State PSUs yield poor returns on government investments

The investments made by the state government on public sector undertakings (PSUs) in the past five years have yielded lacklustre returns.

While the government has invested Rs 2,190.37 crore on statutory corporations, rural banks, joint stock companies and cooperatives by the end of 2010-11, the returns from this investment were negligible on absolute terms.

The latest report on state finances for the year ended March 31, 2011 says the average return on this investment was a meagre 8.44 per cent in the last five years. The return obtained from these PSUs in 2010-11 was Rs 101.58 crore, meaning only 4.64 per cent of the committed investment.

The state government, on the contrary, paid an average interest in the range of 7.39 per cent to 8.18 per cent on its borrowings during 2006-07 to 2010-11.

The returns fetched by the government from these PSU stood at Rs 49.39 crore in 2006-07, Rs 140.93 crore in 2007-08, Rs 252.85 crore in 2008-09 and Rs 250.78 crore in 2009-10.

Of the Rs 101.58 crore received in 2010-11, the share of Orissa Mining Corporation (OMC) was 98.44 per cent of the total return received. The mining PSU alone contributed Rs 100 crore whereas Orissa State Cashew Development Corporation and Industrial Development Corporation accounted for Rs 46 lakh and Rs 31 lakh respectively.

Ironically, two statutory corporations, 77 government companies and 29 cooperative societies where the government had invested 94 per cent of its total investments did not return any dividend to the government. The government had pumped Rs 490.70 crore in two statutory corporations, Rs 1,242.54 crore in 77 government companies and Rs 320.98 crore in 29 cooperative societies.

The major loss making PSUs of the state include Grid Corporation of Orissa Ltd-Gridco (Rs 101.25 crore as on 2008-09), Orissa State Road Transport Corporation-OSRTC (Rs 228.02 crore as on 2007-08), Orissa State Financial Corporation-OSFC (Rs 375.75 crore as on 2009-10) and Orissa Forest Development Corporation-OFDC (Rs 159.20 crore as on 2008-09).

The CAG observed there are 32 working PSUs in the state with the other 51 PSUs being non-working. The 13th Finance Commission recommended the state government to draw up a road map for closure of non-working PSUs by March 2011 which the state government has not done yet.