Minerals Limited Infructuous expenditure 3.5 67-68 Tamil Nadu Small Industries Development Corporation Limited Loss of revenue 3.6 68-69 Electronics Corporation of Tamil Nadu Limited Unproductive investment 3.7 69-70 Tamil Nadu Transmission Corporation Limited Avoidable extra expenditure 3.8 70-71 Infructuous expenditure due to ill planning 3.9 72-73 Tamil Nadu Generation and Distribution Corporation Limited Avoidable extra expenditure 3.10 73-74 Irregular payment 3.11 74-75 Avoidable expenditure 3.12 76-77 Adherence to Pollution Control Norms in Thermal 3.13 77-91 Power Plants of TANGEDCO ANNEXURES 1. Statement showing investments made by 1.11 95 State Government in PSUs, whose accounts are in arrears 2. Summarised financial position and 1.14 96-103 working results of Government companies and Statutory Corporation as per their latest finalised financial statements/accounts 3. Statement showing Budget and Actuals of 2.1.8 104-105 Tamil Nadu Industrial Investment Corporation Limited for the five years ending 2015-16 iii Audit Report (Public Sector Undertakings) for the year ended 31 March 2016 Particulars Reference to Paragraph Page 4. Statement showing financial position of 2.1.9 106 Tamil Nadu Industrial Investment Corporation Limited for the five years ended 31 March 2016 5. Statement showing working results of 2.1.9 107 Tamil Nadu Industrial Investment Corporation Limited for the five years ended 31 March 2016 6. Statement showing deficiencies in sanction 2.1.17 108-111 and disbursement of loans 7. Statement showing deficiencies in 2.1.29 112-114 monitoring of loans 8. Statement showing recovery of principal 2.1.30 115 and interest by Tamil Nadu Industrial Investment Corporation Limited from the assisted units during 2011-16 9. Statement showing deficiencies in recovery 2.1.30 116-119 of loans 10. Statement showing deficiencies in recovery 2.1.31 120-125 of loans in written off cases 11. Statement showing details of take over of 2.1.33 126 assets of the defaulted units and its disposal during 2011-16 12. Statement showing service rendered and 3.1 127-129 charges collected by TIDCO from its JV companies 13. Statement showing loss of advertisement 3.3 130 revenue 14. Statement showing additional interest cost 3.4 131 15. Photos of poor maintenance of premises 3.7 132 16. Statement showing the levels of SPM at 3.13.3 133 stack in the thermal plants of TANGEDCO 17. Statement showing the SPM/SO2/NOx 3.13.3 134 levels at ambient air of thermal plants 18. Statement showing the fly ash generated 3.13.6 135 and disposed off by the thermal plants 19. Statement showing hazardous waste 3.13.15 136 generated, sold and the balance remaining in the thermal plants of TANGEDCO Glossary of Abbreviations 137-140 iv PREFACE This report deals with the results of audit of Government Companies and Statutory Corporation for the year ended March 2016. The accounts of the 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 Section 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 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. Reports in relation to the accounts of a Government Company or Corporation are submitted to the Government by CAG for laying before State Legislature of Tamil Nadu under the provisions of Section 19-A of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971. In respect of Tamil Nadu Electricity Regulatory Commission, the CAG is the sole auditor. The Audit Report on the annual accounts of Tamil Nadu Electricity Regulatory Commission is forwarded separately to the State Government. 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 reports; matters relating to the period subsequent to 2015-16 have also been included, wherever necessary. The audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. v OVERVIEW 1 Overview of Government Companies and Statutory Corporations Audit of Government Companies is governed by Section 139 and 143 of the Companies Act, 2013. The accounts of Government Companies are audited by Statutory Auditors appointed by the CAG. These accounts are also subject to supplementary audit conducted by the CAG. Audit of Statutory Corporations is governed by their respective legislations. As on 31 March 2016, the State of Tamil Nadu had 68 working PSUs (67 Companies and one Statutory Corporation) and six non-working PSUs (all Companies), which employed 2.91 lakh employees. The State PSUs registered a turnover of ` 99,850.38 crore as per their latest finalised accounts. This turnover was equal to 8.23 per cent of State’s Gross Domestic Product, indicating the important role played by State PSUs in the economy. The PSUs had accumulated losses of ` 80,925.82 crore as per their latest finalised accounts. Investment in PSUs As on 31 March 2016, the investment (capital and long term loans) in 74 PSUs was ` 1,40,677.30 crore. Power sector accounted for 93.21 per cent of total investment and Service sector 2.76 per cent in 2015-16. The Government contributed ` 18,416.05 crore towards equity, loans and grants/subsidies during 2015-16. Performance of PSUs As per latest finalised accounts, out of 68 working PSUs, 41 PSUs earned profit of ` 811.27 crore and 21 PSUs incurred loss of ` 15,684.69 crore. The major contributors to profit were Tamil Nadu Newsprint and Papers Limited (` 253.93 crore), Tamil Nadu Power Finance and Infrastructure Development Corporation Limited (` 108.42 crore), TIDEL Park Limited (` 42.14 crore), Tamil Nadu Industrial Investment Corporation Limited (` 34.98 crore) and Tamil Nadu Magnesite Limited (` 26.65 crore). In respect of Tamil Nadu Civil Supplies Corporation, the loss is compensated by the State Government.