Preface Government commercial enterprises, the accounts of which are subject to audit by the Comptroller and Auditor General of India, fall under the following categories: (i) Government companies, (ii) Statutory corporations, and (iii) Departmentally managed commercial undertakings. This Report deals with the results of audit in respect of Government companies and Statutory corporations and has been prepared for submission to the Government of Madhya Pradesh 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. The results of audit relating to departmentally managed commercial undertakings are included in the Report of the Comptroller and Auditor General of India for the year ended 31 March 2009 (Civil)- Government of Madhya Pradesh. Audit of the accounts of Government companies is conducted by the Comptroller and Auditor General of India (CAG) under the provisions of Section 619 of the Companies Act, 1956. In respect of Madhya Pradesh Road Transport Corporation and Madhya Pradesh State Electricity Board which are Statutory corporations, the Comptroller and Auditor General of India is the sole auditor. As per the State Financial Corporations (Amendment) Act 2000, CAG has the right to conduct the audit of accounts of Madhya Pradesh Financial Corporation in addition to the audit conducted by the Chartered Accountants appointed by the Corporation out of the panel of auditors approved by the Reserve Bank of India. In respect of Madhya Pradesh Warehousing and Logistics Corporation, CAG has the right to conduct the audit of its accounts in addition to the audit conducted by the Chartered Accountants appointed by the State Government in consultation with CAG. In respect of Madhya Pradesh Electricity Regulatory Commission, CAG is the sole auditor. The Audit Reports on the annual accounts of all these corporations are forwarded separately to the State Government. The cases mentioned in this Report are those which came to notice in the course of audit during the year 2008-09 as well as those which came to notice in earlier years but were not dealt with in the previous Reports. Matters relating to the period subsequent to 2008-09 have also been included, wherever necessary. Audit have been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. v Overview Overview 1. Overview of Government companies and Statutory corporations CAG shows that the State PSUs’ losses Audit of Government companies is of Rs. 365.76 crore and infructuous governed by Section 619 of the investments of Rs. 22.41 crore were Companies Act, 1956. The accounts of controllable with better management. Government companies are audited by Thus, there is tremendous scope to Statutory Auditors appointed by CAG. improve the functioning and These accounts are also subject to minimise/eliminate losses. The PSUs supplementary audit conducted by CAG. can discharge their role efficiently only if Audit of Statutory corporations is they are financially self-reliant. There is governed by their respective legislations. a need for professionalism and As on 31 March 2009, the State of accountability in the functioning of Madhya Pradesh had 40 working PSUs PSUs. (36 companies and 4 Statutory corporations) and 10 non-working PSUs Quality of accounts (all companies), which employed 0.36 lakh employees. The working PSUs The quality of accounts of PSUs needs registered a turnover of Rs. 20,735.68 improvement. All 27 accounts finalised crore for 2008-09 as per their latest during October 2008 to September 2009 finalised accounts. This turnover was received qualified certificates from equal to 12.76 per cent of State GDP Statutory Auditors. There were 32 indicating an important role played by instances of non-compliance with State PSUs in the economy. Accounting Standards. Reports of Statutory Auditors on internal control of Investments in PSUs the companies indicated several weak As on 31 March 2009, the investment areas. (Capital and long term loans) in 50 PSUs was Rs 17,447.93 crore. It grew by Arrears in accounts and winding up 239.81 per cent from Rs. 5,134.61crore 29 working PSUs had arrears of 63 in 2003-04. Power Sector accounted for accounts as of September 2009. The per cent 83.85 of total investment in arrears need to be cleared by setting 2008-09. The State Government targets for PSUs and outsourcing the contributed Rs 2,940.55 crore towards work relating to preparation of accounts, equity, loans and grants/subsidies during if required. There were 10 non-working 2008-09. companies. As no purpose is served by keeping these PSUs in existence, they Performance of PSUs need to be wound up quickly. During the year 2008-09, out of 40 Discussion of Audit Reports by COPU working PSUs, 26 PSUs earned profit of Rs 113.70 crore and 10 PSUs incurred The Audit Reports (Commercial) for loss of Rs 3,233.83 crore for remaining 2004-05 onwards are yet to be discussed four companies first accounts were not fully by COPU. These four audit reports received. Working PSUs had contained 15 reviews and 69 paragraphs accumulated losses of Rs. 6,497.80 crore. of which three reviews and 22 paragraphs have been discussed. The losses are attributable to various deficiencies in the functioning of PSUs. (Chapter I) A review of three years’ Audit Reports of vii Audit Report (Commercial) for the year ended 31 March 2009 Performance review relating to Government company Madhya Pradesh State Agro Industries Development Corporation Limited The Madhya Pradesh State Agro the Company. Since uniform pricing Industries Development Corporation was applicable to the Company as well Limited (Company) was incorporated as JVs, undue favour was extended to in March 1969 for establishment and Rs. 16.83 crore to JVs and 1.88 crore promotion of agro based industries to the Company. Further, undue and allied activities. The performance favour of Rs. 1.49 crore passed on to audit of the Company for the period JVs due to consideration of same 2004-09 was conducted to assess transportation component for the efficiency and economy of the Company as well as JVs though the activities of trading fertilisers, Company’s own plant was farther than pesticides, promotion and supply of the JVs plant. Ready to Eat food (RTE), Bio fertilisers, cultivation activities at Performance of Bio-Fertiliser Mechanised Agriculture Farm, Babai Plant and Organic Manure Plant (MAF) and implementation of National Biogas Programme. Ability The production by Bio-Fertiliser plant of the Company to meet its financial exceeded the demand leading to commitments alongwith increase in unsold stock. As the self life of Bio- the profitability by realigning the fertiliser is of six months only, the activities were studied besides the Company incurred expenditure of Rs. management and monitoring aspects. 63.52 lakh for retrival of lignite of Rs. 13.94 lakh only. Thus, expenditure of Finance and Performance Rs. 49.58 lakh remained infructuous. The accumulated loss of the Company The Company established Organic stood at Rs 9.90 crore against the paid Manure Plant of 22 MTs of waste per up capital of Rs 3.30 crore as on 31 day at Bhopal out of city wastage March 2007. The Company did not /garbage. The production of manure prepare perspective plan and their was drastically reduced from 1,472 annual operational plans were delayed MTs to 263 MTs as sales did not pick upto seven months. These annual up. Efforts were not made to increase action plans were not compared with sales. actual achievements and thus lacked focus in setting up priorities. Performance of Mechanised Agriculture Farm (MAF), Babai Performance of RTE plant and The Company had 3,251 acres of land Joint Ventures (JVs) at Babai for cultivation since inception The Company failed to approach the of which 2,444 acres land was levelled State Government for procurement of and made fit for cultivation. 231 acres sugar at Public Distribution System land was used for building and roads. (PDS) rates, which had resulted in Despite passage of 38 years, 576 acres avoidable expenditure of Rs. 1.40 was still left as barren land. As a crore. result, there was encroachment on 203 The Woman and Child Development acres land valuing Rs 2.59 crore by Department of the State Government Jhuggi dwellers/villagers. The fixed the sale price of RTE on the Company did not achieve the norms in basis of inflated cost data supplied by respect of cultivation of wheat and vi ii Overview tuar. Harvested crop of wheat & paddy Due to non receipt of completion were sold in open market at less than certificates since 1991-92 to 2008-09, the minimum support price fixed by the Company could not render Government of India/State assistance of Rs 2.64 crore to the Government and thereby a loss of beneficiaries Rs.0.46 crore was incurred. The Company also failed in seed Conclusion and Recommendations cultivation in 2005-06 and incurred The performance of the Company with loss of Rs. 0.77 crore on sale of sub- regard to establishment and promotion standard seeds. The by-product (Husk) of agro based industry was dismal as it produced from wheat cultivation failed to achieve the targets during during 2004-09 was not sold and 2004-08 and it did not venture into hence revenue worth Rs.0.24 crore diversification in Agro based was forgone. industries rather confined only to supply of RTE and farming at Babai. Implementation of National Project The review contained three on Biogas Development recommendations which included National Project on biogas reduction in operation cost , increase development through setting up of in efficiency and establishing system biogas plants and distribution of for realistic cost determination for financial assistance to the beneficiaries RTE.