State-owned firms in Punjab see steep hike in losses

Vijay C Roy

Tribune News Service

Chandigarh, March 3

The Punjab Government-owned companies have proved to be a “white elephant” for the state government as their losses have mounted by more than three times in five years, according to a report by the Comptroller and Auditor General (CAG).

The losses of the state-owned companies have touched Rs 2,265.70 crore in 2017-18 from Rs 691.78 crore in 2013-14. There has been substantial increase in losses of Punjab State Civil Supplies Corporation Ltd and Punjab State Grains Procurement Corporation Ltd.

According to latest finalised accounts of 28 state-owned companies, nine earned profit of Rs 52.89 crore and 12 incurred losses of Rs 2,318.59 crore. Out of the remaining seven, three are functioning on ‘no profit no loss’ basis and accounts of four others are awaited.

According to the report, overall negative return on state government investment increased due to heavy losses incurred by companies such as Punjab State Civil Supplies Corporation Ltd (Rs 995.78 crore), Punjab State Grains Procurement Corporation Ltd (Rs 733.91 crore) and Punjab Agro Foodgrains Corporation Limited (Rs 362.63 crore) due to cumulative interest on the outstanding cash credit limit (CCL) repayments on account of non-reimbursement of actual incidentals incurred by these companies for procurement of foodgrain on behalf of the Central government, misappropriation of paddy, damage of wheat stocks, inefficiencies in milling operations, non-recovery of costs from millers, delayed and non-raising of claims on Food Corporation of India and millers.

The state government provides financial support to these companies in the form of equity, loans, grants and subsidies. The total investment of the state government and others in these companies other than the power sector was Rs 27,838.09 crore, comprising equity of Rs 1,281.77 crore and long-term loans of Rs 26,556.32. Out of this, the Punjab Government has an investment of Rs 25,408.22 crore in the 33 state-owned companies comprising equity of Rs 1,157.19 crore and long-term loans of Rs 24,251.03 crore.

Due to the mounting losses, the percentage of return on capital employed (ROCE) decreased substantially to -31.05% in 2017-18 from 34% in 2015-16. The ROCE was not measurable for the year 2016-17 as both the capital employed and the EBIT were negative.

Return on Capital Employed (ROCE) is a ratio that measures the company’s profitability and the efficiency with which its capital is employed. ROCE is calculated by dividing a company’s earnings before interest and taxes (EBIT) by the capital employed.

The top profit-making companies include Punjab Small Industries and Export Corporation Limited (Rs 22.14 crore) and Punjab State Container and Warehousing Corporation Limited (Rs 13.85 crore).