CAG raps 11 K'taka PSUs for lapses

As many as 11 public sector undertakings (PSUs) in the state have come in for reprimand from the Comptroller and Auditor General (CAG) for financial lapses and bad business decisions.

In its report for 2004-05, tabled in the legislature recently, the CAG has taken a strong objection to lapses in Karnataka Neeravari Nigam Ltd, Karnataka State Tourism Development Corporation Ltd, Krishna Bhagya Jala Nigam Ltd, Karnataka Soaps and Detergents Ltd, Mysore Sugar Company Ltd, Karnataka Scheduled Castes and Scheduled Tribes Development Corporation Ltd, Karnataka Minorities Development Corporation Ltd, Karnataka State Women's Development Corporation Ltd, Karnataka Backward Classes Development Corporation Ltd, Karnataka Forest Development Corporation Ltd and Karnataka State Industrial Investment and Development Corporation Ltd.

The Karnataka Neeravari Nigam Ltd was set up in 1998 to complete various irrigation projects on a fast track basis by 2003 to utilise the state's share of water awarded under the Krishna Water Disputes Tribunal. According to the CAG report, the company incurred an extra expenditure of Rs 2.18 crore as it failed to utilise the hard rock available from excavation of canal for dam works.

The construction of dam across Tunga river near Gajanur village was awarded to the Mysore Construction Company. The contractor executed 2.34 lakh cubic metre of concrete work and 2.57 lakh cubic metre of rubble.

At the same time, excavation in Upper Tunga canal project were in full swing and over 28 lakh cubic metres of hard rock was available. Though the contract work contained a provision for the issue of rubble from excavation, the company did not divert the rubble to the contractor, resulting in the extra expenditure.

Similarly, the Krishna Bhagya Jala Nigam Ltd was found to have made an excess payment of Rs 40.54 lakh to a contractor by adopting market rates instead of those specified in the schedule of rates, in contravention of the terms of agreement. The CAG has suggested the recovery of the payment.

In case of Karnataka Soaps and Detergents Ltd, the CAG found that the company incurred a loss of Rs 1.76 crore in the sale of 'All Fair' fairness cream. The company had entered into an agreement with Vale Exports Private Ltd, Chennai for marketing the cream.

As per the agreement, the firm was to finalise advertising strategies and media plans, issue post-dated cheques to safeguard the company against closure of the agreement or very low level of sales and sales return in case the products remained unsold.

The company received a blank cheque and another post-dated cheque of Rs 10 lakh from the firm. Audit observed that the company decided to carry out the advertisement by spending Rs 82.35 lakh as the firm expressed its inability to do so though it was the firm's responsibility as per the agreement.

It was found that the company had not conducted a market survey before launching the product. The company procured 21.35 lakh tubes of cream at a cost of Rs 2.01 crore and paid Rs 1.43 crore through letter of credit. However, it managed to sell only 6.21 lakh tubes leaving 15.14 lakh tubes of 'All Fair' fairness cream costing Rs 1.52 crore unsold.

The company did not return the unsold tubes. It could also not recover Rs 82.35 lakh spent on the advertisement.

The company did not encash the blank cheque and another post-dated cheque of Rs 10 lakh. This resulted in a loss of Rs 1.76 crore.

In the case of the Mysore Sugar Company Ltd, it was found the company had failed to claim export incentive of Rs 1.71 crore from the state government for settlement of dues of farmers. Similarly, it raised bonds without prior consent of the government for budgetary support. This move resulted in the locking up of funds raised and consequential loss of interest of Rs 86.84 lakh.

The Karnataka State Industrial Investment and Development Corporation Ltd entered into a joint venture project to develop an IT/BT project at Rajajinagar Industrial Estate. The company was awarded the civil works contract without obtaining the approval of the government. The work was stopped by the government and the delay in obtaining permission resulted in an extra expenditure of Rs 4.20 crore.

The Karnataka Forest Development Corporation Ltd lost Rs 1.14 crore for failing to protect the agave plantation on 701 hectares. The plantation was a total failure owing to attacks by wild boars on the plants and adverse climatic conditions. The CAG has held the company responsible for the loss.

According to the CAG, the Karnataka State Tourism Development Corporation Ltd had failed to prepare annual plans for upgradation and renovation of its Mayura hotels.

The grants received from the Central and state governments were parked in fixed deposits and their utilisation was low. This adversely affected the completion of the projects. The delay in renovation of hotels resulted in the foregoing of revenues of Rs 2.24 crore in 2004-05.

Four boards and corporations operating social welfare schemes for SC/STs, backward classes, minorities and women, were found to have failed in utilising Rs 101.21 crore provided by Centre and state government.