CAG: Centre’s returns from capital investments in CPSEs fall sharply

The government’s gains from capital investments in CPSEs seems to be on a perpetual decline, going by a recent audit report by the comptroller and auditor general (CAG).

The consolidated returns on government investment in 53 listed CPSEs fell from 190.24% in 2016-17 to 182.53% in 2017-18 to 159.31% in 2018-19, the CAG observed in a report tabled in Parliament on Tuesday. In fact, the consolidated ROI (annual average rate) had been declining from 469% since 2007-08, the final year of the economic boon in early 2000s.

While this largely reflects the overall economic conditions, it seems that the CPSEs also have specific infirmities, compared with the private sector. An analysis by CAG showed that, when 35 listed CPSEs were compared with the private companies with similar nature of business over the five years to 2018-19, the state-owned firms’ performance was on the lower side in parameters like earnings per share and P/E ratio. Of course, in other parameters like return on equity, and interest coverage ratio, no marked contrast was seen among the two classes of companies.

As on March 31, 2019, 189 loss-making CPSEs had accumulated losses of Rs 1,40,308 crore. Of the 189 CPSEs, 123 CPSEs incurred losses in FY19 amounting to Rs 13,748 crore.

Net worth of 77 out of 189 CPSEs had been completely eroded by accumulated loss and their net worth was either zero or negative. The net worth of these 77 CPSEs was minus Rs 83,394 crore against equity investment of Rs 40,006 crore in these CPSEs as on March 31, 2019.

About 100 CPSEs declared a dividend of Rs 71,857 crore during FY19. Out of this, the dividend received/receivable by central government amounted to Rs 36,709 crore which represented 9.16% return on the total investment by the Centre (Rs 4,00,909 crore) in all government companies and corporations.