CAG Flags Inactive, Loss-Making J&K Pses, Recommends Liquidation

(MENAFN- Kashmir Observer) Jammu- The Comptroller and Auditor General of India has recommended that the Jammu and Kashmir government decide early on initiating the liquidation process for inactive public sector enterprises (PSEs), noting that they were neither contributing to the economy nor meeting the objectives for which they were established.

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The CAG, in its report on the functioning of Union Territory Public Sector Enterprises (UTPSEs), also called for remedial measures to improve the performance of loss-making enterprises.

“The UT Government may take an early decision regarding commencement of liquidation process in respect of the inactive PSEs as they are neither contributing to economy nor meeting the objectives for which they were set up”, the CAG report for the period ending March 2023, said.

It flagged the financial performance of public sector enterprises (PSEs) in Jammu and Kashmir, noting that six of the 42 PSEs under its audit jurisdiction were inactive as of March 31, 2023, while 20 enterprises reported losses and 14 had their net worth completely eroded by accumulated losses.

“The UT government may take remedial actions to improve the performance of loss-making PSEs,” it further recommended.

As on March 31, 2023, there were 42 PSEs in Jammu and Kashmir under the CAG's audit jurisdiction, comprising 39 government companies, two statutory corporations and one government-controlled other company.“Of the 39 government companies, six were inactive, including four under liquidation. Overall, 36 PSEs were active, it said.

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The report said 11 PSEs in J&K earned a profit of Rs 1,286.79 crore in their latest finalised accounts, compared with Rs 566.10 crore in 2021-22, while 20 enterprises reported losses totalling Rs 252.53 crore in 2022-23.

The CAG noted that the thrust of PSE investment was on the power sector, which accounted for 77.58 per cent, or Rs 29,879.63 crore, of the total investment of Rs 38,516.67 crore.

The J&K government had invested Rs 5,536.96 crore in PSEs, of which Rs 2,593.54 crore, or 46.84 per cent, was invested in power sector enterprises.

The audit also flagged delays in finalisation and submission of accounts. Of the 34 PSEs whose accounts for 2022-23 were due for audit, only four had presented their financial statements to the CAG by September 30, 2023.

Nineteen PSEs had accounts in arrears for three years or more, while the accounts of the Jammu and Kashmir Road Transport Corporation and the Jammu and Kashmir and Ladakh Financial Corporation were in arrears for two years or more.

The CAG recommended that the government direct enterprises with pending accounts to ensure their early finalisation, noting that delays keep government investments outside legislative oversight.

Read Also CAG Flags ₹12,000 Crore Pending UCs in J&K Till March 2024

The report also pointed to shortcomings in corporate governance.“Of 10 PSEs required to appoint independent directors, only Jammu and Kashmir Bank Limited had appointed the required number during 2022-23”.

Similarly, of 10 enterprises required to constitute Audit Committees and Nomination and Remuneration Committees, only J&K Bank had formed such committees, it said.

Only two of eight eligible PSEs had appointed a whole-time company secretary. In one enterprise, a part-time company secretary performed the function, while five had no company secretary.

Only nine of the 33 enterprises reviewed held the required number of Board meetings during 2022-23, while 24 enterprises did not hold annual general meetings, it said.

The CAG recommended that the government direct the respective administrative departments and PSE boards to ensure compliance with the Companies Act, 2013. The audit also examined corporate social responsibility (CSR) compliance.

Of nine UTPSEs meeting the criteria for undertaking CSR activities, only four had constituted CSR committees and framed CSR policies. Seven enterprises were required to incur CSR expenditure during 2022-23, but only three did.

The CAG recommended that all eligible PSEs frame CSR policies and constitute CSR committees and ensure that required CSR allocations are made and utilised in accordance with the Companies Act and CSR Rules.

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