3 major state PSUs incurred loss of Rs 981 cr in 2016-17: CAG

Three major public sector units, including Karnataka Neeravari Nigam Limited, incurred loss of Rs 981 crore to the state exchequer during 2016-17, according to a Comptroller and Auditor General report.
The report, which was made public today, said the working state PSUs earned a profit of Rs 1,420.49 crore in the aggregate and incurred a loss of Rs 1,265.37 crore as per their latest finalised accounts at the end of September 2017.
The Karnataka Rural Infrastructure Development Corporation Limited made a profit of Rs 109.88 crore.
As per the report, the major loss making units were Karnataka Neeravari (irrigation) Nigam Limited under the Water Resources Department (Rs 476.88 crore), Hubli Electricity Supply Company Limited (Rs 372.73 crore) and Gulbarga Electricity Supply Company Limited (Rs 131.25 crore).

In an example citing the reason for the losses, the audit report said the water resources department had introduced an incentive clause for contractors completing the modernisation of the Bhadra River Canal System.
Though the work was not completed within the stipulated time, the accounts department released the incentive of Rs 10.35 crore to the contractor.

The report said the contractor did not complete 90 per cent of the modernisation work within the single closure period as per tender condition.
"The company released incentive of Rs 10.35 crore for 13 items of work stating that he achieved 90 per cent within the second canal closure period in May/June 2012," it said.

There was another instance of undue financial benefit to a contractor carrying out remodelling of 30 km Shahapur branch canal.
"Premature payment of weightage of Rs 51.58 crore and excess payment of Rs 4.82 crore contrary to tender conditions resulted in extending undue financial benefit to the contractor and potential loss of interest of Rs 6.02 crore on the amount prematurely released," it said.
Cauvery river water sharing has always been a bone of contention between Karnataka and Tamil Nadu. Both the states demand more share in water.
However, the CAG report says the Cauvery Neeravari (irrigation) Nigam Limited lacked the priority in planning for potential oriented works and creation of Field Irrigation Channels (FICs). This resulted in 5,968 hectares of potential oriented work and 42,400.68 hectares of FICs.

These projects should have been completed by 2005 and 2006 respectively as per state water policy. Yet, they are still incomplete even after a lapse of more than 12 years, the report said.
The CAG also noticed deficiencies in preparation of the estimates of the projects like omission of items and incorrect classification due to non-compliance with Karnataka public works department code.
Reviewing the performance of Raichur Thermal Power station unit, the CAG noticed excess consumption of coal of 4.22 lakh tonnes not only resulted in financial loss of Rs 153.45 crore but also impacted the environment as HFO and coal have a direct negative effect on the environment.

An ash pond meant for only bottom ash was filled with 100 per cent fly ash too, the report said.
It said filling of ash pond may threaten premature closure of the plant besides endangering the neighbourhood.
"There was no action plant in place to handle this crisis (ash pond) on a timely basis," the CAG said.