maharashtra - report of the comptroller and auditor...

REPORT OF THE COMPTROLLER AND AUDITOR GENERAL

OF INDIA

FOR THE YEAR ENDED 31 MARCH 2004

COMMERCIAL

GOVERNMENT OF MAHARASHTRA

http://cagindia.org/states/maharashtra/2004

REPORT OF THE COMPTROLLER AND AUDITOR GENERAL

OF INDIA

FOR THE YEAR ENDED 31 MARCH 2004

COMMERCIAL

GOVERNMENT OF MAHARASHTRA

i

TABLE OF CONTENTS

Particulars Reference to

Paragraph Page

Preface vii Overview ix-xv

CHAPTER – I

General view of Government companies and Statutory corporations

1 1

Introduction 1.1 1-2

Working Public Sector Undertakings (PSUs) 1.2-1.13 2–8

Reforms in Power Sector 1.14-1.15 9-10

Non-working Public Sector Undertakings (PSUs) 1.16-1.20 10–11

Status of placement of Separate Audit Reports of Statutory corporations in Legislature

1.21 12

Disinvestment, Privatisation and Restructuring of Public Sector Undertakings

1.22 12

Results of audit of accounts of PSUs by Comptroller and Auditor General of India

1.23-1.32 12–14

Internal audit/internal control 1.33 14-15

Recommendations for closure of PSUs 1.34 15

Position of discussion of Audit Reports (Commercial) by the Committee on Public Undertakings (COPU)

1.35 16

619-B Companies 1.36 16

CHAPTER – II

Review relating to Government company

Maharashtra Agro Industries Development Corporation Limited

2 17

Highlights 17– 18

Introduction 2.1 18

Objectives 2.2 18-19

Organisational set up 2.3 19

Scope of Audit 2.4 19

Funding arrangements 2.5 20

Financial position and working results 2.6 20-21

Production 2.7-2.12 21–24

Purchases 2.13-2.15 24-26

Marketing activities 2.16-2.24 26-29

Analysis of sundry debtors 2.25 30

Establishment expenditure 2.26 30-31

Conclusion 31-32

Audit Report (Commercial Audit) for the year ended 31 March 2004

ii


Paragraph Page

CHAPTER – III

Reviews relating to Statutory corporations 3 33

Maharashtra State Electricity Board 33

Fund Management 3.1 33

Highlights 33–34

Introduction 3.1.1 34

Organisational set up 3.1.2 34

Scope of Audit 3.1.3 34-35

Sources and application of funds 3.1.4 35

Revenue 3.1.5-3.1.7 35–37

Management of revenue collection 3.1.8-3.1.11 37-39

Management of banking transactions 3.1.12-3.1.24 39-44

Management of loan transactions 3.1.25-3.1.29 45-46

Conclusion 46-47

Implementation of information technology in the Integrated Bus Reservation System in Maharashtra State Road Transport Corporation

3.2 49

Highlights 49



Scope and methodology of Audit 3.2.3 50

Integrated Bus Reservation System 3.2.4 50-51

Audit observations on IBRS 3.2.5-3.2.13 51–55

System security 3.2.14-3.2.16 55-56

Absence of business continuity plan 3.2.17 56-57

Conclusion 57

Maharashtra State Financial Corporation 3.3 59

Defaults and recovery performance 59

Highlights 59-60



Scope of Audit 3.3.3 60-61

Financial position and working results 3.3.4 61

Procedure for financial assistance 3.3.5 61–62

Sanction and disbursement of loan 3.3.6-3.3.14 62–67

Recovery performance 3.3.15-3.3.20 67–74

Conclusion 74

Table of contents

iii


Paragraph Page

CHAPTER – IV

Transaction audit observations relating to Government companies and Statutory corporations

4 75

Government companies 75

City and Industrial Development Corporation of Maharashtra Limited

75

Loss of revenue 4.1-4.1.6 75– 81

Purchase of luxurious cars 4.2 81

Maharashtra Film, Stage and Cultural Development Corporation Limited

82

Irregular financial assistance to a private firm 4.3 82-83

Irregularities in production of Superstar dhamaka 4.4 83-84

Haffkine Bio-Pharmaceuticals Corporation Limited 84

Non surrender of unutilised lease premises 4.5 84-85

Maharashtra State Road Development Corporation Limited

85

Consultancy contract 4.6 85-86

Construction of Nagpur-Sinner-Ghoti-Mumbai Road 4.7 86-87

Payment of idling charges 4.8 87-88

Toll collection contract 4.9 88-89

Maharashtra State Textile Corporation Limited 89

Implementation of Voluntary Retirement Scheme 4.10 89-90

General 90

Delay in finalisation of accounts by working Government companies

4.11 90-93

Statutory corporations 93

Maharashtra State Electricity Board 93

Bulk discount to industrial consumers 4.12 93-94

Non recovery of service line charges 4.13 94-95

Procurement of 630 KVA distribution transformers 4.14 95

Lack of transparency in procurement of transformers 4.15 96

Maharashtra State Road Transport Corporation 97

Investment of contributory provident fund and gratuity fund

4.16 97-98

Provision of buses to a political party 4.17 98

Accident compensation 4.18 98-99

Lack of transparency in procurement of tyres and tubes 4.19 99-100

Procurement of tarpaulin 4.20 100-101

Audit Report (Commercial Audit) for the year ended 31 March 2004

iv


Paragraph Page

Maharashtra Industrial Development Corporation 101

Leasing of buildings 4.21 101–102

Construction of common effluent treatment plant 4.22 102-103

Payment of intermediary charges 4.23 103

Allotment of plots 4.24 104

Construction of flatted building at Satpur 4.25 104-105

General 105

Follow up action on Audit Reports 4.26 105-106

Response to Inspection Reports, Draft paras and reviews

4.27 107

Annexures

v

Sl. No.

Annexures Page No.

1 Statement showing particulars of up-to-date paid-up capital, equity, loans received out of budget and loans outstanding as on 31 March 2004 in respect of Government companies and Statutory corporations

111-119

2 Summarised financial results of Government companies and Statutory corporations for the latest year for which accounts were finalised

120-126

3 Statement showing grants and subsidy received/receivable guarantees received, waiver of dues, loans on which moratorium allowed and loans converted into equity during the year and guarantees outstanding at the end of March 2004

127-129

4 Statement showing financial position of working Statutory corporations

130-134

5 Statement showing working results of working Statutory corporations

135-138

6 Statement showing operational performance of working Statutory corporations

139-143

7 Statement showing paid-up capital, investment and summarised working results of 619-B companies as per their latest finalised accounts

144

8 Statement showing the financial position and working results of Maharashtra Agro Industries Development Corporation Limited

145-146

9 Statement showing dealerwise amount recoverable during last three years up to 2003-04 (January 2004) vis-à-vis amount of bank guarantees submitted but not encashed

147

10 Statement showing sources and Application of funds of Maharashtra State Electricity Board during 1999-2004

148

11 Statement showing the financial position and working results of Maharashtra State Financial Corporation

149-150

12 Statement showing delay in finalisation of accounts and holding of Annual General Meetings

151-152

13 Status of action taken on the cases of persistent irregularities pertaining to Government Companies and Corporations appeared in the Report of the Comptroller and Auditor General of India for the years 1999-2000 to 2002-03 (Commercial) - Government of Maharashtra

153-155

14 Statement showing the department-wise outstanding inspection reports (IRs)

156

15 Statement showing the department-wise draft paragraphs/reviews to which replies were awaited

157

vii

PREFACE

Government commercial concerns, the accounts of which are subject to audit by the Comptroller and Auditor General of India, fall under the following categories:

?? Government companies,

?? Statutory corporations, and

?? Departmentally managed commercial undertakings.

2. This report deals with the results of audit of Government companies and Statutory corporations including Maharashtra State Electricity Board and has been prepared for submission to the Government of Maharashtra under Section 19A of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971, as amended from time to time. The results of audit relating to departmentally managed commercial undertakings are included in the Report of the Comptroller and Auditor General of India (Civil) – Government of Maharashtra.

3. Audit of the accounts of Government companies is conducted by the Comptroller and Auditor General of India (CAG) under the provisions of Section 619 of the Companies Act, 1956.

4. In respect of the Maharashtra State Road Transport Corporation and Maharashtra State Electricity Board, which are Statutory corporations, CAG is the sole auditor. As per State Financial Corporations (Amendment) Act, 2000, CAG has the right to conduct the audit of accounts of Maharashtra State Financial Corporation in addition to the audit conducted by the Chartered Accountants, appointed by the Corporation out of the panel of auditors approved by the Reserve Bank of India. In respect of Maharashtra State Warehousing Corporation, CAG has the right to conduct the audit of accounts in addition to the audit conducted by the Chartered Accountants, appointed by the State Government in consultation with CAG. The audit of accounts of Maharashtra Industrial Development Corporation was entrusted to the CAG under section 19 (3) of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 for a period of five years up to 2006-07. In respect of Maharashtra Electricity Regulatory Commission, CAG is the sole auditor. The Audit Reports on the annual accounts of all these Corporations/Commission are forwarded separately to the State Government.

5. The cases mentioned in this Report are those which came to notice in the course of audit during the year 2003-04 as well as those which came to notice in earlier years but not dealt with in the previous Reports. Matters relating to the period subsequent to 2003-04 have also been included, wherever necessary.

ix

OVERVIEW

1. General view of Government companies and Statutory corporations

As on 31 March 2004, the State had 81 Public Sector Undertakings (PSUs) comprising of 76 Government companies and five Statutory corporations, as against 71 PSUs as on 31 March 2003. Out of 76 Government companies, 55 were working Government companies, while 21 were non-working Government companies. All the five Statutory corporations were working corporations.

(Paragraph 1.1)

The total investment in working PSUs was Rs.21,733.38 crore as on 31 March 2004 as against Rs.17,808.73 crore as on 31 March 2003. The total investment in non-working PSUs was Rs.265.29 crore and Rs.213.20 crore during the same period.

(Paragraphs 1.2 and 1.16)

The budgetary support in the form of capital, loans, and grants/subsidies disbursed to the working PSUs decreased from Rs.1,798.55 crore in 2002-03 to Rs.890.28 crore in 2003-04. The State Government guaranteed loans aggregating Rs.2,223.76 crore to working PSUs during 2003-04. The total amount of outstanding loans guaranteed by the State Government to working PSUs as on 31 March 2004 was Rs.9,412.72 crore.

(Paragraph 1.5)

Nine working Government companies and four working Statutory corporations finalised their accounts for the year 2003-04. The accounts of the remaining 46 working Government companies and one working Statutory corporation were in arrears for periods ranging from one to 14 years as on 30 September 2004. The accounts of 13 non-working Government companies were in arrears for periods ranging from one to 18 years as on 30 September 2004.


According to the latest finalised accounts, nine Government companies and two Statutory corporations earned aggregate profit of Rs.43.25 crore and Rs.1.61 crore respectively. Against this, 41 working Government companies and three Statutory corporations incurred aggregate loss of Rs.622.81 crore and Rs.525.93 crore respectively as per their latest finalised accounts. Of the loss incurring working Government companies, 12 companies had accumulated losses aggregating Rs.1,473.60 crore, which exceeded their aggregate paid-up capital of Rs.290.87 crore. Of the three loss incurring

Audit Report (Commercial) for the year ended 31 March 2004

x

Statutory corporations, two Statutory corporations had accumulated losses of Rs.1,525.48 crore, which exceeded their paid-up capital of Rs.720.07 crore.

(Paragraphs 1.7,1.9 and 1.11)

Even after completion of five years of their existence, the individual turnover of 16 working and four non-working Government companies was less than rupees five crore in each of the preceding five years as per their latest finalised accounts. Further, two Government companies (both working), had been incurring losses for five consecutive years as per their latest finalised accounts, leading to negative net worth. As such, the Government may either improve the performance of these 22 Government companies or consider their closure.

(Paragraph 1.34)

2 Review relating to Government company

2 Maharashtra Agro Industries Development Corporation Limited

Maharashtra Agro Industries Development Corporation Limited was incorporated in December 1965 to assist, promote and develop agro industries and its connected activities in Maharashtra. The Company has been incurring operational losses since 2000-01. The operations relating to animal feed and fruits and vegetables processing factory at Nagpur continue to be a drag on profits of the Company. The idle labour cost in NPK factories has been affecting adversely the profitability of the Company. Some of the important observations made in the review were as under:

Capacity utilisation of fruits and vegetables processing factory at Nagpur was far below the break-even point resulting in loss of Rs.5.09 crore during 1999-2004.

(Paragraph 2.10)

In the entrustment of fruit processing plants at Katol and Morshi valued at Rs.9.75 crore to a private party, the agreement was silent on the action to be taken in the event of default in redemption of preference shares and payment of dividend. The party was allowed to raise loans against the assets without ensuring that the funds were fully invested in the plant and not diverted.

(Paragraph 2.11)

The Company failed to avail of cash rebate of 18 per cent fully in purchase of fertilisers despite being attractive. This has resulted in loss of Rs.44 lakh even after allowing interest on cash credit.

(Paragraph 2.14)

Overview

xi

Advertising contracts worth Rs.1.81 crore were awarded during 2002-03 to a single firm without calling for tenders, thus, violating the norms of transparency. Expenditure of Rs.41.10 lakh on advertisement proved infructuous besides affecting the Company's image due to non sale of advertised products.

(Paragraph 2.24)

3. Reviews relating to Statutory corporations

Maharashtra State Electricity Board

3.1 Fund Management The fund inflow of the Board mainly comprises revenue from sale of power, equity contribution and loans from State Government, banks and financial institutions, subsidy/grants from Sate Government. The fund outflow is by way of expenditure on power and fuel, interest payment, establishment, operation and maintenance works, repayment of loans and capital assets. There was deterioration in collection of revenue. The Board was lax in initiating legal action for recovery of arrears. Delayed remittances by banks, unnecessary retention of large balances in collection accounts and delay in realisation of revenue on inter-state sales resulted in loss of interest. Non redemption of costlier loans, payment of commitment charges and penal interest on undrawn loans contributed to higher cost of borrowing. Some of the important observations made in the review were as under:

Due to delayed remittances by banks between headquarters and field offices, the Board suffered interest loss of Rs.1.33 crore.

(Paragraphs 3.1.12 and 3.1.13)

Short recovery of security deposits of Rs.31.66 crore from consumers resulted in interest loss of Rs.3.48 crore per annum.

(Paragraph 3.1.19)

Failure to take full advantage of rebate offered by National Thermal Power Corporation led to loss of Rs.7.34 crore.

(Paragraph 3.1.23)

The Board has not drawn loans as per drawal schedule in 109 out of 138 cases during 1999-2004 which resulted in payment of commitment charges of Rs.8.45 crore to Power Finance Corporation.

(Paragraph 3.1.27)


xii

3.2 Implementation of information technology in the Integrated Bus Reservation System in Maharashtra State Road Transport Corporation

The Maharashtra State Road Transport Corporation has an online passenger reservation system known as Integrated Bus Reservation System (IBRS). The IBRS, an online wide area networking system, had poor networking, operating, application and database security features and was hence vulnerable to unauthorised access and data/source code modification. These deficiencies had security implications in the absence of audit trails, system logs. Unauthorised business rule having bearing on the revenues of the Corporation was incorporated in the software. The database was not designed to capture critical data for grant of various concessions and validation checks were inadequate. Some of the important observations made in the review were as under:

The Corporation did not invite open tenders for procurement of hardware.

(Paragraph 3.2.5)

There was under realisation of revenue of Rs.16.50 crore due to incorporation of unauthorised computation rules.

(Paragraph 3.2.6)

Assignment of common identity for all users instead of having a unique identity for each user rendered the system vulnerable to misuse.

(Paragraph 3.2.14)

Maharashtra State Financial Corporation

3.3 Defaults and recovery performance

Maharashtra State Financial Corporation was established in August 1962 with main objective to accelerate industrial growth by providing financial assistance to small and medium scale industries. The Corporation incurred losses continuously during 1999-2004 mainly due to slackness in recovery of its dues. Net worth of the Corporation was negative since 2000-01. Due to slackness in recovery of its dues, the Corporation’s ability to finance units was seriously impaired and disbursement of loans declined from Rs.46.66 crore in 1999-2000 to Rs.1.57 crore in 2003-04.

Loans were sanctioned to unviable projects. Disbursements were made without ensuring compliance with vital conditions necessary to safeguard the Corporation’s interests. Effective post disbursement inspection and monitoring to identify units that were likely to turn unviable was not done. The Corporation did not safeguard its interests by invoking Section 29 of SFC Act and personal guarantees of promoters/directors. Some of the important observations made in the review were as under:

Overview

xiii

Due to slackness in recovery of its dues, the Corporation’s ability to finance units was seriously impaired and disbursement of loans declined from Rs.46.66 crore in 1999-2000 to Rs.1.57 crore in 2003-04.

(Paragraph 3.3.6)

There was frequent dishonour of cheques in 412 live loan accounts. But, cases under Section 138 of Negotiable Instruments Act were not filed in 356 accounts with overdues of Rs.283.17 crore.

(Paragraph 3.3.19)

There were 1,066 cases under the category of non-performing assets for more than two years. But, the Corporation did not invoke Section 29 of State Financial Corporations Act to take over possession of assets of the defaulters. The outstanding dues in these cases were Rs.365.76 crore. In 119 out of 210 cases involving dues of Rs.78.74 crore, the Corporation did not invoke personal guarantees obtained from promoters/directors.

(Paragraph 3.3.20)

4 Transaction audit observations

Transaction audit observations included in the Report highlight deficiencies in the management of PSUs, which resulted in serious financial implications. The irregularities pointed out are broadly of the following nature:

?? Imprudent investment/blocking of fund amounting to Rs.23.60 crore in four cases due to imprudent investment decisions.

(Paragraphs 4.16, 4.22, 4.24 and 4.25)

?? Excessive, irregular and extra avoidable expenditure amounting to Rs.13.32 crore in five cases.

(Paragraphs 4.2,4.3,4.4,4.5 and 4.23)

?? Loss of revenue of Rs.86.90 crore in three cases due to irregularities in allotment of plots of land and bulk discount to industrial electrical consumers.

(Paragraphs 4.1, 4.12 and 4.13)

?? Excess/irregular payment of Rs.4.78 crore in one case made to staff on account of implementation of voluntary retirement scheme.

(Paragraph 4.10)


xiv

?? Violation of contractual obligations and undue favours to contractors resulting in loss of Rs.13.81 crore in eight cases.

(Paragraphs 4.6,4.7,4.8,4.9,4.14,4.15,4.19 and 4.20)

?? Non recovery of dues amounting to Rs.9.64 crore in two cases.


?? Interest payment of Rs.5.08 crore on account of delayed payment of accident compensation claims.

(Paragraph 4.18)

Gist of some of the important audit observations is given below:


By charging lease premium less than market rates, under recovery of service charges and allowing excess discount, the Company passed on undue benefits of Rs.32.60 crore to a private builder, co-operative housing societies, school trust and others.

(Paragraph 4.1)


The Company extended irregular financial assistance of Rs.8.03 crore to a private firm in contravention of the agreement. The Company is also stuck with a liability of Rs.4.50 crore due to drawal of money by the proprietor of the private firm from joint bank account.


Maharashtra State Road Development Corporation Limited

The Company incurred infructuous expenditure of Rs.7.97 crore due to non finalisation of basic design relating to type of link.

(Paragraph 4.6)

Maharashtra State Textile Corporation Limited

The Company incurred extra expenditure of Rs.4.78 crore in implementation of voluntary retirement scheme.

(Paragraph 4.10)

Overview

xv


Due to improper formulation of bulk discount scheme, the Board suffered loss of revenue of Rs.53 crore during 2000-03.

(Paragraph 4.12)

Maharashtra State Road Transport Corporation

The Corporation is liable to bear losses due to injudicious investment of Rs.16.04 crore made by its contributory provident fund and gratuity fund trust.

(Paragraph 4.16)

The Corporation failed to discharge its statutory obligation to make timely payment to accident compensation claimants.

(Paragraph 4.18)

Maharashtra Industrial Development Corporation

Non collection of premium in terms of Memorandum of Understanding from a firm resulted in outstanding dues of Rs.9.37 crore.

(Paragraphs 4.21)

1

Chapter-I

1. General view of Government companies and Statutory corporations

Introduction

1.1 As on 31 March 2004, there were 76 Government companies (55 working companies and 21 non-working companies?) and five working Statutory corporations as against 66 Government companies (48 working companies and 18 non-working companies) and five working Statutory corporations as on 31 March 2003 under the control of the State Government. During the year 2003-04, ten? new companies came under the audit purview of Comptroller and Auditor General of India (CAG). In addition, the State had formed Maharashtra Electricity Regulatory Commission whose audit is also being conducted under Section 104(2) of the Electricity Act, 2003? by the CAG. The accounts of the Government companies (as defined in Section 617 of the Companies Act, 1956) are audited by Statutory Auditors who are appointed by the CAG as per provision of Section 619(2) of the Companies Act, 1956. These accounts are also subject to supplementary audit conducted by the CAG as per provisions of Section 619 of the Companies Act, 1956. The audit arrangements in respect of Statutory corporations are as shown below:

Sl. No.

Name of the corporation

Authority for audit by the Comptroller and Auditor General

of India

Audit arrangement

1 2 3 4

1. Maharashtra State Electricity Board

Under Rule 14 of the Electricity (Supply) (Annual Accounts) Rules, 1985 read with section 185(2)(d) of the Electricity Act, 2003?

Sole audit by CAG

2. Maharashtra State Road Transport Corporation

Section 33(2) of the Road Transport Corporations Act, 1950

Sole audit by CAG

3. Maharashtra State Financial Corporation

Section 37(6) of the State Financial Corporations Act, 1951

Audit by Chartered Accountants and supplementary audit by CAG

?Non-working companies/corporations are those which are defunct and under the process of liquidation/closure/merger etc. ? Sl. No.A-26,27,28,29,30,31,32,33,54 and 55 of Annexure-2. ? Erstwhile Electricity Regularity Commission Act, 1998 replaced by the Electricity Act, 2003. ? The earlier provision of Section 69(2) of the Electricity (Supply) Act, 1948 was repealed by the Electricity Act, 2003.


2

1 2 3 4

4. Maharashtra State Warehousing Corporation

Section 31(8) of the State Warehousing Corporations Act, 1962

Audit by Chartered Accountants and supplementary audit by CAG

5. Maharashtra Industrial Development Corporation

Maharashtra Industrial Development Act, 1961 and Section 19 (3) of CAG’s (Duties, Powers and Conditions of Service) Act, 1971

Sole audit entrusted by the State Government to CAG up to 2006-07.

Working Public Sector Undertakings (PSUs)

Investment in working PSUs

1.2 The total investment? in 60 working PSUs (55 Government companies and five Statutory corporations) at the end of March 2004 as against 53 working PSUs (48 Government companies and five Statutory corporations) at the end of March 2003 was as follows: (Rupees in crore)

Investment in working PSUs Year

Number of working

PSUs Equity Share

application money

Loans? Total

2002-03 53 4,749.37 123.72 12,935.64 17,808.73

2003-04 60 4,556.01? 461.72? 16,715.65 21,733.38

The analysis of investment in working PSUs is given in the following paragraphs.

Sector wise investment in working Government companies and Statutory corporations

The investment (equity and long term loans) in various sectors and percentage thereof at the end of 31 March 2004 and 31 March 2003 are shown below in the pie charts:

? Investment by way of equity and share application money by State Government is Rs.5,017.93 crore whereas as per finance accounts 2003-04 the amount is Rs.4,824.40 crore. The difference is under reconciliation. ?Long-term loans mentioned in paras 1.2, 1.3, 1.4 and 1.16 are excluding interest accrued and due on such loans.

Chapter-I - General view of Government companies and Statutory corporations

3

Investment as on 31 March 2004 (Rupees in crore)

Power13,239.56

(60.92)

Others489.07(2.25)

Construction5,112.34(23.52)

Textile524.19(2.41)

Agricultre & Allied252.97(1.16)

Development of Weaker Sections240.35(1.11)

Area Development

79.68(0.37)

Transport830.43(3.82)

Finance778.51(3.58)

Forest186.28(0.86)

(Figures in brackets indicate percentage of investment)

Investment as on 31 March 2003 (Rupees in crore)

Power13,679.81(76.81)

Others334.49(1.88)

Construction1,098.06

(6.17)

Textile630.93(3.54)

Agricultre & Allied116.37(0.65)

Development of Weaker Sections213.29(1.20)

Area Development

77.95(0.44)

Transport689.43(3.87)

Finance778.51(4.37)

Forest189.89(1.07)

(Figures in brackets indicate percentage of investment)


4

Working Government companies

1.3 The total investment in working Government companies at the end of March 2003 and March 2004 was as follows:

(Amount: Rupees in crore)

Investment in working Government companies Year

Number of working

Government companies

Equity Share application money

Loans Total

2002-03 48 677.26 123.72 1,720.19 2,521.17

2003-04 55 819.88 4.45 6,021.49 6,845.82

As on 31 March 2004, the total investment in working Government companies comprised 12.04 per cent of equity capital and 87.96 per cent of loans as compared to 31.77 per cent of equity capital and 68.23 per cent of loans as on 31 March 2003.

The summarised statement of Government investment in working Government companies in the form of equity and loans is given in Annexure-1.

Working Statutory corporations

1.4 The total investment in five working Statutory corporations at the end of March 2003 and March 2004 was as follows:

(Rupees in crore)

2002-03 2003-04 Name of corporation Capital Loans Capital Loans

Maharashtra State Electricity Board 3,464.62 10,215.19 3,464.62 9,774.94 Maharashtra State Road Transport Corporation

536.14 153.28 657.43 173.00

Maharashtra State Financial Corporation 62.64 715.88 62.64 715.88 Maharashtra State Warehousing Corporation

8.71 --- 8.71 22.75

Maharashtra Industrial Development Corporation (MIDC)

---? 131.10 ---? 7.60

Total 4,072.11 11,215.45 4,193.40 10,694.17

The summarised statement of Government investment in working Statutory corporations in the form of equity and loans is given in Annexure-1.

? There is no investment of State Government by way of share capital or loan in MIDC. However, the land is acquired by the State Government and handed over to MIDC for development activities.


5

Budgetary outgo, grants/subsidies, guarantees, waiver of dues and conversion of loans into equity?

1.5 The details regarding budgetary outgo, grants/subsidies, guarantees issued, waiver of dues and conversion of loans into equity by State Government to working Government companies and working Statutory corporations are given in Annexures-1 and 3.

The budgetary outgo in the form of equity capital, loans and grants/subsidies from the State Government to working Government companies and working Statutory corporations for the three years up to 2003-04 are given below: (Amount : Rupees in crore)

2001-2002 2002-2003 2003-2004

Companies Corporations Companies Corporations Companies Corporations

Particulars

No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt.

Equity capital outgo from budget

8 20.63 1 132.91 5 7.09 - - 5 10.35 1 121.29

Loans given from budget

5 74.59 1 522.29 6 115.10 1 179.64 5 7.23 - -

Other grants/ subsidy

5 53.53 1 1,349.41 8 641.76 2 854.96 6 17.32 1 734.09

Total outgo 148.75 2,004.61 763.95 1,034.60 34.90 855.38

During the year 2003-04, the Government had guaranteed loans aggregating Rs.2,223.76 crore, obtained by seven working Government companies (Rs.1,064.99 crore) and one Statutory corporation (Rs.1,158.77 crore). The guarantees in respect of outstanding loans decreased from Rs.12,921.88 crore at the end of March 2003 obtained by 15 working companies (Rs.2,916.92 crore) and two Statutory corporations (Rs.10,004.96 crore) to Rs.9,412.72 crore? at the end of March 2004 obtained by 11 working companies (Rs.4,184.01 crore) and two Statutory corporations (Rs.5,228.71 crore). There was no case of default in repayment of guaranteed loans during the year. The guarantee fee/commission paid/payable to Government by six working Government companies during 2003-04 was Rs.10.20 crore.

Finalisation of accounts by working PSUs

1.6 Out of 55 working Government companies and five Statutory corporations, only nine working companies and four working Statutory corporation had finalised their accounts for the year 2003-04 up to 30 September 2004. During the period from October 2003 to September 2004, 41 working companies finalised 43 accounts of previous years. Similarly, one working Statutory corporation finalised accounts for previous year during this period.

? Information in respect of 14 companies and two corporations are not received (Sr. No.A-6, 10,13,14,32,34,40,42,43,45,48,49,51,55, B-1,3) ?Figures as per Finance accounts is Rs.26,433.88 crore (23 companies and four corporations). The difference is under reconciliation.


6

The accounts of 46 working Government companies were in arrears for periods ranging from one to 14 years as on 30 September 2004, as detailed below. Besides, accounts of one working Statutory corporation (B-1) was also in arrears for one year, i.e. 2003-04.

Sl. No.

Number of working Government companies

Period for which accounts were in

arrears

Number of years for which accounts were in arrears

Reference to Sl. No. of Annexure-2

1 2 1990-91 to 2003-04 14 A-38,39

2 1 1992-93 to 2003-04 12 A-51

3 1 1993-94 to 2003-04 11 A-40

4 2 1995-96 to 2003-04 9 A-4, 9

5 2 1997-98 to 2003-04 7 A- 34,50

6 1 1998-99 to 2003-04 6 A-43

7 4 1999-2000 to 2003-04 5 A-14,23,35,42

8 3 2000-01 to 2003-04 4 A-7,16,46

9 2 2001-02 to 2003-04 3 A-5,41

10 5 2002-03 to 2003-04 2 A-6,10,11,44,52

11 23 2003-04 1 A-1,2,3,13,17,20,21,

22, 26, 27, 28,29,

30,31,32,33,36,45,

47,48, 53,54,55

Total 46

Reasons for delay in finalisation of accounts of working companies in general and of 18 working companies, where accounts were in arrears for three years or more in particular, have been discussed in detail in paragraph 4.11 of Chapter-IV.

Financial position and working results of working PSUs

1.7 The summarised financial results of working PSUs (Government companies and Statutory corporations) as per their latest finalised accounts are given in Annexure-2. Besides, statements showing financial position and working results of individual working Statutory corporations for the latest three years for which accounts are finalised are given in Annexures-4 and 5, respectively.

According to the latest finalised accounts of 55 working Government companies and five working Statutory corporations, 41 companies and three corporations had incurred losses for the respective years aggregating Rs.622.81 crore and Rs.525.93 crore; nine companies and two corporations earned an aggregate profit of Rs.43.25 crore and Rs.1.61 crore respectively. Two companies (Sl.No.A-43,55 of Annexure-2) had not submitted their first accounts, one company (Sl.No.A-20 of Annexure-2) had capitalised excess of expenditure over income and one company (Sl.No.A-49 of Annexure-2) had recovered excess of expenditure over income from its shareholders. In respect


7

of one company (Sl. No.53 of Annexure-2), expenditure was met by recoupment of grant from Government.

Working Government companies

Profit earning working Government companies and dividend

1.8 Three profit earning working Government companies, which finalised their accounts for 2003-04 up to 30 September 2004 earned profit aggregating Rs.37.77 crore. None of these companies declared dividend during the year. The State Government had not formulated a dividend policy for payment of minimum dividend.

Five profit earning working Government companies, which finalised their accounts for previous years during October 2003 to September 2004, showed profit aggregating Rs.5.30 crore. Out of above eight companies, six companies were earning profit for two or more successive years.

Loss incurring working Government companies

1.9 Of the 41 loss incurring working Government companies, 12? companies had accumulated losses aggregating Rs.1,473.60 crore which exceeded their aggregate paid-up capital of Rs.290.87 crore by more than four times.

Despite poor performance and complete erosion of paid-up capital, the State Government continued to provide financial support to these companies in the form of contribution towards equity, further grant of loans, conversion of loans into equity, subsidy etc. According to available information, the total financial support so provided by the State Government to three? companies was Rs.61.36 crore by way of loans (Rs.5.76 crore) and conversion of loans into equity (Rs.55.60 crore) during 2003-04.

Working Statutory corporations

Profit earning Statutory corporations and dividend

1.10 Four? Statutory corporations finalised their accounts for 2003-04 by September 2004. Of these, two Statutory corporations (B-4, 5 of Annexure-2) earned profit aggregating Rs.1.60 crore and only one Statutory corporation (Sl.No. B-4 of Annexure-2) had declared dividend of Rs.14.71 lakh which was 1.72 per cent of its paid-up capital of Rs.8.71 crore.

Loss incurring Statutory corporations

1.11 Of the three loss incurring Statutory corporations, two Statutory corporations (Sl. No. B-2 and B-3 of Annexure-2) had accumulated losses

? Sl.No.A-4,6,7,10,13,14,15,16,17,19,21 and 37 of Annexure-2. ? Sl.No.A-10,13 and 17 of Annexure-2. ? Sl.No.B-2,3,4 and 5 of Annexure-2.


8

aggregating Rs.1,525.48 crore, which exceeded their aggregate paid-up capital of Rs.720.07 crore.

Despite poor performance and complete erosion of paid-up capital, the State Government continued to provide financial support to these corporations in the form of contribution towards equity, further grant of loans, conversion of loans into equity, subsidy etc. According to available information, the total financial support during 2003-04 by the State Government to the corporations in the form of equity was Rs.121.29 crore.

Operational performance of working Statutory corporations

1.12 The operational performance of the working Statutory corporations is given in Annexure-6.

In Maharashtra State Electricity Board, transmission and distribution losses had increased from 34.79 per cent in 2000-2001 to 38.59 per cent in 2002-03. In Maharashtra State Financial Corporation, the disbursements had decreased from Rs.30.35 crore in 2001-02 to Rs.1.57 crore in 2003-04 and the overdue amount had increased from Rs.1,014.72 crore in 2001-02 to Rs.1,116.08 crore in 2003-04.

Return on capital employed

1.13 As per the latest finalised accounts (up to September 2004), the capital employed? worked out to Rs.5,674.46 crore in 49? working companies and total return? thereon was negative (Rs.(-) 116.99 crore) as compared to total return of Rs.198.79 crore (3.73 per cent) on capital employed of Rs.5,336.15 crore in the previous year (accounts finalised up to September 2003). Similarly, the capital employed and total return thereon in case of working Statutory corporations as per their latest finalised accounts (up to September 2004) worked out to Rs.16,590.54 crore and Rs.765.13 crore (4.61 per cent), respectively as against the total return of Rs.622.55 crore (3.70 per cent) and capital employed of Rs.16,843.12 crore in the previous year (accounts finalised up to September 2003). The details of capital employed and total return on capital employed in case of working Government companies and Statutory corporations are given in Annexure-2.

? Capital employed represents net fixed assets (including capital works-in-progress) plus working capital except in finance companies and corporations where it represents a mean of aggregate of opening and closing balances of paid-up capital, free reserves, bonds, deposits and borrowings (including refinance). ? This does not include two companies (Sl. No.A-43 and 55 of Annexure-2) whose first accounts are awaited, one company (Sl. No,A-20 of Annexure-2) who had capitalised its excess of expenditure over income, one company whose expenditure is recouped from Government grant (Sl. No.A-53 of Annexure-2), one company (Sl.No.49 of Annexrure-2) who had recovered its excess of expenditure over income from its shareholders and two companies whose previous years’ figures were not available for computation of capital employed (Sl. No.A-42 and 53 of Annexure-2). ? For calculating total return on capital employed, interest on borrowed fund is added to net profit/subtracted from the loss as disclosed in the profit and loss account.


9

Reforms in Power Sector

Status of implementation of Memorandum of Understanding between the State Government and the Central Government

1.14 In pursuance to discussions in Chief Minister's conference on power sector reforms, held in March 2001, a Memorandum of Understanding (MOU) was signed on 16 March 2001 between the Government of Maharashtra and the Government of India as a joint commitment for implementation of reform programme in power sector with identified milestones. The MOU was valid for five years and subject to review annually. Status of implementation of reform programme against each commitment made in the MOU is detailed below:

Sl. No.

Commitments as per MOU

Targeted completion schedule

Status (as on 31 March 2004)

Commitments made by the State Government

1 Reduction in transmission and distribution losses

18 per cent by March 2003.

38.20 per cent

2 100 per cent electrification of all villages

No target fixed. 100 per cent electrified.

3 100 per cent metering of all distribution feeders

December 2001. Achieved.

4 100 per cent metering of all consumers

December 2005. 86.08 per cent metered consumers.

5 Securitise outstanding dues of Central Public Sector Undertakings.

--- Securitisation of NTPC dues has been done.

6 State Electricity Regulatory Commission (SERC) i) Establishment of SERC ii) Implementation of tariff orders issued by SERC during the year.

---

SERC was established on 5 August 1999. Latest tariff orders issued on 10 March 2004 and implemented

Maharashtra Electricity Regulatory Commission

1.15 Maharashtra Electricity Regulatory Commission (Commission) was formed on 5 August 1999 under Section 17 of the Electricity Regulatory Commissions Act, 1998? with the object of determining electricity tariff, advising on matters relating to electricity generation, transmission, distribution etc., in the State. The Commission is a body corporate and comprises three members including a Chairman, who are appointed by the State Government. The audit of accounts of the Commission has been entrusted to CAG under Section 104 of the Electricity Act, 2003. The Commission had finalised its ? Since replaced by the Electricity Act, 2003.


10

accounts up to 2003-04 (30 September 2004) and had excess of income over expenditure of Rs.15.66 crore during the year.

Non-working Public Sector Undertakings (PSUs)

Investment in non-working PSUs

1.16 The total investment in 21« non-working PSUs (all Government companies) at the end of March 2003 and March 2004 was as follows: (Rupees in crore)

Investment in non-working PSUs Year Number of non-working PSUs Equity Share application money Loans Total

2002-03 18 48.36 0.20 164.64 213.20

2003-04 21« 70.55 0.20 194.54 265.29 ÷

The classification of the non-working PSUs was as under:

(Amount: Rupees in crore) Investment in companies Sl. No. Status of

non-working PSUs Number of companies

Equity Long-term loans

(i) Under liquidation 3 20.50 9.25

(ii) Under closure 11 46.98 67.22

(iii) Others? 7 3.27 118.07

Total 21« 70.75 194.54 (Note: There is no non-working Statutory corporation)

Of the above 21 non-working PSUs, two non-working companies opted for simplified exit scheme under Section 560(3) of the Companies Act, 1956. However, their names are yet to be struck off from the records of Registrar of Companies. Twelve Government companies were under liquidation or closure under Section 560 of the Companies Act, 1956 for three to 26 years and substantial investment of Rs.143.95 crore was involved in these companies. Effective steps need to be taken for their expeditious liquidation or revival.

«Holding company sold the shares of companies at Sl. No. C-15,16 of Annexure-1 on 29 March 2004 and 19 November 2003 respectively. The investments in these companies are shown as nil. ÷ Figures as per finance accounts is Rs.2.75 crore in respect of equity. Difference is under reconciliation. ?Activities have been stopped and accounts are yet to be finalised and action has not been initiated for their closure.


11

Budgetary outgo, grant/subsidy, guarantees, waiver of dues and conversion of loans into equity?

1.17 The details regarding budgetary outgo, grants/subsidies, guarantees issued, waiver of dues and conversion of loans into equity by the State Government to non-working PSUs are given in Annexures-1 and 3.

At the end of the year, guarantee for loans amounting to Rs.78.17 lakh obtained by one? non-working company was outstanding as against Rs.83.86 lakh as on 31 March 2003.

Total establishment expenditure of non-working PSUs

1.18 The year-wise details of total establishment expenditure of non-working PSUs and the sources of financing them during last three years up to 2003-04 are given below: (Amount: Rupees in lakh)

Financed by Year Number of PSUs

Total establishment expenditure Disposal of

investment/assets Government by

way of loans Others*


2001-02 10# 98.26 2.21 37.10 58.95

2002-03 10 2,111.51 - -- 2,111.51

2003-04 6 2,035.66 - 1,969.00 66.66

(Note : There is no non-working Statutory corporation)

Finalisation of accounts by non-working PSUs

1.19 Out of 21 non-working Government companies, five companies (Sl. No. C-6,7,14,17 and 18 of Annexure-2) finalised their accounts for the year 2003-04. The accounts of 13 non-working companies were in arrears for periods ranging from one to 18 years as on 30 September 2004. Three? companies were under liquidation as seen from Annexure-2.

Financial position and working results of non-working PSUs

1.20 The summarised financial results of non-working Government companies as per their latest finalised accounts are given in Annexure-2.

The net worth? of 21 non-working Government companies against their paid-up capital of Rs.101.80 crore was Rs.(-) 293.14 crore. These companies suffered cash loss of Rs.339.73 crore and their accumulated loss worked out to Rs.394.93 crore.

? Information in respect of 6 companies are not received (Sr. No.C-3,7,13,19,20 and 21) ? Sl.No.C-1 of Annexure-3. #There was no establishment expenditure in respect of remaining non-working companies. * Financed by holding company. ? Sl. No.3, 10 and 21 of Annexure-2. ? Net worth represents paid-up capital plus free reserves less accumulated loss.


12

Status of placement of Separate Audit Reports of Statutory corporations in Legislature

1.21 Separate Audit Report (SAR) on the accounts of Maharashtra State Financial Corporation for the year 2001-02 was issued on 13 September 2003 and awaiting placement before State Legislature by the Government (September 2004). SARs on the accounts of Maharashtra State Warehousing Corporation and Maharashtra State Electricity Board for the year 2002-03 were placed before State Legislature by the Government in December 2003 and June 2004 respectively. SARs in respect of remaining two Statutory corporations up to 2001-02 have already been placed before State Legislature.

Disinvestment, Privatisation and Restructuring of Public Sector Undertakings

1.22 During the year, Maharashtra State Textile Corporation Limited disinvested two subsidiary companies namely Devgiri Textile Mills Limited and Kalameshwar Textile Mills Limited.

Results of audit of accounts of PSUs by Comptroller and Auditor General of India

1.23 During the period from October 2003 to September 2004, the audit of 63 accounts of 50 Government companies (42 working and eight non-working) and five working Statutory corporations was taken up for review. As a result of the observations made by CAG, one working company (A-45) and three Statutory corporations (B-1, 2 and 5 of Annexure-2) revised their accounts for 2002-03. The net impact of the important audit observations as a result of review of the remaining PSUs was as follows:

Number of accounts (Amount: Rupees in lakh) Government companies Government companies

Sl.No.

Details

Working Non-working Statutory working

corporations Working Non-working

Statutory working

corporations 1 Decrease in profit 4 - 1 404.11 - 20.78 2 Increase in profit 2 1 1 3.54 168.24 10.79 3 Increase in loss 4 2 2 81.74 181.49 39,197.00 4 Decrease in loss 3 - 2 19.03 - 24,049.30 5 Non-disclosure of

material facts 6 1 2 695.15 4.65 2,008.20

6 Errors of classification

10 - 4 1,759.47 - 27,883.14

Some of the major errors and omissions noticed during October 2003 to September 2004 in the course of review of annual accounts of some of the above companies and corporations are mentioned below:


13

Errors and omissions noticed in case of Government companies

Maharashtra Petrochemicals Corporation Limited (2002-03)

1.24 As against the diminution of Rs.2.55 crore in the value of investment, the Company provided for Rs.2.01 crore resulting in under provision for diminution in the value of investment by Rs.53.60 lakh and overstatement of profit for the year by Rs.53.60 lakh.

Maharashtra State Police Housing and Welfare Corporation Limited (2002-03)

1.25 The cost of welfare complex at Worli has been misclassified under user department assets, resulting in understatement of gross fixed assets by Rs.1.81 crore, accumulated depreciation by Rs.16.63 lakh and overstatement of completed work by Rs.1.64 crore.

Forest Development Corporation of Maharashtra Limited (2002-03)

1.26 The accounts receivable and profit had been overstated by Rs.3.15 crore due to inclusion of Rs.5.63 crore towards compensation for loss of forest crop of the Company on the land acquired by Sardar Sarovar Project, as against the compensation of Rs.2.48 crore worked out by the State Forest Research Institute of Madhya Pradesh.

Errors and omissions noticed in case of Statutory corporations

Maharashtra State Electricity Board (Board) (2002-03)

1.27 The Board commissioned 60,491 works amounting to Rs.1,004.71 crore during 2002-03. However, work completion reports (WCRs) in respect of 4,060 works valuing Rs.42.17 crore were not prepared. In addition, WCRs were not completed in respect of 9,956 works amounting to Rs.74.80 crore, which were commissioned prior to 2002-03 but remained to be capitalised. This resulted in understatement of fixed assets and overstatement of capital expenditure in progress by Rs.116.97 crore and consequential non provision of depreciation (amount unascertained).

1.28 The actuarial value of gratuity liability as on 31 March 2003 was Rs.910.15 crore. The Board, however, made provision of Rs.1,145.86 crore. The excess provision of Rs.235.71 crore for gratuity was to be written back. Non adjustment has resulted in overstatement of provision and deficit to that extent.

Maharashtra State Road Transport Corporation (MSRTC) (2002-03)

1.29 Sale of scrapped vehicles does not include Rs.2.94 crore being scrapped vehicles sold in auction before March 2003 but not lifted, resulting in overstatement of loss and asset account by Rs.2.94 crore.


14

1.30 Due to non maintenance of year wise account of Kutcha building, MSRTC charged excess depreciation of Rs.4.08 crore till 2000-01 even though these assets were fully depreciated before March 2002. The excess depreciation of Rs.4.08 crore provided on these old assets up to March 2002 has not been written back resulting in overstatement of depreciation fund and prior period expenditure by Rs.4.08 crore.

Audit assessment of the working results of State Electricity Board

1.31 Based on the audit assessment of the working results of the Board for three years up to 2002-03 and taking into consideration the major irregularities and omissions pointed out in the SARs on the annual accounts of the Board and not taking into account the subsidy/subventions receivable from the State Government, the net surplus/deficit of the Board would be follows:

(Rupees in crore) Sl. No. Particulars 2000-01 2001-02 2002-03

1 Net surplus/(-) deficit as per books of accounts (-) 2,467.66 (-) 539.46 (-) 254.69

2 Subsidy from the State Government (-) 373.85 Nil Nil

3 Net surplus/(-) deficit before subsidy from the State Government (1-2)

(-) 2,841.51 (-) 539.46 (-) 254.69

4 Net increase/decrease in net surplus/ (-) deficit on account of audit comments on the annual accounts

(-) 237.45 (-) 234.30 147.40

5 Net surplus/(-) deficit after taking into account the impact of audit comments but before subsidy from the State Government (3 + 4)

(-) 3,078.96 (-) 773.76 (-) 402.09

Recoveries at the instance of audit

1.32 Test check of records of Government companies and Statutory corporations conducted during April 2003 to March 2004 disclosed violation of terms of agreement/short recovery of liquidated damages/wrong fixation of tariff/short levy of tariff aggregating Rs.19.88 crore in 29 cases. The companies/corporations accepted the observations in all 29 cases which had been pointed out by Audit and recovered the full amount at the instance of audit.

Internal audit/internal control

1.33 The Statutory Auditors (Chartered Accountants) are required to furnish a detailed report on various aspects including the internal control/internal audit system in the Government companies audited in accordance with the directions issued by the Comptroller and Auditor General of India to them under Section 619(3)(a) of the Companies Act, 1956 and to identify the areas which needed improvement. An illustrative resume of major recommendations/ comments made by Statutory Auditors on possible improvement in the internal


15

audit/internal control system in respect of State Government companies is indicated below:

Sl. No.

Nature of observations made by

Statutory Auditors

Number of companies in

which observations were noticed

Reference to serial number of companies

as per Annexure-2

1 Internal audit required to be strengthened having due regard to its size and nature of its business

4

A-2,5,7,21

2 Absence of internal audit system 1 A-35 3 Inadequate internal audit system 1 A-51 4 Internal audit needs to be

conducted at frequent intervals 1 A-8

Recommendations for closure of PSUs

1.34 Even after completion of five years of their existence, the annual turnover of 20? Government companies (working: 16, non-working: four) had been less than rupees five crore in each of the preceding five years as per their latest finalised accounts. Similarly, two? working Government companies had been incurring losses for five consecutive years (as per their latest finalised accounts) leading to negative net worth. In view of poor turnover and continuous losses, the Government may either improve performance of above 22 Government companies or consider their closure. In addition, four? working Government companies engaged in similar activities having poor turnover could be considered for merger.

The State Government took a decision to wind up 14 companies in 1992. However, the process of liquidation of these companies could not be initiated on account of stay order issued by the Aurangabad bench of Mumbai High Court. Action was being taken to get the stay order vacated by the State Government.

?Annexure-2 Sl.No.A-4,5,6,9,12,14,19,20,34,35,36,38,39,40,49,50 and C-2,4,5 and 9. ?Annexure-2 Sl.No.A-13 and 20. ?Annexure-2 Sl.No. A-38,39,40 and 41.


16

Position of discussion of Audit Reports (Commercial) by the Committee on Public Undertakings (COPU)

1.35 The status of Audit Reports (Commercial) and their reviews and paragraphs pending for discussion by the COPU as on 30 September 2004 was as under:

No. of reviews and paragraphs

Appeared in the Audit Report Pending for discussion

Period of Audit Report

Reviews Paragraphs Reviews Paragraphs

2000-01 4 21 1 14

2001-02 4 20 4 20

2002-03 4 24 4 24

Total 12 65 9 58

The Audit Report (Commercial) for the year 2002-03 was placed before the State Legislature on 8 June 2004.

619–B companies

1.36 There were three working companies coming under Section 619-B of the Companies Act, 1956. Annexure-7 gives the details of paid-up capital, investment by way of equity, loans and grants and summarised working results of these companies based on their latest available accounts.

17

Chapter-II

Review relating to Government company


Highlights

Maharashtra Agro Industries Development Corporation Limited (Company) was incorporated in December 1965 to assist, promote and develop agro industries and its connected activities in Maharashtra.

(Paragraph 2.1)

The Company has been incurring operational losses since 2000-01. Manufacturing and trading of fertilisers, which contributed to profits up to 2001-02 turned unprofitable from 2002-03. The operations relating to animal feed and fruits and vegetables processing factory at Nagpur continue to be a drag on the profits of the Company.

(Paragraph 2.6)

The controllable idle hours showed an increasing trend during 1999-2004 and were as high as 81 per cent in 2003-04. The cost of idle labour in fertiliser factories has been adversely affecting the profitability of the Company.

(Paragraph 2.8)

Single super phosphate plant at Jalna purchased for Rs.1.29 crore was lying idle which resulted in interest loss of Rs.54.56 lakh on idle investment during May 2001 to March 2004.

(Paragraph 2.9)

Capacity utilisation of fruits and vegetables processing factory at Nagpur was far below the break-even point resulting in loss of Rs.5.09 crore during 1999-2004.

(Paragraph 2.10)

In the entrustment of fruit processing plants at Katol and Morshi valued at Rs.9.75 crore to a private party, the agreement was silent on the action to be taken in the event of default in redemption of preference shares and payment of dividend. The party was allowed to raise loans against the


18

assets without ensuring that the funds were fully invested in the plant and not diverted.

(Paragraph 2.11)

The Company failed to avail of cash rebate of 18 per cent fully in purchase of fertilisers despite being attractive. This has resulted in loss of Rs.44 lakh even after allowing interest on cash credit.

(Paragraph 2.14)

The arrangement for sale of fertilisers was prone to delays in remittance of sale proceeds and misstatement of the prices at which the sale took place. In the context of several benefits extended to the dealers, the dealers’ margin was rather high. For every one hundred rupees reduction in dealers’ margin, the Company would save Rs.2.43 crore per annum.

(Paragraphs 2.18-2.19)

Advertising contracts worth Rs.1.81 crore were awarded during 2002-03 to a single firm without calling for tenders, thus, violating the norms of transparency. Expenditure of Rs.41.10 lakh on advertisement proved infructuous besides affecting the Company’s image due to non sale of advertised products.

(Paragraph 2.24)

Introduction

2.1 Maharashtra Agro Industries Development Corporation Limited (Company) was incorporated in December 1965 as a Government company to assist, promote and develop agro industries and its connected activities in Maharashtra.

Objectives

2.2 The main objectives of the Company as envisaged in the Memorandum of Association are to:

?? organise, conduct or manage engineering, repair shop or workshop of all description and to manufacture, import, export, buy and sell agricultural equipment, fertilisers, manures, insecticides, pesticides, etc.

?? aid, assist, promote, develop and manufacture agricultural implements, machineries and other equipment required for fisheries, poultry, sheep, cattle and dairy development in Maharashtra and in India;

Chapter-II - Review relating to Government company

19

?? aid, assist, finance, protect and promote the interest of agro industries and its connected activities in Maharashtra.

The main activities undertaken by the Company are development of agricultural implements, manufacturing of nitrogen phosphorous potash (NPK) fertilisers, animal feed, fruit and vegetable products and trading of fertilisers, pesticides and agricultural implements.

Organisational set up

2.3 The management of the Company is vested in a Board of Directors (BOD). As on 31 March 2004, the BOD consisted of fourteen directors (eight non-official and six official) of whom thirteen were appointed by the State Government and one by Government of India (GOI). The Managing Director is the chief executive of the Company and is assisted by eight? Heads of Department. The production activities at factory level are managed by the Factory Manager and marketing activities are coordinated through the network of twelve regional offices$ and two sub-regional offices$$.

Scope of Audit

2.4 The working of the Company was last reviewed in the Report of the Comptroller and Auditor General of India for the year ended 31 March 1987 (Commercial), Government of Maharashtra. The present review conducted during December 2003 to April 2004 covers the examination of records for the period 1999-2004 at head office, test check of records of seven? out of 14 regional/sub regional offices, three? out of six fertiliser factories, one? out of two animal feed factories, agro engineering division and fruits and vegetables processing factory (Nagpur Orange Growers Association-NOGA).

The audit findings as a result of test check of records were reported to Government/ Company in May 2004 with a specific request to attend the meeting of Audit Review Committee for State Public Sector Enterprises (ARCPSE). The meeting of ARCPSE was held on 23 July 2004 and their viewpoints had been duly incorporated in the review.

? Fertiliser and Pesticides, Finance and Accounts, Animal Feed, Engineering, Administration, NOGA, Planning and Audit Department. $Akola, Amravati, Aurangabad, Chandrapur, Jalgaon, Kolhapur, Nagpur, Nanded, Nasik, Osmanabad, Pune and Ratnagiri. $$ Bhir and Thane. ? Akola, Amravati, Kolhapur, Nagpur, Nanded, Pune and Thane. ? Kolhapur, Nanded and Rasayani. ? Pune.


20

Funding arrangements

Share capital

2.5 As on 31 March 2004, the authorised share capital of the Company was Rs.8 crore and paid up capital was Rs.5.50 crore which was contributed by the State Government (Rs.3 crore) and GOI (Rs.2.50 crore). There was no contribution towards share capital during 1999-2004, both by the State Government and GOI.

Financial position and working results

2.6 The financial position and working results of the Company for five years up to 2003-04 are detailed in Annexure-8.

The table below shows the profitability of the Company during 1999-2004:

(Rupees in crore) Particulars 1999-2000 2000-01 2001-02 2002-03 2003-04

(provisional)

Operational profit? (+) /loss (-)

(+) 2.55 (-) 8.17 (-) 8.41 (-) 9.51 (-) 9.42

Other income 5.30 12.24 10.09 7.95 10.09

Profit (+)/loss (-) (+)7.85 (+) 4.07 (+)1.68 (-)1.56 (+) 0.67

The Company has been incurring operational losses since 2000-01. The operational losses increased from Rs.8.17 crore to Rs.9.42 crore. The profit during 1999-2002 was on account of other income which mainly included refund of Sales Tax and interest income. It was noticed that interest income on fund received from Government for disbursal to beneficiaries under various schemes was being wrongly shown as income of the Company.

The segment-wise profitability worked out for the four years 2000-04 is given below:

Profit(+)/loss(-)

(Rupees in crore) Activity 2000-01 2001-02 2002-03 2003-04

(provisional)

Fertiliser (+)4.07 (+)0.99 (-)1.96 (-)2.25

Pesticides (+)0.94 (+)1.16 (+)1.29 (+)1.69

Agro engineering (+)2.14 (+)2.01 (+)1.14 (+)2.80

Animal feed (-)1.08 (-)0.68 (-)1.21 (-)0.96

NOGA? (-)2.00 (-)1.80 (-)0.82 (-)0.61

Total (+)4.07 (+)1.68 (-)1.56 (+)0.67

? Profit excluding other income. ? Fruits and vegetables processing factory at Nagpur.


21

Manufacturing and trading of fertilisers, which contributed to profits up to 2001-02 turned unprofitable from 2002-03 due to reduction in sales. The operations relating to animal feed and NOGA continue to be a drag on the profits of the Company.

Production

Production of fertilisers

2.7 The Company has six? NPK fertiliser factories. Factories at Rasayani and Jalna have the facilities to produce both NPK as well as single super phosphate (SSP) fertilisers.

Idle working hours

2.8 The Company manufactures NPK fertilisers in its NPK factories by mixing basic fertilisers such as urea, dia ammonium phosphate, SSP, muriate of potash, etc. The working hours? available in the NPK factories were not utilised fully resulting in idle labour cost. The summarised position of working hours and idle hours in six NPK factories during 1999-2004 was as under:

Particulars 1999-2000 2000-01 2001-02 2002-03 2003-04 (Provisional)

Total available working hours

39,840 39,288 45,192 44,424 45,144

Hours utilised 24,880 24,233 24,646 18,602 22,027

Idle hours 14,960 15,055 20,546 25,822 23,117

Percentage of idle hours to total working hours

37.6 38.3 45.5 58.1 51.2

Labour cost per hour (Rupees)

1,250 1,299 1,152 1,103 1,107

Controllable idle hours (due to absence of production programmes and non availability of raw materials)

7,305 7,642 13,635 19,208 18,725

Percentage of controllable idle hours to total idle hours

48.8 50.8 66.4 74.4 81.0

Idle labour cost (Rupees in crore) (5 x 6)

0.91 0.99 1.57 2.12 2.07

The idle hours increased from 37.6 per cent in 1999-2000 to 58.1 per cent in 2002-03. This resulted in increase of idle labour cost from Rs.91.31 lakh in 1999-2000 to Rs.2.12 crore in 2002-03. The controllable idle hours ranged ? Jalna, Kolhapur, Nanded, Pachora, Rasayani and Wardha ? No. of working days x 24 hours x six factories (sixth factory added in 2001-02).

High idle labour cost is a drag on the profits of the Company.


22

from 48.8 to 81 per cent of total idle hours. The Company stated that the increase in idle hours was due to decrease in production. Given the increasing cost implications, there is a need to curtail idle labour cost.

Purchase of second hand fertiliser plant from a private party

2.9 The Company purchased (January 2001) NPK and SSP plants for Rs.1.71 crore (including building Rs.72.91 lakh) from SICOM Limited who auctioned the plant of HIMCO Fertiliser Private Limited, Jalna. The purchase was approved by the Board of Directors. The Company started operation of NPK plant in May 2001 after incurring capital expenditure of Rs.42.57 lakh. The actual production of NPK fertiliser was 17,183 MT (2001-02) and 16,959 MT (2002-03), which was 57.3 and 56.3 per cent, respectively of the installed capacity. SSP plant taken over in May 2001 has been lying idle and the loss of interest on idle investment (Rs.1.29 crore) worked out to Rs.54.56 lakh?. The Company stated (July 2004) that the plant was purchased to meet the expected increase in demand for fertilisers.

The reply is not tenable as:

?? The purchase of the plants was not in the interest of the Company, as it was not utilising the capacity of its own existing plants fully.

?? The purchase resulted only in shifting the burden of bad investment from the promoter to the Company.

?? The transaction only helped the private party to discharge its liability to SICOM Limited.

Processing of fruits and vegetable products

2.10 The Company has a fruit and vegetable-processing factory (NOGA) at Nagpur for manufacturing squashes, syrup, jam, fruit juices, tomato ketchup etc. The production performance and working results of NOGA factory during 1999-2004 were as under:


Production performance

Installed capacity (MT) 4,950 4,950 4,950 4,950 4,950

Actual production (MT) 2,059 1,390 1,758 1,471 1,806

Percentage of utilisation

42 28 36 30 36

Working results (Rupees in crore)

Total expenditure 9.68 8.79 8.09 6.72 7.28

Total income 8.94 7.00 6.49 6.16 6.88

Loss? 0.74 1.79 1.60 0.56 0.40

?Worked out at the rate of 14.5 per cent (cash credit rate) on Rs.1.29 crore from June 2001 to March 2004. ? This does not include head office overheads.

Purchase of second hand NPK/SSP plant resulted in shifting the burden of bad investment from the promoter to the Company.


23

Audit observed the following:

?? The production in 1999-2000 was as low as 42 per cent of the installed capacity. There was further decrease in capacity utilisation during the subsequent years.

?? The Company has to compete with private parties in sale of its products. Cost control is crucial for surviving in a competitive market. The Company can recover its fixed cost fully only if production is increased up to 4,413 MT i.e. 90 per cent of capacity based on data for 2002-03. The capacity utilisation was far below 90 per cent. The total loss of NOGA during 1999-2004 was Rs.5.09 crore. The Company while accepting (August 2004) the facts stated that the level of 90 per cent break even point could not be achieved with the present traditional equipment and machinery. The fact remains that by not taking remedial measures, the Company has been incurring regular loss on this activity.

Deficiencies in entrustment of fruit processing plants to a private party

2.11 In December 1999, the State Government decided to entrust the operation of fruit processing plants at Katol and Morshi to Scientechnic India Private Limited, Mumbai (SIPL). The decision was not implemented. The Company executed (April 2001) an agreement with SIPL for transfer of assets of both the plants based on revised conditions. The assets of Katol plant were handed over in May 2001 but the Morshi plant was not taken over by SIPL.


?? The assessed value of Rs.9.75 crore (Katol-Rs.8.07 crore, Morshi-Rs.1.68 crore) was to be treated by SIPL as “Seed Capital” and was to be refunded after five years from the date of possession with interest at the rate of 14 per cent per annum. This condition was modified (April 2001) treating the seed capital as Cumulative Redeemable Preference Shares payable in six yearly instalments starting from fifth year with 14 per cent dividend per annum to be calculated from third year. Due to change of this condition, the benefit passed on to the party was Rs.2.26 crore due to waiver of interest for the first two years. The agreement was silent as to what action would be taken against the party in the event of default in redemption of preference shares and payment of dividend.

?? The security was impaired due to revised condition permitting SIPL to mortgage the assets with financial institutions with first charge on the assets. Further, this changed condition facilitated the private party to raise loans without ensuring that the funds were not diverted but fully invested in the plant.

?? As per the agreement, SIPL was to start Morshi project within two years from the date of agreement. There was no clause in the agreement for penal action for not taking over the plant. The Company has also not operated the plant. Consequently, the plant at Morshi (value Rs.1.68 crore) has been lying idle since 1997.

Capacity utilisation was far below the break even point which resulted in losses.

The party was allowed to raise loans against the assets without ensuring that the funds were not diverted but fully invested in the plant.

The plant at Morshi is lying idle.

The agreement was silent as to what action would be taken against the party in the event of default in payments.


24

The Company stated (July 2004) that the entrustment of the plants to the private party was not done by the Company's Board but by the State Government. The selection of party was stated to have been done by the private consultant engaged by the State Government. However, the fact remains that many of the initial contract conditions were modified to the detriment of Company's interest.

Production of animal feed

2.12 The Company has two animal feed factories (AFF) located at Chinchwad (Pune) and Yeotmal. The installed capacity of each factory was 30,000 MT per annum. Review of production performance of the plant at Yeotmal which was taken on lease in 1983 from Alap Cattle Feed Manufacturing Company Private Limited revealed that the actual utilisation of installed capacity (30,000 MT) ranged from 3.2 to 8.7 per cent during 1999-2004 due to lack of demand in the Vidarbha region and thus remained grossly underutilised. The animal feed produced at Yeotmal factory was marketed by the Company at a loss ranging from Rs.723 to Rs.1,753 per MT. The total loss during 1999-2003 was Rs.61.34 lakh.

The Company has not returned the plant so far and continued to incur losses. The Company stated (July 2004) that the unit has not been returned as an amount of Rs.53.72 lakh plus interest due from the party has not been received and a case has been filed in the court of law (November 1994). Pending this, effective steps are required to increase production and to sell the products in other regions. This would also be helpful to the Company in improving the recovery of fixed cost from the increased production.

Purchases

Purchase of fertilisers

2.13 The Company procures raw material required for production and finished products for trading by inviting tenders at head office level. The materials are procured by field offices and payment is released by head office.

Non availment of cash rebate

2.14 Apart from in-house production, the Company purchases fertilisers from outside sources. During March-September 2002, the Company placed orders for the purchase of dia ammonium phosphate (DAP) and SSP on nine suppliers? . The suppliers offered credit period of 45 to 90 days. For cash payment, a discount of 18 per cent was offered by the suppliers. The Company had a sound liquidity position. Even if cash credit facility at the rate of 14.5 per cent was availed of to make cash payment, the rebate would have

? Indian Potash Limited, Gujrat State Fertiliser and Chemical Limited, Paradeep Phosphates Limited, Indogulf Corporation Limited, Indian Farmers Fertiliser Co-operative Limited, Nirma Limited, Rama Krishi, BEC Fertiliser and Shiva Fertiliser.


25

been beneficial. The Company did not avail of cash rebate of Rs.2.27 crore on these purchases. Audit noticed that the Company could have saved Rs.44 lakh by opting for cash rebate even if cash credit facilities with interest at 14.5 per cent were availed.

The Company stated (July 2004) that the sales and collection eroded during 2002-03 and availing cash discount became difficult. The reply is not tenable as the Company could have availed minimum cash rebate of Rs.44 lakh by availing cash credit facilities.

Failure to purchase on consignment basis

2.15 The Company purchases fertiliser and pesticides from private parties. In respect of products whose marketability is untested the basic principle to safeguard the financial interest of the Company is that such purchases should be on consignment basis. Cash payment in such cases is clearly not in the interest of the Company. Audit observed that the Company deviated from this sound principle and purchased certain products on cash basis as discussed below. It took a long period to sell the material with the result that apart from loss of interest on delayed realisation from sales there was deterioration in unsold stock.

Product

(supplier) Period of supply

Purchase value

(Rupees in lakh)

Remarks

Bio-fertilisers (M/s. Sona Agrovet Labrotaries, Mumbai)

1999-2002 74.59 As per terms of purchase orders, unsold stock was not returned to supplier.

The carrying cost of inventory was Rs.11.67 lakh up to March 2004.

Stock valuing Rs.11.18 lakh was lying in damaged condition (August 2004).

Fertilisers (Microplex India, Wardha)

2000-01 39.36 The product was new in the market.

It took four years to sell material valuing Rs.32.73 lakh.

Stock valuing Rs.6.63 lakh was lying in damaged condition.

Petisides-Prahar (M/s. Green farm organic, Warora)

2001-02 21.15 Originally, it was proposed to purchase the material on consignment basis. However, at the instance of the then Managing Director, it was purchased on cash basis.

Out of 9,946 litres purchased for Rs.21.15 lakh, the Company could sell only 1,568 litres for Rs.3.27 lakh as against purchase cost of Rs.3.31 lakh.

The remaining stock (8,378 litres) purchased for Rs.17.84 lakh was lying in damaged condition.

The Company suffered a loss of Rs.44 lakh due to non availment of cash rebate.


26

The Company stated (July 2004) that efforts were being made to sell the damaged stock and it has decided to purchase such untested products on consignment basis in future.

Marketing activities

2.16 Marketing activities are carried out by 14 regional/sub regional offices of the Company through dealers.

Marketing of fertilisers

2.17 Fertiliser was the major constituent (74-75 per cent) of the Company's total turnover during 1999-2004. The details of fertilisers marketed by the Company during the period are as under:

Particulars 1999-2000 2000-01 2001-02 2002-03 2003-04

(Provisional)

Manufactured NPK fertilisers

Quantity sold (MT in lakh) 2.87 2.47 2.50 2.01 2.30

Value (Rupees in crore) 169.33 148.00 148.25 123.38 140.73

Traded fertilisers?

Quantity sold (MT in lakh) 4.19 3.64 3.24 2.53 2.18

Value (Rupees in crore) 183.80 183.47 167.19 123.80 115.25

It could be seen from above that there was downward trend in the sale of fertilisers, (manufactured/traded) during 1999-2004.

The Company attributed fall in sale to drought conditions and increasing competition from private manufacturers. The reply is not tenable as the total demand for NPK fertiliser in the State has increased from 5.53 lakh MT in 1999-2000 to 6.73 lakh MT in 2002-03 whereas the share of the Company in the market for NPK fertiliser has come down from 52.68 per cent in 1999-2000 to 29.80 per cent in 2002-03.

Realisation of sales proceeds

2.18 Deficiencies were noticed in the system of sales through dealers. Apart from the sale of its own fertilisers (manufactured fertilisers), the Company also trades in fertilisers procured from outside (traded fertilisers). For sale of fertilisers, stock is kept with dealers on consignment basis. The dealers are allowed credit period of 30 to 105 days for payment from the date of sale of traded fertilisers. For sale of fertilisers manufactured by the Company, the dealer is not allowed any credit period and payment is on cash basis. Prices were revised from time to time. The price increase during 2002-03 was as high ?Dia ammonium phosphate (DAP), Urea, Muriate of potash (MOP), Single super phosphate (SSP), Nitrogen phosphorous potash (NPK) fertilisers etc.


27

as Rs.150 per tonne (rupees three per day for 50 days average sale period). There is no mechanism to ascertain the exact date of sale and the quantity sold on that date for ensuring that:

?? credit period is correctly regulated, and

?? payment by the dealer is exactly the same as the sale price applicable on the date of actual sale.

The Company relies solely on the dealer for the correctness of critical information relating to actual date of sales and the quantity sold. The present procedure stipulates verification of stock with the dealer twice a year during March and August. Shortfall in stock is treated as credit sales (30 days credit) to dealers. This procedure does not safeguard the Company's interest in ensuring realisation of sales proceeds at the sales price applicable on the date of sale and prompt realisation of dues. The system is prone to delays in remittance of sales proceeds and misstatement of the prices at which the sales took place.

Dealers' margin

2.19 There is no upfront payment by dealers. The sale is on consignment basis and the dealer is paid godown rent. In spite of various benefits extended to the dealers, the dealers' margin ranged from 20 to 23 per cent. For ascertaining the reasonability of margin, a study of marketing arrangement in another central public sector undertaking i.e. Rashtriya Chemicals and Fertilisers Limited (RCFL) located in Maharashtra was undertaken. Dealers' margin in RCFL for sale of fertilisers was Rs.200 per tonne as against more than Rs.1,000 per tonne given by the Company for sale of NPK fertilisers.

The Company stated that comparison with RCFL was not appropriate as the products were different. The reply is not tenable. The margin of Rs.1,000 is rather high. To boost sales, part of the margin could have been reduced to lower the Maximum Retail Price (MRP) so that the farmers could have benefited directly in a transparent manner. Had the margin been restricted to Rs.200, part of the benefit would have also accrued to the Company. For every one hundred rupees reduction in dealers’ margin, the benefit to the Company would be Rs.2.43 crore? per annum. Besides, the sales to dealers by RCFL is on upfront basis and not on consignment basis. Therefore, the scope for misstatement of actual data of sales in case of RCFL was minimal.

Godown rent

2.20 The Company pays godown rent at the rate of Rs.12 per month per tonne for five months (season period) on the one-third quantity sold by the dealer in the season. The unstated assumption in the formula for godown rent is that the material on an average is stored with the dealer for a period of 50 days. There is a need to fix the godown rent taking into account the period for which the material is actually stored based on detailed study. The

? 2.43 lakh MT (Average sale of Manufactured fertilisers during 1999-2004) x Rs.100.

The arrangement for sale of fertilisers was prone to delays in remittance of sale proceeds and misstatement of the prices at which the sale took place.


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Company stated (July 2004) that the formula for godown rent will be reviewed taking into account the audit observations.

Non collection of bank guarantee (BG) from private dealers

2.21 As per the Company’s policy for sale of fertiliser, private dealers have to submit bank guarantee/security deposit (BG/SD) of minimum of rupees one lakh at the time of their appointment.

?? On test check, Audit noticed that three regional offices did not obtain initial BG/SD of rupees one lakh from 28 private dealers.* The Company stated (July 2004) that the policy is not strictly implemented. The reply is not tenable as the Company violated its own policy. As a result of this laxity, the amount recoverable for more than six months from these dealers was Rs.26.37 lakh# (including Rs.10.40 lakh for more than three years old) as on 31 December 2003.

The sales policy for NOGA products stipulated that NOGA products will be supplied to the distributor on credit only on submission of BG and in exceptional cases two times of BG.

?? Audit noticed that the Company supplied NOGA products to nine dealers without obtaining BG. This lapse facilitated default by the dealers as the amount outstanding for more than three years, as on 31 March 2003 was Rs.23.22 lakh. The Company stated (July 2004) that strict instructions have been issued to obtain BG.

Insufficient bank guarantee from private dealers

2.22 As per the Company’s policy, sale of fertilisers/pesticides on credit to private dealers should not exceed the amount of BG furnished by them as security.

On scrutiny of transactions with 15 private dealers from two regional offices (Akola: six and Nanded: nine) during April 2000 to January 2004, audit noticed that credit per dealer in excess of BG allowed by Regional Managers ranged from Rs.3.45 lakh to Rs.83.51 lakh. In eight cases as against BG of Rs.30 lakh, the arrears increased to Rs.2.98 crore (January 2004) from Rs.1.39 crore (March 2002). Thus, by deviating from the laid down sales policy the Company has been increasing its unsecured debts as detailed in Annexure-9.

* Pune-eight, Amravati-nine, Nasik-one and Sub-regional office Thane-ten. #RO Pune : Rs.11.48 lakh, RO Amravati : Rs.0.57 lakh, Nasik : Rs.10.40 lakh and Sub-RO Thane : Rs.3.92 lakh.

Failure to obtain bank guarantee facilitated default of Rs.49.59 lakh by dealers.

Insufficient BG resulted in increased unsecured debts.


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Non verification of grade of co-operative dealers

2.23 As per Company’s policy, dealers from co-operative sector with 'A' grade? certification are allowed exemption from submission of bank guarantee. Audit noticed that the Company was not verifying audit certificate before allowing exemption. Out of 121 dealers, 108 dealers were exempted without verification.

The Company while admitting (July 2004) the facts stated that other public sector undertakings were not insisting on such certificate. The reply is not tenable as the Company is violating its own policy of exempting only eligible dealers.

Award of advertising contracts

2.24 For expenditure involving public money, transparency demands calling of tenders. The Company selected Swayam Communication Private Limited, Mumbai (Ratna Publicity) without calling rates from other agencies for various types of publicity works and awarded (August-September 2002) advertising contracts for marketing green peas and basmati rice. The work consisted of hoardings (Rs.21.13 lakh), printing of pouches (Rs.5.30 lakh), campaign theme (Rs.5.25 lakh), electronic cylinder (Rs.3.96 lakh) and others (Rs.5.46 lakh) totalling to Rs.41.10 lakh.

Since no competitive tenders were called, it is not clear whether the rates charged were the best that could have been obtained. The entire expenditure of Rs.41.10 lakh proved to be infructuous besides denting the Company's image as the marketing of green peas and basmati rice was not undertaken. The Company stated (July 2004) that the work was awarded to the party based on its assessment during presentation.


?? The short listing/selection of advertising agencies up to 2001-02 was done through tendering system. Short listed agencies were called for media presentation and works were awarded at the lowest acceptable rates. However, in 2002-03, the tendering system was not followed and four agencies were called for media presentation.

?? The quotations were not obtained from the parties before the presentation but after selection of the party.

?? The same firm was repeatedly selected for various other advertising works during 2002-03 valued at Rs.1.40 crore without obtaining competitive rates from others. The publicity expenditure mainly consisted of advertisements and tender notices (Rs.36.04 lakh), laminated boards, leaflets and posters (Rs.23.17 lakh), campaign theme (Rs.16.28 lakh), radio broadcast (Rs.12.28 lakh), banner and brochures (Rs.7.14 lakh) and others (Rs.45.09 lakh). In the absence of tenders, the reasonability of rates could not be verified.

? Sound liquidity position.

Award of advertising contracts worth Rs.1.81 crore repeatedly to a single firm without calling for tenders violated the norms of transparency.


30

Analysis of sundry debtors

2.25 The agewise position of sundry debtors for the five years ending March 2004 was as under:

Sundry debtors as on 31 March (Rupees in crore)

Particulars 2000 2001 2002 2003 2004 (Provisional)

Agewise breakup Less than one year 34.15 43.31 52.76 56.12 46.93 One–three years 1.54 2.15 3.18 6.07 7.16

More than three years

2.25 2.48 2.79 3.22 3.93

Total 37.94 47.94 58.73 65.41 58.02 Sales 471.41 441.30 424.83 332.33 342.99

Percentage of debtors to sales

8.1 10.9 13.8 19.7 16.9

It could be seen from above that there was deterioration in recovery performance. Percentage of debtors to total turnover increased from 8.1 per cent in 1999-2000 to 16.9 per cent in 2003-04. At the end of March 2004 sundry debtors included private parties (Rs.30.54 crore) and co-operative societies (Rs.4.69 crore), out of which Rs.4.73 crore (private: Rs.3.80 crore and co-operative: Rs.93.48 lakh) were one to three years old and Rs.2.75 crore (private: Rs.2.12 crore and co-operative: Rs.62.97 lakh) were more than three years old.

The Company stated (July 2004) that the deterioration in debt recovery was due to non recovery of dues for supplies made under various schemes at the instance of Government. The reply is silent on the action taken to recover the dues of Rs.35.23 crore from private parties and co-operative societies.

Establishment expenditure

2.26 The scrutiny of establishment expenditure of the Company revealed the following:

?? Promotion of junior officers was effected in May-June 1999 despite non availability of sanctioned posts. As a result, the Company has 88 persons actually working against the sanctioned strength of 29 middle level management posts. The Company stated (July 2004) that the promotions of officers were upheld by High Court. The reply is not tenable. The Court case merely arose because the Company decided to cancel the promotions on the ground that the approval of Board of Directors was not obtained and the honourable High Court only directed to restrain the


31

reversion of already promoted persons. The limited issue before the Court was whether promotions could be effected without obtaining Board's approval. The basic fact remains that the promotion of officers without availability of sanctioned posts was irregular and should have been avoided.

?? As per the Fifth Pay Commission’s recommendations, casual leave (CL) of eight days is permitted. But the Company allowed CL of 12 days. Further the benefit of encashment of CL for seven days was given at double the rate on the grounds of agreement with the labour union. However, the State Government while permitting the implementation of the Fifth Pay Commission directed (February 2001) that all allowances should be at par with that given to the State Government employees and any other allowances payable should be stopped. Audit observed that the Company paid extra amount of Rs.39.65 lakh on account of such encashment to its employees of seven? regional offices and six? factories during 2001-02 to 2002-03.

?? House rent allowance (HRA) and city compensatory allowance (CCA) are allowances of compensatory nature and therefore, any payment of HRA/CCA in a year cannot exceed twelve times the monthly allowance. The Company's rules permitting payment of HRA and CCA on privilege leave (PL) encashed is thus not justifiable. Financial burden on this account was Rs.15.78 lakh during the three years ended March 2003.

The Company stated (July 2004) that the provision of encashment of PL/CL will be reviewed in the light of audit observations.

The matter was reported to the Government (May 2004); their reply had not been received (December 2004).

Conclusion

Manufacturing and trading of fertilisers, which contributed to profits, turned unprofitable from 2002-03. The operations relating to animal feed and fruits and vegetables processing factory continue to be a drag on profits of the Company. The idle labour cost in NPK factories has been affecting adversely the profitability of the Company. The capacity utilisation of fruits and vegetables processing factory was far below the breakeven point resulting in losses. Serious deficiencies were noticed in the transfer of the fruit processing plants at Katol and Morshi to a private party. The arrangement for sale of fertilisers was prone to delays in remittance of sale proceeds and misstatement of the prices at which the sale took place. In the context of several benefits extended to the dealers, the dealers’ margin appears to be rather high.

? Nanded, Akola, Amaravati, Nagpur, Kolhapur, Pune and Thane. ? Rasayani, Kolhapur, Nanded, NOGA Factory, Animal Feed, Pune and Agro Engineering Pune.

Extra payment of Rs.39.65 lakh was made in violation of Government directives.


32

The Company should either improve the operation of animal feed and fruits and vegetables processing factories or consider their closure. The Company should evolve a system for timely remittance of sale proceeds and ensure correct declaration of sale price of fertiliser by the dealers. Dealers' margin needs to be rationalised.

33

Chapter-III

3. Reviews relating to Statutory corporations


3.1 Fund Management

Highlights

The fund inflow of the Board mainly comprises revenue from sale of power, equity contribution and loans from State Government, banks and financial institutions, subsidy/grants from State Government. The fund outflow is by way of expenditure on power and fuel, interest payment, establishment, operation and maintenance works, repayment of loans and capital assets.

(Paragraph 3.1.1)

There was deterioration in collection of revenue. Arrears of revenue increased by 91 per cent (Rs.4,875.39 crore to Rs.9,300.33 crore) during 1999-2004. At the end of March 2004, arrears more than two years old constituted over 40 per cent of total arrears.

(Paragraphs 3.1.5-3.1.7)

The Board had obtained decrees of Rs.22.44 crore in its favour but the recovery from consumers was a meagre Rs.17.32 lakh.

(Paragraph 3.1.8)

Due to delayed remittances by banks between headquarters and field offices, the Board suffered interest loss of Rs.1.33 crore.

(Paragraphs 3.1.12 and 3.1.13)

Short recovery of security deposits of Rs.31.66 crore from consumers resulted in interest loss of Rs.3.48 crore per annum.

(Paragraph 3.1.19)


34

Failure to take full advantage of rebate offered by National Thermal Power Corporation led to loss of Rs.7.34 crore.

(Paragraph 3.1.23)

Advances to suppliers and contractors amounting to Rs.116.23 crore remained unrecovered/unadjusted.

(Paragraph 3.1.24)

The Board has not drawn loans as per drawal schedule in 109 out of 138 cases during 1999-2004 which resulted in payment of commitment charges of Rs.8.45 crore to Power Finance Corporation.

(Paragraph 3.1.27)

Introduction

3.1.1 Efficient fund management provides for establishing a system of cash and credit control, which serves as a tool for decision making for optimum utilisation of available resources and borrowings at appropriate time and most favourable terms. The fund inflow of the Board mainly comprises revenue from sale of power, equity contribution and loans from State Government, banks and financial institutions, subsidy/grants from State Government. The fund outflow is by way of expenditure on power and fuel, interest payment, establishment, operation and maintenance works, repayment of loans and capital assets.


3.1.2 The fund management of the Board is looked after by the Director of Finance and Director of Accounts under the supervision of Member (Accounts).

Scope of Audit

3.1.3 An appraisal on ways and means (WM) section of the Board was included in the Report of the Comptroller and Auditor General of India for the year ended 31 March 1994 No.1, (Commercial) Government of Maharashtra. The Report was discussed in September 1997 by the Committee on Public Undertakings (COPU). The COPU inter alia recommended that dues recoverable from public utilities should be adjusted from grants and the Board should take up the matter with banks for timely remittance of fund as there was persistent delay in remittances of fund. Action taken report on the

Chapter-III - Reviews relating to Statutory corporations

35

recommendations of the COPU is yet to be submitted by the Board (August 2004).

The present review conducted during January-April 2004 covers cash management, collection and remittances of revenue, borrowings from financial institutions, etc. It is based on a test check of records for the period 1999-2004 at WM section, head office and 15 out? of 100 field units.

The audit findings, as a result of test check of records, were reported to the Government/Board in June 2004 with a specific request for attending the meeting of Audit Review Committee for State Public Sector Enterprises (ARCPSE). The meeting of ARCPSE was held on 19 July 2004 and their viewpoints had been duly incorporated in the review.

Sources and application of funds

3.1.4 The Board prepares an annual financial statement of estimated capital and revenue receipts and expenditure for submission to the State Legislature. Annexure-10 shows sources and application of fund during 1999-2004.

Revenue

3.1.5 The revenue from sale of power accounts for more than 90 per cent of the Board's total revenue during 1999-2004. The position of revenue, its realisation and arrears of revenue during 1999-2004 is given below:

(Rupees in crore)

Year Opening balance

Revenue from sale of power

Total Realisation Closing balance

Borrowings during the

year 1999-2000 4,044.48 10,625.59 14,670.07 9,794.68 4,875.39 1,967.44

2000-01 4,875.39 11,739.70 16,615.09 10,706.09 5,909.00 2,003.91

2001-02 5,909.00 12,048.10 17,957.10 10,698.33 7,258.77 1,802.55

2002-03 7,258.77 12,517.40 19,776.17 10,965.50 8,810.67 1,500.88

2003-04 8,810.67 12,056.29? 20,866.96 11,566.63 9,300.33 1,734.05

From the above table, it is seen that during 1999-2004 arrears of revenue have increased by 91 per cent (Rs.4,875.39 crore to Rs.9,300.33 crore). This indicates that there was deterioration in collection of revenue. The Board could have avoided borrowings by evolving an effective mechanism for recovery of outstanding dues.

? Bhandup and Nagpur Urban Zones, Kalyan, Pen, Vashi, Bhiwandi, Pune Rural, Pune Urban and Nagpur Rural – Operation and Maintenance Circles, Nasik, Koradi, Khaperkheda, Chandrapur and Uran Power Stations and SE Coal Nagpur. ? Demand for the year 2003-04 is provisional.


36

Year-wise and category wise recoverable dues

3.1.6 Following table shows year-wise dues recoverable from the major categories of consumers during 1999-2004:

(Rupees in crore) Category 1999-2000 2000-01 2001-02 2002-03 2003-04 Increase

(Percentage)

Agriculture 1,303.46 1,581.44 2,070.58 2,858.26 2,213.14 69.78

Street lights 49.20 102.46 152.11 230.95 308.29 526.60

Public water works 384.77 470.19 555.56 643.56 738.86 92.03

Power looms --- 258.23 364.36 430.52 560.52 117.06

Industrial 917.43 858.75 802.19 708.18 782.84 (-) 14.67

Permanently disconnected consumers

859.83 1,189.75 1,497.77 1,969.25 2,215.55 157.67

Mula pravara? 364 244.73 223.12 370.61 445.69 22.44

Tata Power Company 181 245.77 417.47 519.87 356.27 96.83

?? Arrears of revenue show an increasing trend for consumers in the category of street lights, public water works, power looms and permanently disconnected consumers.

?? Dues recoverable from permanently disconnected (PD) consumers have increased by 158 per cent (Rs.859.83 crore to Rs.2,215.55 crore) during 1999-2004. The Board needs to investigate how the PD consumers are meeting their energy needs after disconnection by the Board. The Board stated during ARCPSE meeting (July 2004) that the matter would be investigated by vigilance wing of the Board.

?? In the case of Tata Power Company, revenue arrears increased from Rs.181 crore in 1999-2000 to Rs.356.27 crore in 2003-04.

?? Similarly, in the case of Mula Pravara, the arrears increased from Rs.364 crore in 1999-2000 to Rs.445.69 crore.

?? As on 31 March 2004, top 100 industrial and high tension (HT) consumers owed the Board Rs.1,101.84 crore. ‘Conditions and miscellaneous charges for supply of electrical energy’ prescribes payment of the bill within 15 days from the date of the bill (HT consumer). If the consumer fails to pay any bill presented to him within the prescribed period, the Board is at liberty to cut off the supply after giving not less than seven days clear notice. The Board failed to effectively use its powers to ensure prompt recovery of energy charges. Instead, the Board allowed the facility of instalments/deferments of dues from time to time,

? Mula pravara is a co-operative society for distribution of power in Ahmednagar district.


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as discussed below:

Thus, due to the laxity shown by the Board, the consumers failed to clear the dues.

Age-wise analysis of dues

3.1.7 Dues outstanding for more than three years increased from Rs.936.10 crore (1999-2000) to Rs.2,663.68 crore (2003-04). Dues outstanding for more than two years constitute more than 40 per cent of the total dues. Zone-wise analysis showed that major arrears are in Nasik (Rs.1,190.34 crore), Bhandup urban (Rs.1,104.74 crore) and Beed (Rs.1,056.41 crore) zones. Circle wise analysis showed that in Bhiwandi circle, total arrears were to the tune of Rs.809.31 crore followed by Pune urban (Rs.457.22 crore) and Aurangabad (Rs.424.16 crore) circles.

Management of revenue collection

Slackness in recovery

3.1.8 Audit noticed that there was slackness in filing court cases and recovery of dues from defaulters as detailed below:

?? As on 31 March 2004, the Board had not filed court cases against 384 HT consumers for recovery of arrears of Rs.116.08 crore.

Sl. No.

Name of the consumer and

circle

Dues as on March 2004 (Rupees in

crore)

Audit observations

1. Uniferro International (Bhandara circle)

170.07 The consumer was in arrears of Rs.6.61 crore (September 2001). The Board allowed various packages to the consumer from time to time. This resulted in increase in arrears to Rs.170.07 crore (March 2004).

2. Ispat Industries Limited (Pen circle)

132.27 The consumer was given instalment facility for clearing arrears several times. However, arrears of the consumer increased from Rs 5.49 crore (April 1998) to Rs.155.94 crore (July 2000) and Rs.132.27 crore (March 2004).

3. Lloyd Steel Industries (Wardha circle)

33.44 The Board granted instalment facility six times between March 2001 and October 2002.

4. Vipras Castings Limited (Pen circle)

16.78 The Board granted instalment facility several times. Arrears of the consumer increased from Rs.8.33 crore (April 2002) to Rs.16.78 crore (March 2004). The supply of the consumer has been permanently disconnected on 25th May 2004.


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?? The courts had decided 9,423 cases of LT consumers (Rs.6.70 crore) and 228 HT consumers (Rs.56.11 crore) in favour of the Board. A test check of 115 cases in 12 operation and maintenance (O&M) circles? revealed that as against the decreed amount of Rs.22.44 crore the Board recovered only Rs.17.32 lakh. In Kalyan circle, decrees were passed in four cases (January 2001-03) for Rs.2.73 crore in favour of the Board, but even after lapse of two years no action had been taken for execution of the decrees.

Delay in issue of bills

3.1.9 Timely issue of bills facilitates early realisation of revenue. A reference is invited to paragraphs No.3.3.20 and 3.3.27 of Information Technology Review of HT billing system of Comptroller and Auditor General of India (Commercial) 2002-03, Government of Maharashtra wherein delay in issue of bills has been commented upon. There is a need to ensure timely issue of bills.

The Board admitted (July 2004) the delay and promised to strengthen the system.

Incorrect withdrawal of arrears relating to minimum charges

3.1.10 As per Code of Commercial Instructions, consumers in whose case period of six months is not over after temporary disconnection (TD) are to be treated as live consumers. In such cases, the consumer is given a grace period of six months within which the consumer can pay the dues either in lump sum or in instalments to avoid permanent disconnection. In view of this concession, the consumer is required to pay minimum charges to the Board for this period.

Scrutiny in Kalyan circle showed that during 2001-02, while preparing the final bill in respect of 24 consumers, arrears of Rs.1.09 crore billed for the period between temporary and permanent disconnection were wrongly withdrawn on the ground that they were fictitious. The withdrawal was incorrect because the arrears were not fictitious but related to the minimum charges payable. By withdrawing the arrears, the Board forfeited its claim to realise the revenue.

The Board stated (July 2004) that it was revising the suit amount in respect of court cases already filed by incorporating amount of arrears wrongly withdrawn.

Delay in adjustment of energy charges from Western Coal Fields Limited

3.1.11 The Board purchases coal from Western Coal Fields Limited (WCL) and also supplies energy to it. The agreement between the Board and WCL provides that the Board can adjust its monthly energy bills against coal bills of WCL between ninth and eighteenth of the month. Payments to WCL are almost on daily basis. It would have, therefore, been in the interest of the ? Pune Rural , Pune Urban, Vashi, Bhiwandi, Gadchiroli, Nagpur Rural, Jalgaon, Kalyan, Nasik, Pen, Nagpur Urban and Dhule Circle.

There was incorrect withdrawal of arrears of Rs.1.09 crore.

The Board had obtained decrees of Rs.22.44 crore in its favour but recovery from consumers was a meagre Rs.17.32 lakh.


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Board to have made adjustment of its energy bills at the earliest possible date i.e. ninth of a month. A scrutiny of energy bills (2001-2004) showed that energy charges of Rs.397.57 crore were adjusted from the coal bills after nineteenth of the month. Failure to adjust energy bills on the earliest permissible date led to interest loss of Rs.1.44 crore? .

Management of banking transactions

Delayed remittances by nationalised banks

3.1.12 As per the standing instructions given to the nationalised banks, at the time of opening of the non-operative accounts by the concerned unit, remittance of the fund is to be made daily to head office.

?? Test check of 1,509 cases for 2002-03 revealed that after allowing grace period of three days for telegraphic transfer (TT) and seven days for mail transfer, delay in remittances involving Rs.230.24 crore by Bank of Maharashtra and State Bank of India resulted in loss of interest of Rs.91.38? lakh. In 17 cases, delays were more than 100 days. Table below illustrates a few cases:

Sl. No. Name of Bank Place Amount

(Rupees in lakh) Delay

in days

1 State Bank of India Kamptee 5.49 126

2 State Bank of India Bhandara 2.60 125

3 State Bank of India Dhule 3.92 128

4 State Bank of India Dhule 2.45 233

5 Bank of Maharashtra Nasik 20.00 221




The Board stated (July 2004) that the interest due to delayed remittances was not collected from the banks as they were giving at par remittances facilities. The reply is not tenable as the delay by banks was violative of the standing instructions of Reserve Bank of India (RBI). There is a need to evolve transparent arrangement with banks where the two issues are not linked together and a few bank branches do not unduly delay remittances. The Board should have also taken up with the banks to remit the fund through electronic transfer in urban and semi urban areas.

? At the rate of 14.5 per cent being interest rate of cash credit availed by the Board. Loss of interest in other cases in this review has also been worked out by considering interest on cash credit. ? Worked out at cash credit rate of 14.5 per cent per annum.

Due to delayed remittances by banks between HQrs and field offices, the Board suffered interest loss of Rs.91.38 lakh.


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Delay in transfer of funds by banks to field offices

3.1.13 A review of repatriation of funds from WM section to field offices revealed that banks were not repatriating the fund to field offices within three days (as per RBI norm) in the cases of TT. A test check of transactions revealed that there were delays up to 14 days in crediting the funds to units by banks resulting in loss of interest of Rs.41.41 lakh as detailed below:

Name of the units No. of cases

Years Delay in days

Loss of interest (Rupees in lakh)

Nasik TPS 60 2001-03 14 8.56 Chandrapur, Koradi and Khaperkheda TPSs

199 2002-03 10 25.78

Superintendent Engineer, coal office

--- 2002-03 8 7.07

Total 41.41

Delay in transfer of balances from non operative accounts

3.1.14 Operational and maintenance circles, divisions and sub-divisions maintain bank accounts with different banks. Since these are non-operative accounts, there is a need for speedy transfer of balances to the Board’s working fund account at WM section. Audit noticed that in nine? out of 15 circles/divisions test checked, banks were not repatriating funds promptly. Some major cases pertaining to the year 2002-03 are given below:

Name of the Unit Remarks Loss of interest Pune urban circle Non remittance of full amount 1.09 crore Pune rural circle Non remittance of full amount 41.23 lakh Nagpur rural circle Delay in remittances to HQs 1.73 lakh Amravati O&M circle Non remittance of full amount 3.00 lakh Bhandup O&M circle Kept huge balances 0.53 lakh Bhandup O&M division Kept huge balances 0.99 lakh Bhiwandi O&M division Retains more than Rs.10,000 1.58 lakh Panvel O&M division Non remittance of full amount 2.21 lakh Pen O&M circle Kept huge balances

Up to Rs.2.07 crore 0.93 lakh

Prompt transfer of funds from field offices is necessary to minimise drawal of fund under cash credit (CC) and working capital demand loan (WCDL). Audit observed that there were huge balances lying in non-operative accounts in field offices that were not promptly repatriated to WM section. Audit further observed that despite huge balances lying in collection accounts in field units, the Board availed cash credit resulting in avoidable payment of interest. During 1999-2004, the Board paid Rs.3.83 crore towards interest on CC, besides Rs.31.12 crore towards interest on WCDL.

? Nagpur Rural, Amravati, Bhandup, Pune Rural, Pune Urban and Pen - O&M circles and Bhiwandi, Bhandup and Panvel - O&M divisions

Field units failed to promptly transfer funds from non-operative accounts to the Board's working fund.

Delay in transfer of funds by banks resulted in loss of interest of Rs.41.41 lakh.


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The Board stated (July 2004) that instructions would be issued to field offices for prompt remittance of funds from non operative accounts.

Avoidable loss of interest and demand draft charges

3.1.15 Funds are transferred by WM section to various power stations for making various payments including for water cess. TPS in turn issues demand drafts (DD) to offices of the Maharashtra Pollution Control Board. Instead of following this circuitous route, payments directly by WM section through local cheques would have resulted in savings of commission on DDs/TTs besides loss of interest on fund blocked during transfer. A test check in three? TPSs showed that during 2000-03 fund amounting to Rs.2.22 crore were transferred for payment of water cess.

The Board stated (July 2004) that possibility of direct payment at Mumbai through local cheque would be explored.

Non realisation/delay in realisation of inter-state energy charges

3.1.16 The Board was to supply (February-March 1998) electricity to Karnataka Electricity Board (KEB) during off peak period at the rate of Rs.2.10 per unit. The Board supplied electricity to KEB not only during the off peak period but during peak hours also. The tariff for drawal during peak hours was charged at non peak rates resulting in loss of Rs.9.82 crore in the sale of energy. Further, KEB was to open letter of credit (LC) for payment equivalent to one month's energy charges. But no LC was opened by KEB. As a result, dues of Rs.3.36 crore on account of power supply remained to be recovered (July 2004).

Similarly, recoveries from Madhya Pradesh Electricity Board (MPEB) on account of power supply were not made promptly. As a result, the amount outstanding from MPEB accumulated to Rs.2.27 crore as on March 2004, pertaining to the period 1996-2003.

Non refund of TT/DD commission charges

3.1.17 The Board maintains account with Canara Bank. During February-March 1999, in departure from prevalent practice, Canara Bank charged DD/TT commission of Rs.40.98 lakh instead of issuing DD/TT at par. The Board has not got the amount refunded so far (July 2004). The Board has agreed (July 2004) to take up the matter with the bank.

Collection of energy charges by collection Agents

3.1.18 The Board collects energy charges from consumers through its own collection centres as well as private collection agents. The terms and conditions of appointment of collection agents inter alia provides that collection agent shall pay security deposit (SD) which should match with the weekly collection and be reviewed every month. The collection agents are required to submit daily collection statements along with proof of deposit of ? Chandrapur, Koradi and Khaperkheda.


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money in bank. Audit observed that during test check of three? out of 35 divisional offices for the years 2000-04, the SDs given by the agents were not matching with the weekly collections as shown below:

(Amount:Rupees in lakh) Name of O&M

division Security deposit

collected

Average weekly collection

Amount defaulted by

agent

Amount outstanding after adjusting security deposit

Thane 0.50 12.30 14.88 14.38 Vashi 2.00 67.54 10.25 3.91? Kalwa 0.50 4.43 5.12 4.62

Total 3.00 84.27 30.25 22.91

Misappropriated cash of Rs.22.91 lakh by the three collection agents remained unrecovered (July 2004). The matter is pending with police/court in respect of two agents while the third agent (Vashi division) was adjusting the dues in piecemeal.

The Board stated (July 2004) that suitable instructions regarding collection of adequate SDs from private collection agents would be issued.

Short collection of SD from consumers

3.1.19 As per the Board's Conditions and Miscellaneous Charges for Supply of Electrical Energy, the Board shall collect SD amount which shall be equivalent to one month’s average billing for HT consumers, two months average billing for urban domestic consumers and three months average billing for LT agricultural category etc.

Audit observed that O&M circles/divisions were not collecting additional SD when there was increase in average billed charges. The non recovery of additional SD of Rs.31.66 crore during 2002-03 in respect of nine units? resulted in loss of interest of Rs.3.48 crore? in one year besides increasing the risk of bad debts in the event of default by consumers.

The Board stated (July 2004) that the procedure has been streamlined by issuing circular in August 2001. Audit scrutiny, however, revealed that implementation of the directives even after issue of circular was far from satisfactory and there was short collection in 2002-03 also.

? Thane, Vashi and Kalwa divisions. ? After adjustment of SD rupees two lakh and commission Rs.4.34 lakh. ? Pen circle-Rs.5.35 crore; Kalyan circle-Rs.92.77 lakh; Aurangabad urban circle-Rs.1.46 crore; Aurangabad rural circle-Rs.5.20 crore; Parbhani circle-Rs.2.99 crore; Jalna circle-Rs.5.06 crore; Kalwa division-Rs.7.26 crore; Pune division-Rs.3.05 crore; and Pune Rajgurunagar division-Rs.35.9 lakh. ? Interest at the rate of 14.5 per cent as being interest rate of cash credit availed by the Board during 2002-03 less 3.5 per cent interest payable on SD.

Lapses in collection of SDs facilitated default/ misappropriation of collection of Rs.22.91 lakh by private collection agents.

Short recovery of SD of Rs.31.66 crore resulted in interest loss of Rs.3.48 crore per annum.


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Short collection from consumers for outright contribution works

3.1.20 The Board guidelines for outright contribution (ORC) works provides that works executed by O&M divisions on behalf of consumers should be fully funded by the consumers (as per departmental circular (Commercial) No. 521 dated 20 October 1993). Audit observed that divisions were not recovering the actual expenditure incurred from consumers. A test check of O&M divisions revealed that Rs.4.95 crore was recoverable from consumers (1998-2003) in respect of seven circles/divisions.? Interest loss for one year works out to Rs.71.77 lakh.

Delay in realisation of claims

3.1.21 It is necessary that claims receivable should be pursued promptly so that outstanding dues are realised early.

?? Railway claims receivable on account of missing wagons were Rs.213.39 crore as on 31 March 2004. Of this, Rs.188.09 crore is pending for more than three years. The non-settlement of claims has resulted in blocking of funds and loss of interest of Rs.30.94 crore? per year.

?? Audit scrutiny revealed that on account of non-submission of requisite documents for claims (April 1999 to July 2003), the Board is yet (March 2004) to receive from WCL Rs.3.57 crore relating to compensation for shales and stones in respect of all the seven TPSs. This includes claims of Rs.2.40 crore which were not settled due to non submission of documents as per fuel supply agreement (FSA) and Rs.1.17 crore due to non existence of FSA during June 2002-July 2003. The Board stated (July 2004) that the documents have been submitted to WCL. The reply of the Board is not consistent with the letter from WCL (March 2004) pointing out insufficient documentation. The matter needs to be sorted out early.

?? Audit noticed that 30 field offices of the Board paid tax of Rs.1.52 crore on sale of electricity for the calendar year 2000 (up to September 2000) in respect of 251 consumers. As the energy sold in respect of HT consumers did not exceed the specified limit of 2 million units, the tax was not leviable. The refund has not been obtained so far.

The Board stated (July 2004) that the matter regarding refund/adjustment has been taken up with State Government.

? Ahmednagar circle (three divisions)-Rs.16.27 lakh; Thane/Wagle Estate division-Rs.59.18 lakh; Bhandup division-Rs.55.40 lakh; Kalwa division-Rs.2.47 crore; Nagpur Rural circle (three divisions)-Rs.87.19 lakh; Malegaon division-Rs.5.6 lakh Goregaon division-Rs.24.65 lakh. ? Calculated at the rate of 14.5 per cent per annum.

The Board is yet to recover Rs.4.95 crore from consumers for ORC works.

The Board suffered interest loss of Rs.30.94 crore per year due to delay in realisation of railway claims.


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Payments

3.1.22 The major payments of the Board include payments for purchase of power, fuel and capital assets, repayment of loans, interest on loans, establishment expenses and operation and maintenance expenses.

Non availment of the peak rate of rebate offered by National Thermal Power Corporation

3.1.23 As per GOI’s instructions of April 1997, National Thermal Power Corporation (NTPC) was to allow a rebate of 2.5 per cent on the amount paid through LC on presentation of bills to bank, 1.5 per cent up to 20th day and one per cent up to one month from the date of billing.

A scrutiny of payments to NTPC revealed that peak rate of rebate was not availed of. The benefit foregone worked out to Rs.7.34 crore (2003-04) after allowing interest payment and LC charges on availing cash credit for making timely payments to NTPC.

The Board stated (July 2004) that due to uncertain and inconsistent repatriation of funds during the first week of the month coupled with unavoidable scheduled payments to other agencies, it was not able to avail full peak rebate offered by NTPC. The reply is not tenable as the Board has not utilised the option of cash credit. Reduction in outstandings relating to energy charges would have also facilitated the Board to avail of the maximum rebate.

Non recovery/adjustment of interest free advances to suppliers/contractors

3.1.24 As on 31 March 2004, the year-wise position of outstanding interest free advances given by the Board to suppliers and contractors for supply of materials was as under:

(Rupees in crore) Advances to suppliers/contractors

Year Capital Operation and maintenance

Total

Up to 2000-01 1.59 5.06 6.65

2001-02 5.33 4.30 9.63

2002-03 10.01 7.89 17.90

2003-04 22.57 59.48 82.05

Total 39.50 76.73 116.23

Above table indicates that Rs.116.23 crore paid as advances to suppliers/contractors was lying unadjusted and unrecovered as on 31 March 2004. Of this, advances of Rs.6.65 crore remained unadjusted for more than three years. Out of the capital advances of Rs.39.50 crore, more than 59 per cent (Rs.23.13 crore) pertain to extra high voltage construction zone, Pune. There is a need for early adjustment to ascertain balance amounts recoverable as the advances are interest free.

Failure to take full advantage of rebate led to loss of Rs.7.34 crore.

Advances of Rs.116.23 crore to suppliers/ contractors remained unrecovered/ unadjusted.


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Management of loan transactions

3.1.25 The table below summarises the loans received by the Board during 1999-2004 from Government and other financial institutions:

(Rupees in crore) Source of Loan 1999-2000 2000-01 2001-02 2002-03 2003-04

(provisional)

Government 347.24 231.40 522.29 179.64 60.57

LIC 84.00 0.00 0.00 0.00 0.00

IDBI 267.73 117.36 73.79 123.66 72.13

REC 392.00 758.59 558.02 654.24 495.80

PFC 373.91 140.93 348.83 338.29 688.63

Others 502.56 730.19 299.62 203.49 416.92

Total 1,967.44 2,003.91 1,802.55 1,500.88 1,734.05

Non redemption of costly loans

3.1.26 One of the important functions of a fund manager is to avail loans at cheaper rates and prepay costlier loans already taken. The Board was sanctioned loans of Rs.10 crore by Chandrapur District Central Co-operative Bank (DCC bank) in February 1999 and Rs.20 crore by Sindhudurg DCC Bank in August 1999 at the interest rate of 14.5 per cent per annum. Subsequently, in December 1999 the interest rate in the market declined to less than 13 per cent per annum but the Board did not borrow to prepay the costlier loans. The interest benefit foregone was Rs.1.52 crore up to September 2003.

The Board stated (July 2004) that it was not able to prepay the loans due to difficulty in tie-up for finance. Had the Board been effective in recovery of the outstandings, the borrowings at high cost could have been avoided. The Board should have rescheduled the interest rate from December 1999. Only at a belated stage in October 2003 the rate was got reduced.

Avoidable payment of commitment charges to Power Finance Corporation

3.1.27 During 1999-2003, Power Finance Corporation (PFC) sanctioned loans of Rs.1,482.41 crore to the Board. The Board drew only Rs.775.53 crore (52.31 per cent). The terms and conditions of loans sanctioned by PFC inter alia stipulated that failure to adhere to the loan drawal schedule would attract levy of commitment charges at the rate of one per cent per annum on the amount scheduled to be drawn in each quarter/year till the date of actual drawal of the amount. Audit observed that during 1999-2004, the Board had not drawn loans as per the schedule in 109 out of 138 loan cases (79 per cent) and therefore, it had to pay commitment charges of Rs.8.45 crore.

Failure to redeem costly loans led to additional interest payment of Rs.1.52 crore.

The Board paid commitment charges of Rs.8.45 crore due to non adherence to drawal schedule in 79 per cent cases.


46

The Board stated (July 2004) that the delay in execution of projects led to delay in drawal of funds. The reply is not tenable as the Board failed to adhere to the schedule in 79 per cent cases. Given the penalty for delay in drawal of funds, the Board should have completed the project as per schedule.

Lapses in restructuring of debt from PFC

3.1.28 The Board was given an opportunity (May 2002) to reduce its interest burden when PFC agreed to restructure its costlier outstanding loans. There was an error in computing the interest payable to PFC on restructured loans. The Board paid excess interest of Rs.6.76 crore due to application of rate higher than the applicable rate (by 0.5 per cent) on 14 loans amounting to Rs.359.20 crore (20 per cent of total loans).

The Board stated (July 2004) that the issue was taken up with PFC in July 2004.

Payment of penal interest on loans from Rural Electrification Corporation Limited

3.1.29 Correct estimation of fund requirement is an important task of a fund manager. The Board obtains loans from Rural Electrification Corporation Limited (REC) for implementing its different schemes. Out of loans of Rs.161.15 crore sanctioned by REC during 1996-2000, the Board has drawn only Rs.23.70 crore (15 per cent) up to July 2002. In respect of 64 schemes of different categories,? the Board has drawn only first and second instalments. The Board is liable to pay penal interest of Rs.75.11 lakh for the period 2001-04 on the amounts not drawn in respect of 50 schemes.

The Board stated (July 2004) that REC was requested to waive the penalty. The request of the Board for waiver of penal interest has not been accepted by REC so far (July 2004).

Conclusion

There was deterioration in collection of revenue. The Board is lax in initiating legal action for recovery of arrears. Delayed remittances by banks, unnecessary retention of large balances in collection accounts and delay in realisation of revenue on inter-state sales resulted in loss of interest. Inadequate security deposits from private collection agents facilitated fraud. Non redemption of costlier loans, payment of commitment charges and penal interest on undrawn loans contributed to higher cost of borrowing. The Board failed to optimise the benefits of rebates on payments offered by suppliers.

? System improvement, intensive electrification and pumpset energization.

The Board incurred extra interest burden of Rs.6.76 crore due to erroneous computation of interest.


47

The Board should take effective remedial measures to recover its dues promptly, ensure early transfer of funds by banks, redeem its costlier loans and avoid payment of commitment charges by timely implementation of projects through proper planning.

49

3.2 Implementation of information technology in the Integrated Bus Reservation System in Maharashtra State Road Transport Corporation

Highlights

The Corporation did not invite open tenders for procurement of hardware.

(Paragraph 3.2.5)


(Paragraph 3.2.6)

Database was not designed to capture critical data and appropriate validation checks were not incorporated.

(Paragraphs 3.2.7-3.2.8)

A concession of Rs.52.88 lakh was granted under an unauthorised miscellaneous concession code.

(Paragraph 3.2.9)

Due to non-incorporation of audit trails, unauthorised access, modification of data and programs cannot be detected.

(Paragraph 3.2.11)

Assignment of common identity for all users instead of having a unique identity for each user rendered the system vulnerable to misuse.

(Paragraph 3.2.14)

Frequent breakdowns of leased lines resulted in unwarranted expenditure of Rs.15.05 lakh.

(Paragraph 3.2.16)

Due to absence of business continuity plan and standby system, the integrated bus reservation system is vulnerable to serious disruption.

(Paragraph 3.2.17)


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Introduction

3.2.1 Maharashtra State Road Transport Corporation (Corporation) was established in 1961 under the State Road Transport Corporations (SRTC) Act, 1950. To facilitate passenger reservation, the Corporation has an online passenger reservation system known as Integrated Bus Reservation System (IBRS).


3.2.2 The information technology (IT) needs of the Corporation are overseen by the electronic data processing (EDP) Centre at Head Office, Mumbai. EDP is headed by a Deputy General Manager (EDP) who is assisted by Senior Programmers, Junior Programmers and Data Processing Officers. The EDP Centre is responsible for the implementation and maintenance of the IBRS which functions under the Financial Adviser and Chief Accounts Officer.

Scope and methodology of Audit

3.2.3 During October 2003 to April 2004, audit reviewed general IT controls that control the design, security and use of computer programs in the Corporation and IT application controls specific to computerised IBRS and evaluated the effectiveness of the system in achieving organisational objectives. Taking into account various policy guidelines, circulars, tariff rules, fare revision, concessions offered etc., business logic queries were developed which were converted into Structured Query Language (SQL) and run on data of the IBRS pertaining to the period November 2001 to December 2003 with the assistance of authorised EDP staff of the Corporation.

Integrated Bus Reservation System

3.2.4 The online reservation system (IBRS) was first implemented through a proprietary1 mainframe system in 1988 using Cobol? platform, which was reengineered during 1996-97 using Oracle RDBMS? platform as back end and Forms Library as front end. The IBRS facility is available for all the buses originating from Mumbai (including Thane) and Pune. The database is maintained in a server at one location each in Mumbai and Pune respectively. While terminals installed at Mumbai centre are connected to the server using local terminal server (LTS), the terminals installed at six reservation centres2 1 ICIM 6080 ? Cobol – Common business oriented language. ? RDBMS - Relational data base management system. 2 Parel, Kurla, Dadar, Borivali, Vashi and Thane.


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are connected to the Mumbai server through dedicated leased data circuit lines. In addition, reservation facilities have been provided through dial up telephone lines to four private booking agents3 situated in suburban areas at Mumbai. Similar arrangements exist at Pune with five reservation centres4 and six private booking agents5 in suburban areas. The Pune and Mumbai servers are connected to each other through dedicated leased lines.

Audit observations on IBRS

System acquisition, development and implementation

3.2.5 The Corporation, violating the transparency requirements of open tenders, invited limited tenders only from two vendors M/s. International Computers Indian Manufacture Limited (ICIM) and M/s. CMS Computer Private Limited. A purchase order (April 1996) for supply of hardware6 was placed with ICIM, Mumbai for Rs.35.02 lakh even though their past performance was not satisfactory as there were slippages in development of software in an earlier order. A purchase order for development of application software in RDBMS platform and work group server was placed at a cost of Rs.14.57 lakh with M/s. Neo Computers, a subcontractor of ICIM. Though there was a delay of 13 months in the delivery of software, the Corporation did not impose any penalty.

The Corporation stated that Rs.2.52 lakh was withheld by not paying annual maintenance charges. The reply is not tenable as no penalty was charged as per terms of contract.

Audit also observed that systematic phase wise testing and stage wise check off were not done to enable proper evaluation of each stage of system development and no documentation was maintained.

The Corporation stated (August 2004) that proper care would be taken in future.

Unauthorised computation rules

3.2.6 The fare to be collected from a passenger is dependent on the number of stages travelled. Given a starting point and a destination, the number of stages are decided on the basis of one stage for every six kms to be stretched up to next 0.7 km for in between stops and maximum of next 1.3 kms for ultimate destination.

Audit noticed that this was not implemented in practice and the number of stages for which a passenger is charged is generally lower than the number of stages actually travelled. Using SQL, Audit noticed that in respect of long

3 Vile Parle, Goregaon, Kandivali and Malad. 4 Swargate, Shivajinagar, Pune Station, Pimpri Chinchwad, and Deccan. 5 Aundh, Singhgad Road, Kothrud, Nigdi, Paud Road and Bhusari Colony. 6 Team server with SCO Unix operating system.

Phase wise testing was not done; certification from competent authority was not obtained.


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distance (LD) and middle long distance (MLD) services departing from Mumbai Central and Pune, there was shortfall in fixing of chargeable stages in respect of 12,157 bus stops for the period January 2001 to December 2003. This resulted in under charging of fares and consequent loss of revenue of Rs.16.50 crore7.

The Corporation while confirming the above facts stated (August 2004) that stretching of stages may be necessitated by many factors such as (a) bifurcating of route from state/national highway to interior routes, (b) coinciding of stages point of various routes, (c) considering important alighting/boarding stops, villages, towns etc. The reply was not tenable, as the Corporation did not furnish any authority such as Government/Board of Directors’ resolution, circulars permitting the stretching of stages beyond prescribed limits stated above.

The Corporation also stated that detailed examination of these issues will be taken up and necessary action will be taken accordingly.

Defective table design

3.2.7 The Corporation offers 100 per cent concessional fare to freedom fighters, Dalit Mitras,? authorised press reporters, employees etc. Audit observed that the number of passengers who availed the above concessions between January 2001 and December 2003 was 1,33,526 and the monetary value of the concessions so availed was Rs.2.18 crore. Audit also observed that the database was not designed to capture data such as identity number, pass number, date of issue, validity period of pass, authorisation details, family details of employees, depot where passes were issued etc. In the absence of above data, the system was prone to misuse.

Audit also observed that the ‘name’ field accepted numeric characters. It was evident that user requirements were not properly assessed while designing the table structure. In view of the large number of passengers and the money value involved, capture of important data is critical for information as well as for analysis of the concessional scheme.

The Corporation, while confirming the above facts and figures stated (September 2004) that necessary action would be taken to capture such critical data in the new system.

Lack of preventive validation checks/controls

3.2.8 Audit observed that important validation checks/controls, which are necessary to prevent misuse of the system, were not incorporated in the application as is evident from the following examples:

7 Based on a conservative 50 per cent load factor for the number of days the bus services were operated during the period November 2001 to March 2004. ? The persons who have received Dalit Mitra (friend of backward person) award from State Government.

Database was not designed to capture critical data.



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?? Passengers whose age was less than 60 years (i.e. date of birth after 1943) and minors (i.e. age <15 years) were granted 100 per cent concession in fare as freedom fighters.

?? As per business rules, a Dalit Mitra is eligible for only one escort. Audit, however, observed that often more than two persons were allowed to travel on the same ticket.

It is evident that preventive validation checks were neither incorporated in the IBRS system nor exercised by the booking clerks at the booking centres.

The Corporation stated that necessary validation checks would be provided in the software and instructions would also be issued to the booking clerks.

Unauthorised 'MS' code used for grant of concession

3.2.9 Audit noticed that a miscellaneous concession code (MS) was created in the concession table wherein 100 per cent concession was granted and 34,543 passengers availed 100 per cent concession aggregating Rs.52.88 lakh under this category for the period November 2001 to December 2003. However, there was no authorisation for creation of this code for grant of 100 per cent concession and consequently no eligibility criteria was fixed for grant of such concessions by the Corporation. The grant of above concession was left entirely to the discretion of the data entry clerk at the reservation counter without any validation checks. Thus, it is clear that the IBRS database was vulnerable to manipulation, which, in the absence of any logs and trails cannot be traced.

The Corporation stated that the matter of deletion of the said concession code would be taken up with the traffic department. Moreover, critical information system such as IBRS requires a sound change management procedure for recording and performing changes. It was also observed that EDP officials interpreted the various circulars and incorporated the required changes in the IBRS system without formally involving the user department responsible for the implementation of Board’s directives. Although sample cases of major changes were sent to the user department there was no system of formal certification from the user department for proper feedback.

The Corporation stated that such formal certification from user department would be obtained in future.

Lack of supplementary checks

3.2.10 Audit noticed that, apart from the deficiencies in the application software as stated above, even manual supplementary checks were lacking as seen from the following examples:

?? Employees were permitted to book tickets without pass or beyond expiry date of pass. The Corporation stated that necessary validation checks would be incorporated.

Appropriate validation checks were not incorporated.

A concession of Rs.52.88 lakh was granted under an unauthorised code.

Feedback from user department was not obtained for changes carried out.


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?? During travel, conductors are required to verify the identity and authenticity of the concession holders by verifying the identity card, pass/coupon number issued by the respective depots and enter such details in the way bills for further check at the depot level. Audit, however, observed that the above details were not entered in 1,095 waybills verified. The Corporation stated (September 2004) that instructions for recording the details of concessions on the waybill have been issued vide department circular No.25/2004 dated 2 September 2004.

?? Family members of employees are eligible for free travel passes. As the employee is not mandatorily required to travel with the family and the pass is valid for travel anywhere in Maharashtra for one month, the present practice of not issuing family identity cards is not foolproof. No photo identity cards are issued. In the absence of such photo identity cards for families, it is not clear as to how the Corporation ensures that only bonafide family members avail of this concession. Audit further observed that conductors did not enter travel details in the pass. In the absence of such details, the Corporation will not be able to restrict travel to the prescribed limit. The Corporation stated (August 2004) that it would examine the possibility of issuing photo identity cards. It also stated that necessary instructions would be issued to the conductors for recording the details of travel in the pass.

Audit trails not incorporated

3.2.11 As per the system requirement specifications (SRS) and terms of contract, the vendor was to incorporate Master Audit Trail Reports and Other Transaction Reports in the application software. Audit observed that audit/system logs were not incorporated in the software. In the absence of audit trails and system logs, unauthorised access, modification to data, programs, table structure cannot be detected and the person responsible for such unauthorised access and modification cannot be identified.

The Corporation stated (August 2004) that audit trails were not incorporated, as it would affect the response time resulting in delay in issue of tickets to the passengers as well as limited hard disk capacity. The reply is not satisfactory as audit trails are an important and integral part of any IT application and the system response time criterion should have been met without compromising on the audit trail. Creation and maintenance of audit trails is relevant in the view of unauthorised creation of code wherein 100 per cent concession of Rs.52.88 lakh was granted, as detailed in paragraph 3.2.9.

The Corporation stated (August 2004) that such audit trails will be incorporated in the new software under development.

Private booking agents

3.2.12 To safeguard the Corporation’s financial interests, booking by private agents is to be restricted to the extent of security deposit held by the Corporation. Audit noticed that proper validation checks were not incorporated to limit ticket booking by private agents to the extent of security

Family photo identity cards were not issued and hence passes were vulnerable to misuse.

Unauthorised access, modification of data/ programmes cannot be detected due to non-incorporation of audit trails.

There was lack of system controls on booking by private agents.


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deposit held by the Corporation. Consequently, it could not prevent overbooking by four private agents who subsequently defaulted in paying Rs.6.46 lakh. The Corporation accepted (August 2004) that at present there is no provision in the IBRS to check the amount receivable from private booking agents and stated that necessary checks would be incorporated in consultation with user departments. It also stated that it had recovered Rs.5.65 lakh (principal Rs.4.98, interest Rs.0.67 lakh) and balance principal of Rs.1.48 lakh was yet to be recovered.

Non generation of report on balance fare to be collected

3.2.13 The IBRS system did not provide for generation of critical information on the balance fare to be collected whenever fare is revised from the passengers who had availed advance reservation facility prior to revision of fares. A query to generate the above information revealed that 1,47,754 passengers availed advance reservation through the IBRS system and money value of differential fares to be collected was Rs.11.04 lakh as per IBRS system. In the absence of such reports, there is no mechanism to verify whether conductors have collected the balance fare.

The Corporation stated (August 2004) that necessary care would be taken to generate such reports in the future.

System security

3.2.14 Lack of segregation of duties, password, operating and application security controls

?? General users such as punch operators, programmers, computer operators were also granted roles as Data Base Administrator/Divisional Traffic Officer (DBA/DTO). This arrangement is not in conformity with the need for segregation of duties. The user ID was the same for all the booking centres.

The Corporation stated (August 2004) that such logins were maintained for effective operation of the system. The reply is not acceptable as this practice adversely affected the security in a revenue generating application.

?? Unix login for access to the IBRS source code was too generic and all persons having access to the source code shared the same password. Persons who had resigned/transferred to another department continued to have user access as DBA/DTO. Even the software vendor who developed the software in 1997 continued to have user access. The Corporation stated (August 2004) that necessary action would be taken.

?? Even single character was accepted as password. Normal password control procedures of automatic lapse of password after a predefined period to facilitate periodic change of passwords were non-existent. In the absence of system logs, security breaches cannot be detected. The

IBRS was vulnerable to unauthorised access/modification.


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Corporation while confirming the above facts stated (August 2004) that it would do the needful.

?? Audit observed that the IBRS system lacked physical security as the main server was placed at the entrance of a common room in the EDP centre where visitors and staff of other departments had easy access. The Corporation stated (August 2004) that necessary care would be taken to place the server in a separate room.

Deficiencies in networking security

3.2.15 Audit observed that:

?? No firewalls, intrusion detection system, network management software to support fault management, traffic management/monitoring, access control management and security management etc. were installed in the IBRS. The Corporation stated (August 2004) that the same would be provided in future.

?? The current dial up facility requires dialling in the telephone number and password only. There was no procedure for dial back i.e. terminal/ token-based authentication system provided to private booking agents. The system is thus vulnerable to unauthorised access as any person even with little IT skills and utilities can access the database of IBRS system from anywhere through dial up modem. This vulnerability was further compounded as the data is transmitted in the network in unencrypted form. The Corporation while confirming the above facts stated (August 2004) that necessary care would be taken in the new system.

Breakdown of networking equipments

3.2.16 Breakdown of networking equipments results in denial of services. Audit observed that the service level agreement for networking did not specify any benchmark for the frequency of breakdowns and the maximum time within which the system was to be restored failing which penalty was to be levied. Due to frequent breakdowns of leased lines, connectivity had to be established through dial up facility resulting in unwarranted expenditure of Rs.15.05 lakh.

The Corporation while confirming the above facts stated (August 2004) that no service level agreement was entered into with the service provider, MTNL/BSNL being Government agencies. The reply is not tenable as service level agreement should have been entered into to ensure better service.

Absence of business continuity plan

3.2.17 The Corporation had not documented ‘disaster recovery and business continuity plan’ outlining the action to be undertaken immediately after a disaster and to effectively ensure that information processing capability can

No firewalls, intrusion detection system were installed.

IBRS was vulnerable to unauthorised access through dial up modem due to inadequate security features.

Frequent breakdowns of leased lines resulted in unwarranted expenditure of Rs.15.05 lakh.


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be resumed at the earliest. Emergency hot sites, correct/current version of system software etc., important for recovery from disaster, were not identified and documented. Audit noticed that there is no standby system. Consequently, when there was a data crash in October 2001, back up data since inception up to October 2001 could not be recovered. Subsequently, i.e. even after the crash, Audit observed that although backups of IBRS data were being taken at periodic intervals, there was no practice of offsite storage of backups. Further, there was no formal policy regarding the frequency of testing the backups or maintaining logs to verify any such tests. Though there was an annual maintenance contract worth Rs.3.00 lakh for the period June 1999 to January 2002 with the software developer (M/s. Neo Computers), there was no formal commitment for Oracle support. In the absence of formal commitment, M/s. Neo Computers could not be legally bound.

The matter was reported to the Government (May 2004); their reply had not been received (December 2004).

Conclusion

The Integrated Bus Reservation System, an online wide area networking system, had poor networking, operating, application and database security features and was hence vulnerable to unauthorised access and data/source code modification. These deficiencies had security implications in the absence of audit trails, system logs. Unauthorised business rule having bearing on the revenues of the Corporation was incorporated in the software. The database was not designed to capture critical data for grant of various concessions and validation checks were inadequate.

There is an urgent need to improve networking, operating, application and data base security features of the system.

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3.3 Maharashtra State Financial Corporation

Defaults and recovery performance

Highlights

Maharashtra State Financial Corporation was established in August 1962 under the State Financial Corporations Act, 1951. Its main objective is to accelerate industrial growth by providing financial assistance to small and medium scale industries.

(Paragraph 3.3.1)

The Corporation incurred losses continuously during 1999-2004 mainly due to slackness in recovery of its dues leading to reduction in income. Net worth of the Corporation was negative since 2000-01. As on 31 March 2004, accumulated losses of Rs.570.70 crore exceeded the paid-up capital and reserves by Rs.466.33 crore.

(Paragraph 3.3.4)

Due to slackness in recovery of its dues, the Corporation’s ability to finance units was seriously impaired and disbursement of loans declined from Rs.46.66 crore in 1999-2000 to Rs.1.57 crore in 2003-04.

(Paragraph 3.3.6)

The Corporation sanctioned loans to unviable projects. Compliance with vital conditions necessary to safeguard the Corporation’s interest was not ensured before disbursement of loan.

(Paragraphs 3.3.7 to 3.3.14)

There was no effective post disbursement inspection and monitoring of the units assisted to identify the units that were likely to turn unviable.

(Paragraph 3.3.16)

There was increase in outstanding dues from Rs.734.98 crore in 1999-2000 to Rs.1,109.04 crore in 2003-04 due to slackness in effecting recoveries.

(Paragraph 3.3.17)


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There was frequent dishonour of cheques in 412 live loan accounts. But, cases under Section 138 of Negotiable Instruments Act were not filed in 356 accounts with overdues of Rs.283.17 crore.

(Paragraph 3.3.19)

There were 1,066 cases under the category of non-performing assets for more than two years. But, the Corporation did not invoke Section 29 of State Financial Corporations Act to take over possession of assets of the defaulters. The outstanding dues in these cases were Rs.365.76 crore. In 119 out of 210 cases involving dues of Rs.78.74 crore, the Corporation did not invoke personal guarantees obtained from promoters/directors.

(Paragraph 3.3.20)

Introduction

3.3.1 Maharashtra State Financial Corporation (Corporation) was established in August 1962 under the State Financial Corporations Act (SFC Act), 1951. The main objective of the Corporation is to accelerate industrial growth in Maharashtra, Goa, Daman and Diu by providing financial assistance to small and medium scale industries having net worth (paid-up capital plus reserves) up to Rs.10 crore. Presently, the activities of the Corporation are confined to providing term loans up to Rs.2.40 crore per unit for acquiring capital assets such as land, buildings, plant and machinery etc.


3.3.2 The management of the Corporation is vested with a Board of Directors constituted as per Section 10 of SFC Act. As on 31 March 2004, there were eight directors (three nominated by the State Government, two by the Small Industries Development Bank of India and three by other shareholders). The Managing Director appointed by the State Government is the chief executive of the Corporation and is assisted by one General Manager, three Deputy General Managers and nine Regional* Managers. During 1999-2004, four Managing Directors headed the Corporation; their tenure ranged from four to 38 months.

Scope of Audit

3.3.3 Defaults and recovery performance was reviewed in audit and results thereof were included in the Report of the Comptroller and Auditor General of * At Amravati, Aurangabad, Kolhapur, Nasik, Nagpur, Panaji (Goa), Pune, Mumbai-Konkan and Thane-Daman-Diu


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India for the year ended 31 March 1996 (Commercial), Government of Maharashtra. Committee on Public Undertakings (COPU) in its 14th report (1998-99) recommended that the State Government should issue suitable directives to the Corporation regarding the manner in which speedy recovery should be done. Audit observed that the State Government did not furnish any Action Taken Note to the COPU in this regard. Action taken by the Corporation with regard to recovery has been commented upon in the review.

The present review, conducted during January-April 2004, covers defaults and recovery performance during 1999-2004 through test check of records at head office and five? out of nine regional offices. Data analysis of defaults and recoveries and detailed study of sample cases (25 per cent of overdue less than Rs.50 lakh and 50 per cent of overdue above Rs.50 lakh) was carried out.

The audit findings were reported to Government/Corporation in May 2004 with the request for attending the meeting of Audit Review Committee for State Public Sector Enterprises (ARCPSE). The meeting of ARCPSE was held on 16 July 2004, which was attended by two Deputy General Managers of the Corporation and a representative of the Industries department of Government of Maharashtra. The review has been finalised after taking into consideration replies of the Corporation and deliberations of ARCPSE.

Financial position and working results

3.3.4 Financial position and working results of the Corporation during 1999-2004 are given in Annexure-11. The Corporation made provision of Rs.315.44 crore during 2001-04 towards doubtful recoveries (non performing assets). The Corporation incurred losses continuously during 1999-2004 mainly due to slackness in recovery leading to reduction in income. Net worth was negative since 2000-01. As on 31 March 2004, accumulated losses of Rs.570.70 crore exceeded the paid-up capital and reserves (Rs.104.37 crore) by Rs.466.33 crore.

Procedure for financial assistance

3.3.5 As per Manual for project appraisal (1991), the Corporation is to give financial assistance to eligible units on receipt of application accompanied by detailed project report subject to evaluation of techno-economic viability. Such evaluation is put up to competent authority through a detailed appraisal memorandum. The appraisal memorandum deals with promoter’s background, product, raw material availability, marketability, financial projections, financial and managerial capabilities of promoters and margin money to be brought in by promoters. Loan amount up to Rs.25 lakh is sanctioned by Committee headed by Regional Manager; Rs.26 to 50 lakh by Committee

? Mumbai-Konkan, Thane-Daman-Diu, Nagpur, Aurangabad and Panaji.

The Corporation incurred losses continuously during 1999-2004. Net worth was negative since 2000-01.


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headed by General Manager; Rs.51 to 75 lakh by Committee of senior officers headed by Managing Director; Rs.76 to 125 lakh by Executive Committee (committee of directors headed by Managing Director) and full powers to the Board beyond Rs.1.25 crore. Disbursement of loan is to be made after compliance with all the terms of sanction letter and on the basis of progress of implementation of the project.

Sanction and disbursement of loan

3.3.6 A comparative statement showing the receipt of applications, sanctions and disbursement of term loans during 1999-2004 is given below: (Rupees in crore)

1999-2000 2000-01 2001-02 2002-03 2003-04 Particulars

No. Amount No. Amount No. Amount No. Amount No. Amount Loan applications pending at beginning of the year

27 15.65 21 11.50 28 21.16 11 6.85 2 3.40

Add: applications received

267 76.18 396 116.01 193 34.83 3 0.30 10 5.02

Less: Applications rejected/withdrawn

46 24.34 69 28.07 54 25.52 11 3.57 3 3.61

Net balance 248 67.49 348 99.44 167 30.47 3 3.58 9 4.81

Loans sanctioned 227 55.99 320 78.28 156 23.62 1 0.20 6 2.49

Loan applications pending at the end of the year

21 11.50 28 21.16 11 6.85 2 3.40 3 2.32

Loans disbursed 46.66 50.49 30.35 5.55 1.57

Disbursement of loans declined sharply from Rs.46.66 crore in 1999-2000 to Rs.1.57 crore in 2003-04. This was due to slackness in recovery leading to accumulation of non-performing assets which seriously impaired the Corporation’s ability to finance units.

Audit observed the following deficiencies in the disbursement of loan:

?? The Corporation provided financial assistance to units, which were unviable at the appraisal stage.

?? To safeguard the Corporation’s interest and to weed out non-serious promoters, the Corporation failed to ensure that the promoters had invested their contribution before disbursement of any part of loan. The certificates furnished by chartered accountants were faulty but no action was taken against them, which could have acted as a deterrent. The inspections carried out before disbursements were also ineffective.

?? The Corporation did not have a suitable mechanism for creating and updating data bank of physical and financial achievements of units financed vis-à-vis projections considered at the time of sanction of loan.

The Corporation’s ability to finance units was seriously impaired due to slackness in recovery.


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?? Appraisal memorandum shows details of immovable properties of promoters/directors and market value as furnished by them in the loan application. However, vital documents such as title deeds, valuation reports etc. were not obtained and verified before accepting personal guarantee.

A few cases where deficiencies in sanction and disbursement of loans were noticed are discussed in the succeeding paragraphs.

Loan to a holiday resort

3.3.7 Shubhangi Holiday Resort & Club Limited (SHRCL) sought (December 1997) loan of Rs.1.15 crore towards escalation in cost of setting up a holiday resort at Panvel. The Corporation sanctioned (July 1999) loan of Rs.86.50 lakh and disbursed Rs.76 lakh during September 1999 to December 2000.


?? The loan of Rs.76 lakh should not have been disbursed, as SHRCL was a defaulter since May 1997 in respect of an earlier loan of Rs.90 lakh.

?? In addition to adjustment of overdue interest of Rs.49.22 lakh against earlier loan, further disbursement of Rs.26.78 lakh was made to the defaulter leading to delayed action for recovery.

?? Managing Director of the Corporation visited SHRCL in February 2001 and commented that the assets created did not appear to be as reported and considered for loan. The Corporation should have immediately investigated the matter and ascertained the exact value of assets created. In the event of expenditure certificate not being true, action should have been taken against the chartered accountant who had furnished (June 1999) the expenditure certificate and against the officers who had inspected (September 1999) the site before disbursement of loan.

?? Despite the fact that SHRCL was a chronic defaulter with outstanding dues of Rs.2.18 crore including interest of Rs.80.10 lakh (as on 31 March 2004), the Corporation had not recovered its dues by invoking Section 29 of SFC Act. The Corporation had also not invoked personal guarantees of directors.

Loan to an oil unit

3.3.8 The Corporation disbursed (February 1998 to February 1999) loan of Rs.1.79 crore to Precious Oil Products Private Limited (POPPL) for manufacture of non-edible oil. POPPL surrendered the assets in January 2001 stating that the unit was not viable in view of competition from imports. The Corporation sold (August 2001) the assets for rupees one crore. The outstanding dues as on 31 March 2004, after sale of assets, amounted to Rs.1.15 crore including interest of Rs.36 lakh. Action for sale of collateral security in the form of residential flat (estimated value: Rs 45 lakh) was in progress (July 2004).

Loan of Rs.76 lakh was disbursed to a unit which had defaulted in repayment of an earlier loan.


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The Corporation stated (July 2004) that though there was increasing competition it thought that POPPL might not face difficulty in achieving estimated turnover. Sanction of loan to POPPL was not justified in view of the following:

?? Even at the time of sanction, there was stiff competition from imports due to liberalised import policy of the Government of India.

?? The Corporation had earlier financed (1987/1995) similar units (Umred Agro Complex Limited and Narendra Dada Agro Industries) and was thus aware of the downward trend in market.

Loan to a restaurant

3.3.9 The Corporation sanctioned (January 1999) and disbursed (August 1999 to March 2000) loan of Rs.1.25 crore to Oriental Estate and Properties Private Limited (OEPPL) for setting up a restaurant at Matheran near Mumbai. The loan was repayable in 13 six monthly instalments during August 2001 to August 2007. The sanction letter stipulated that OEPPL shall invest Rs.1.25 crore being 50 per cent of the total project cost before disbursement of any part of loan. OEPPL was a defaulter since August 2001 with outstanding dues of Rs.1.40 crore including interest of Rs.15.42 lakh (March 2004). The Corporation had not taken over (July 2004) the assets of OEPPL including collateral security (estimated value : Rs.50 lakh).

The Corporation stated (July 2004) that OEPPL had recently submitted a proposal for repayment of dues, which was being examined.


?? The Corporation disbursed the loan relying on the certificate of a chartered accountant (M/s Rajesh B Gosar). This certificate turned out to be false. From the annual accounts (2001-02) of OEPPL, Audit observed that actual gross fixed assets were only Rs.1.78 crore as against fixed assets of Rs.2.30 crore certified by the chartered accountant. Thus, the contribution of the promoters of OEPPL was only Rs.53 lakh? instead of Rs.1.25 crore.

?? The Corporation did not take any action against the chartered accountant for the incorrect certificate issued and the unit for submission of certificate containing false information.

Loan to a pipe manufacturing unit

3.3.10 The Corporation disbursed (July 1999 to June 2000) loan of Rs.64.15 lakh to Mahalaxmi Extrusion Products Private Limited (MEPL) for setting up a pipe manufacturing unit at Palghar. The promoters of MEPL were already engaged in manufacture of pipes through Mukesh Industries Limited (MIL) located at Palghar. MEPL defaulted in payment of dues since

? Rs.1.78 crore less Rs.1.25 crore. Percentage of promoters contribution (Rs.53 lakh) to actual gross fixed assets (Rs.1.78 crore).

No action was taken against the Chartered Accountant for issuing false certificate.

Loan was given despite knowledge of adverse effects of stiff competition from imports and downward trend in market.


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August 2000 and owed to the Corporation Rs.1.05 crore including interest of Rs.41.23 lakh (March 2004).

Audit observed that the Corporation extended following undue favours to MEPL:

?? MEPL sought funds to manufacture pipes with brass connections. As its sister concern MIL was already manufacturing pipes, the Corporation initially rejected (November 1997) the application unless the applicant was agreeable to purchase the pipes from MIL and fit only brass connections as manufacture of pipes by MEPL would entail duplication of infrastructure and consequent higher requirement of fund. But, subsequently the Corporation sanctioned (May1999) the loan without insisting on the above condition.

?? Three cheques for Rs.1.50 lakh given by MEPL in March 2002 were dishonoured on the ground that the account was closed. Machinery valuing Rs.7.37 lakh were found missing at the time of takeover of assets in April 2002. The Corporation still accepted six post dated cheques for rupees three lakh and returned possession of assets in May 2002. These cheques were also dishonoured.

?? Return of assets enabled MEPL to divert further machinery. Two more items valuing Rs.26 lakh were found missing on inspection by the Corporation in November 2002.

The Corporation stated (July 2004) that a criminal complaint against director of MEPL for diversion of machinery was filed in November 2002. The Corporation had not taken action against its officials for the above lapses.

The Corporation had neither taken over (July 2004) the assets of MEPL nor invoked personal guarantees of directors to recover its dues of Rs.1.05 crore (including interest of Rs.41.23 lakh).

Loan to an industrial gas unit

3.3.11 The Corporation disbursed (May-November 1999) loan of Rs.68.60 lakh to Maharashtra Air Products Private Limited (MAPPL) for setting up a unit for manufacture of industrial gases. MAPPL was a defaulter since August 1999. The outstanding dues was Rs.1.02 crore including interest of Rs.31.01 lakh (March 2004). The Corporation stated (July 2004) that orders of Debt Recovery Tribunal for attachment of collateral security in the form of two residential buildings (estimated value: Rs.55 lakh) were obtained (February 2004).


?? The promoters of MAPPL were already engaged in trading in industrial gases. The terms of sanction stipulated that MAPPL was to invest Rs.1.45 crore (Rs.89 lakh towards purchase of 2,100 cylinders and Rs.56 lakh on other assets). No disbursement should have been made without this condition being fulfilled.

The Corporation extended benefits to a party which had removed machinery and submitted cheques which were dishonoured.


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?? The Corporation accepted Rs.56.28 lakh as new investment towards 600 cylinders and equipment, which MAPPL already possessed.

?? Certificate of chartered accountant submitted by MAPPL for claiming disbursement showed that the equipment was already purchased one year before sanction of loan. Thus, the promoters did not raise and invest additional fund as per terms and conditions of sanction.

?? Despite non-fulfillment of vital conditions imposed in sanction letter, the Corporation disbursed the loan.

The Corporation had neither taken over (July 2004) the assets of MAPPL nor sold the collateral security to recover its dues of Rs.1.02 crore (including interest of Rs.31.01 lakh).

Loan to a ginning unit

3.3.12 The Corporation sanctioned (November 2000) loan of Rs.46 lakh to Khatri Cotton Ginning Pressing Industries (KCGPI) for setting up a cotton ginning and pressing factory at Wadner in Wardha district and disbursed loan of Rs.44.77 lakh during March 2001 to March 2002.

The viability of the project was directly linked to assured supply of raw cotton from Maharashtra State Co-operative Cotton Growers Marketing Federation (Federation). KCGPI started defaulting in payment of dues since June 2002 because it could not obtain cotton from the Federation. The outstanding dues was Rs.51.92 lakh including interest of Rs.7.17 lakh (March 2004). The Corporation stated (July 2004) that loan was disbursed assuming the supply of raw cotton by the Federation.

The reply was not tenable as the proposed factory was to be set up in pursuance of an offer (August 2000) from the Federation. The offer of Federation stipulated that the proposed factory should be set up by December 2000 failing which supply of raw cotton would be made to others. The Corporation should not have disbursed the loan after this date without ensuring revised offer for supply of raw cotton from the Federation.

Loan to a paperboard unit

3.3.13 Yash Papers Limited (YPL) sought a loan for setting up a unit to manufacture paperboards. The Corporation disbursed (February 1998 to June 2000) loan of Rs.13.99 lakh. Availability of sufficient water was critical to the success of the unit. The requirement of water was 20,000 litres per day for manufacturing. YPL did not commence production for want of sufficient water and started defaulting in payment of dues since February 2000. YPL owed Rs.27.17 lakh including interest of Rs.13.15 lakh (March 2004).

The Corporation stated (July 2004) that report of site inspection done before disbursement mentioned that water would be available from nearby well and borewell at site. However, subsequent technical inspection (July 2000) revealed non-availability of sufficient water at the site. The reply is not tenable. The

The Corporation disbursed loan without ensuring that the unit could obtain cotton from Federation.

The Corporation disbursed loan despite non-fulfilment of vital conditions imposed in sanction letter.


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matter should have been investigated as to whether initial inspection was properly carried out. The promoters did not also make alternative arrangements for supply of water.

The Corporation had neither invoked Section 29 of SFC Act to take over the assets including collateral security (estimated value: Rs.25.70 lakh) nor invoked personal guarantee of proprietor to recover its dues.

Loan to a hotel

3.3.14 Hotel Pinak (HP), a proprietorship concern, was operating a restaurant 12 Km away from Khed on Goa-Mumbai route. HP sought (August 1999) loan of Rs.14 lakh for expansion. The Corporation, without proper assessment of the viability of the project, disbursed the same during November 1999 to May 2000. HP started defaulting in payment of dues since August 2000. The outstanding dues as on 31 March 2004 was Rs.17.55 lakh including interest of Rs.3.55 lakh.

The Corporation stated (July 2004) that the viability of the project was assessed on the basis of projected profitability and cash flow. It disbursed the loan on the basis of assets created.

The reply was not tenable in view of the following:

?? Against estimated investment of Rs.28.02 lakh, the projected annual turnover of the restaurant was only Rs.25.90 lakh. The internal rate of return (IRR) as assessed in the project appraisal note was only 13.78 per cent which was less than the interest rate of 15.5 per cent applicable for this loan. Thus, the project was not viable.

?? HP had already incurred expenditure of Rs.24.34 lakh on the project. The additional investment involved was only Rs.2.70 lakh. So, the disbursement of Rs.14 lakh should not have been done. The extra disbursement facilitated the proprietor to recoup investment of Rs.11.30 lakh already made.

?? Disbursement of loan to an unviable scheme resulted in merely shifting the burden of a bad investment from the proprietor to the Corporation.

The Corporation had not recovered its dues by invoking Section 29 of SFC Act to take over prime and collateral security (estimated value: Rs.25 lakh).

Recovery performance

Procedure

3.3.15 The term loans are repayable, along with interest, in quarterly instalments within a maximum period of eight years with moratorium of two years. Regional offices are responsible for monitoring and recovery of dues. The loans granted by the Corporation are secured by mortgage of the fixed assets of the units financed. The Corporation also obtains collateral security

The Corporation failed to take over assets including collateral security to recover its dues.

The Corporation disbursed loan to an unviable project.


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in the form of land, residential/office premises etc. and/or personal guarantee of promoters/directors.

SFC Act, inter-alia, stipulates that the Corporation may appoint one or more nominee directors on the board of directors of assisted unit and also impose such conditions in the sanction letter as may be necessary to protect its financial interests. The sanction letter stipulates submission of audited annual accounts, yearly progress report on physical/financial performance, insurance policy along with premium receipts for each renewal of insurance cover for assets mortgaged to the Corporation and the right of the Corporation to carry out periodical inspection of the unit assisted.

In the event of default, SFC Act empowers the Corporation to recall the entire loan before the expiry of agreed period (Section 30), to take over management/possession of security offered and to realise the dues by sale/transfer/lease (Section 29), to enforce personal guarantee offered by promoters/directors (Section 31aa) and to recover the dues as arrears of land revenue through State Government (Section 32G).

Post disbursement inspection and monitoring

3.3.16 Post disbursement inspection (PDI) of units financed including monitoring of physical and financial performance is of vital importance. The Corporation has to ensure that the funds granted are used for specified purposes only and not diverted for other purposes. The Corporation should monitor physical/financial performance of units assisted to evaluate whether it is in line with projections made.

Audit noticed the following deficiencies in PDI and monitoring:

?? The Corporation did not appoint nominee director during 1999-2004 on the board of directors of any of the units assisted.

The Corporation while accepting the above facts stated (July 2004) that nominee directors were not appointed due to its experience in the past of assisted units not extending full co-operation to the nominee directors. The reply was not acceptable. The Corporation should have insisted on obtaining all necessary feed back through nominee directors to safeguard its financial interests and should have enforced its right under SFC Act to recall the entire loan in the event of non-compliance.

?? The Corporation was not receiving audited annual accounts and progress report on physical/financial performance. No efforts were made to ensure submission of these documents necessary for monitoring the performance of units assisted.

?? PDI is important in identifying units that are likely to become unviable in near future as well as units that had become unviable for taking immediate remedial measures. Reports of periodical inspection of units were furnished by Nagpur region for only one year (2001-02). Periodical inspection was not carried out at other regions.

There was no effective post disbursement inspection and monitoring of units assisted.


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?? The format of inspection report as prescribed by the Corporation deals with important issues such as extent, details and adequacy of working capital, operational performance for last three years, factors affecting growth and overall performance of unit. But, scrutiny by Audit of 40 inspection reports at Nagpur pertaining to units financed after April 1998 showed that the reports were deficient as they did not provide full data as per the format prescribed. Thus, PDI reports failed to analyse the operational performance and point out cases of recovery likely to become doubtful.

The Corporation stated (July 2004) that very often the executive/promoter concerned was not present during the inspection and as such it could not collect relevant data. This plea is not acceptable as collection of data was vital for proper post disbursement monitoring. The Corporation should have insisted on obtaining the full data.

?? The computerised loan accounting system provided for entry of details relating to expiry of insurance cover and generation of report relating to insurance policies due for renewal. However, the Corporation failed to utilise this reporting facility to ensure that the assets were insured by the borrowers.

The Corporation while admitting the fact stated (July 2004) that the borrowers did not show interest in insuring the assets.

Defaults and recoveries

3.3.17 The details of term loans due for recovery, target fixed for recovery, amount recovered and recovery performance are given below:

(Rupees in crore) Particulars 1999-2000 2000-01 2001-02 2002-03 2003-04

(Provisional) Amount due for recovery Arrears at the beginning of the year

607.03 734.98 876.90 1,007.80 1,162.59

Amount due during the year 419.36 374.99 336.46 306.11 287.15 Total recoverable 1,026.39 1,109.97 1,213.36 1,313.91 1,449.74 Amount rescheduled /waived/written-off

33.19 30.85 31.17 27.58 235.68

Net amount recoverable 993.20 1,079.12 1,182.19 1,286.33 1,214.06 Target for recovery 431.80 367.65 320.00 *320.00 350.00 Percentage of target to amount recoverable

43.5 34.1 27.1 24.9 28.8

Recovery against Old dues 107.49 81.70 85.14 68.27 63.16 Current year demand 150.73 120.52 89.25 55.47 41.86 Total recovery 258.22 202.22 174.39 123.74 105.02 Amount in arrears 734.98 876.90 1,007.80 1,162.59 1,109.04 Percentage of recovery against Target 59.8 55.0 54.5 38.7 30.0 Old dues(beginning of year) 17.7 11.1 9.7 6.8 5.4 Current year demand 35.9 32.1 26.5 18.1 14.6 Net amount recoverable 26.0 18.7 14.7 9.6 8.7

*Target not fixed for 2002-03 hence assumed as target for 2001-02.


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The Corporation did not take effective measures for recovery. Audit observed that 100 out of 210 units financed since April 1999 were defaulters with outstanding dues of Rs.7.93 crore. The target fixed for recovery was only 28.8 per cent in 2003-04 as against 43.5 per cent in 1999-2000. The Corporation could not achieve even the reduced targets relating to recovery. Consequently, the outstanding dues including interest increased from Rs.734.98 crore as on 31 March 2000 to Rs.1,109.04 crore as on 31 March 2004.

Due to slackness in recovery of dues, non performing assets have also increased from 65.53 to 91.41 per cent during 1999-2004. Details of loans (principal) classified as per SIDBI/RBI guidelines are given below:

(Rupees in crore)

Classification 1999-2000 2000-01 2001-02 2002-03 2003-04 (Provisional)

Standard Assets? 279.21 222.38 154.19 138.89 44.51

Non Performing Assets (NPA)? ?

Sub-standard 217.84 97.15 80.35 57.06 44.28

Doubtful 241.86 334.84 307.68 227.09 218.54

Loss 71.15 74.91 105.08 135.05 210.85

Total NPA 530.85 506.90 493.11 419.20 473.67

Total dues 810.06 729.28 647.30 558.09 518.18

Percentage of NPA to total dues

65.53 69.51 76.18 75.11 91.41

The Corporation stated (July 2004) that concerted efforts were made for maximisation of recoveries. Audit observed that the Corporation failed to enforce recovery by invoking provisions of SFC Act to take over the assets financed including collateral security and to enforce personal guarantees given by promoters/directors (discussed in paragraph 3.3.20).

? Standard assets are those loans with overdues up to 180 days. ? ? NPAs are those loans with overdues more than 180 days.

There was increase in outstanding dues from Rs.734.98 crore as on 31 March 2000 to Rs.1,109.04 crore as on 31 March 2004.


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Deficiencies in recovery

Case study

3.3.18 Cases of loans under default test checked in audit revealed that there were deficiencies in recovery as discussed below. The lacunae found at the disbursement stage have also been brought out in the table.

Amount

(Rupees in crore)

Sl. no.

Name of the

borrower Disbursed

Outstanding including interest

as on 31 March 2004

Deficiencies in recovery

Further observations relating to lacunae at the disbursement stage

1 2 3 4 5 6 1 Ashwini

Developers Private Limited

1.09 4.25 ??Section 29 of SFC Act was not invoked.

??Personal guarantee of promoters/ directors was not invoked.

??Office premises already sold were mortgaged to the Corporation as collateral security. The Corporation did not file criminal case against the director of the unit.

2 Vinar Ispat Limited



??Disbursement was made without ensuring that promoters had invested their share. The Corporation stated that disbursement was made on the basis of chartered accountant's certificate. A critical examination would have revealed that the borrower had not mobilised additional funds but merely diverted existing working capital.

3 Laxmi Resorts Private Limited



??The Corporation disbursed the loan without opening of ESCROW account as required in sanction letter.

4 Top Syringe Manufacturing company.



??Though a new product (plastic syringe) had already entered the market, loan was given for glass syringe project.

5 Govinda Steel Rolling Mill



??The Corporation disbursed the loan without ensuring arrangement for working capital as per terms of sanction.

6 Chaitanya Papers Private Limited



??The Corporation sanctioned loan despite knowing that market conditions were unfavourable.


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1 2 3 4 5 6 7 Raitex Mills

Private Limited 0.21 0.39 ??Section 29 of SFC

Act was not invoked.


??Loan was sanctioned although the Corporation's appraisal found the project unviable.

8 Prakash Agro Industries



??Viability of project was evaluated based on trading turnover of sister concern instead of the existing unit.

9 Bhagirath Hospitality Private Limited

0.70 1.97 ??Assets taken over were not sold even after three years.


??The Corporation disbursed the loan despite knowing that the location of hotel was near slum area with no proper approach road.

10 Raj & Yash Alloy Private Limited

0.48 0.77 Decree against guarantor was not executed even after 27 months though property worth Rs.70 lakh existed

??The Corporation sanctioned loan although the scheme for expansion of capacity to manufacture steel ingots was not viable as concessional tariff for power was withdrawn before sanction of loan.

11 Silent Real Estate

Developers (India) Private Limited

1.96 2.61 ??Assets taken over

were returned in lieu of postdated cheques, which were subsequently dishonoured.

??The Corporation should not have returned the assets knowing the dishonest nature of the borrower.

??Part of the assets mortgaged as securities were already encumbered.

??The Corporation in its reply stated that all the securities offered to the Corporation were free from encumbrances. Criminal case should have been lodged against the borrowers for mortgaging to the Corporation properties which were already sold.

12 Parca Paper Industries Limited

1.76 3.66 Personal guarantee of promoters/ directors was not invoked.

??The Corporation disbursed the loan without ensuring that promoters had invested their share.

Dishonour of cheques

3.3.19 As per Section 138 of Negotiable Instruments (NI) Act, 1881 dishonour of cheques shall constitute an offence liable for punishment with imprisonment up to one year and/or fine up to twice the amount of cheque. The case is to be filed within one month from the return of dishonoured cheque by the bank. Timely action was therefore necessary. The Corporation did not maintain proper records showing details of cheques dishonoured, legal notices issued and court cases filed to take prompt follow up action.


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The Corporation agreed (July 2004) to maintain proper records.

Audit analysis in respect of Thane region revealed that there was dishonour of cheques in 412 (Rs.57.19 crore) out of 735 live loan accounts. The outstanding dues in these 412 loan accounts were Rs.322.78 crore but Thane region had not filed cases under Section 138 in 356 accounts with overdue of Rs.283.17 crore.

The Corporation confirmed (July 2004) that action under Section 138 of NI Act was taken only in respect of few cases.

Non-invoking provisions of SFC Act

3.3.20 In the event of default, SFC Act empowers the Corporation to recall the entire loan before the expiry of agreed period (Section 30), to take over management/possession of security offered and to realise the dues by sale/transfer/lease (Section 29), to enforce personal guarantees offered by the promoters/directors (Section 31aa) and to recover the dues as arrears of land revenue through State Government (Section 32G).

Invoking Section 29 of SFC Act and prompt takeover of prime and collateral securities in cases of defaults is essential:

?? to compel wilful defaulters to repay;

?? to prevent defaulters from continuing to derive revenue from the use of assets; and

?? to prevent shifting/disposal of securities by the assisted units.


?? The Corporation had not taken over possession of fixed assets in 1,066 cases, which were under the category of NPA for more than two years. The outstanding dues in these 1,066 cases were Rs.365.76 crore (March 2004). Collateral securities valuing Rs.6.04 crore in 78 cases with outstanding dues of Rs.39.81 crore (March 2004) were also not taken over.

?? The Corporation had also not invoked personal guarantees in 119 out of 210 cases, involving dues of Rs.78.74 crore.

?? The performance of the Corporation in recovering its dues even after obtaining decree was poor. Though decree was obtained in 77 cases in favour of the Corporation for Rs.4.59 crore, the recovery by the Corporation was a meagre Rs.22.46 lakh.

The Corporation stated (July 2004) that it has adopted a cautious approach in taking over collateral securities as agricultural land offered as collateral can be sold only for agriculture purpose, it was difficult to evict occupants of residential flats and collateral securities are often sold without the knowledge of the Corporation. The reply was not acceptable in view of the following:

The Corporation failed to take legal action in respect of dishonoured cheques.

The Corporation did not take over assets even after two years of accounts becoming NPA.

Performance of the Corporation in recovery of its dues even after obtaining decree was poor.


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?? The Corporation should not have accepted agriculture land as collateral security in view of difficulties in their takeover and sale;

?? the difficulties in eviction of tenants should not be an excuse for not initiating action; and

?? the reply was silent as to whether any criminal case was filed against the borrowers for sale of collateral securities without the knowledge of the Corporation.

The Corporation further stated (July 2004) that details of personal properties owned by guarantors and documentary evidence thereof were yet to be ascertained. The reply was not acceptable as the Corporation should have obtained such details and documents before accepting guarantee.

The failure on the part of the Corporation to invoke the provisions of SFC Act has severely hampered its efforts to make recoveries and its ability to finance other units.

Conclusion

Loans were sanctioned to unviable projects. Disbursements were made without ensuring compliance with vital conditions necessary to safeguard the Corporation’s interests. Effective post disbursement inspection and monitoring to identify units that were likely to turn unviable was not done. The Corporation did not safeguard its interests by invoking Section 29 of SFC Act and personal guarantees of promoters/directors. The Corporation incurred losses continuously mainly due to slackness in recovery. There was accumulation of non-performing assets. The Corporation’s failure to recover its dues seriously impaired its ability to finance units.

The Corporation should ensure that loans are disbursed only for viable projects and there is no compromise with vital conditions necessary to safeguard its interest. There is an urgent need for effective post disbursement inspection and monitoring of the units and to invoke legal safeguards for recovery of its dues.

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Chapter-IV

4. Transaction audit observations

Important audit findings noticed as a result of test check of transactions made by the State Government companies and Statutory corporations have been included in this Chapter.



4.1 Loss of revenue

City and Industrial Development Corporation of Maharashtra Limited (Company) allots plots for various uses like residential, commercial, schools, to builders, trust and co-operative housing societies. Undue benefits of Rs.32.60 crore were extended to a private builder, co-operative housing societies and a school trust by collecting premium at less than market rates, non collection of additional transfer charges and allowing excess discount to the steel merchants as discussed below:

Allotment of plots to a builder

4.1.1 The Company allotted (October 2003) plots (Vashi, Navi Mumbai) measuring 30,582.87 square metres for residential-cum-commercial purpose to K. Raheja Corporation Private Limited (builder) at the rate of Rs.10,250 per square metre with 1.5 floor space index?. The Company received total lease premium of Rs.31.35 crore.

?Floor space index fixed by local authority. It is the ratio of the combined gross floor area of all floors (excluding areas specifically exempted) to the total area of the plot.

By charging lease premium at less than market rates, under recovery of service charges and allowing excess discount, the Company passed on undue benefits of Rs.32.60 crore to a private builder, co-operative housing societies, school trust and others.


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Audit observed as under:

?? The plots were situated in prime locality opposite Vashi railway station. Surprisingly, no tenders were invited for disposal of the plots.

?? The rate realised in sale of plots during October 2002 in Vashi sector through tender was Rs.20,791 per square metre. The Company however, allotted (October 2003) the plots to the builder at a low rate of Rs.10,250 per square metre.

Thus, the sale of plots in a prime locality without calling for tenders and below the market rate amounted to undue favour to a private party which resulted in loss of revenue of Rs.26.74? crore to the Company.

The Company stated (July 2004) the following:

?? No tenders were invited as rules permitted sale by considering individual applications.

?? New Bombay Disposal of Land Regulations permit the Company to dispose plots by public auction or tender by considering individual applications.

?? The rate of Rs.20,791 per square metre received through tender was for small plots and cannot be considered for comparison with the sale of bulk land plot.

?? Plot is not located in a developed sector in Vashi and infrastructure development is still in progress. By going in for bulk sale to builder the Company would obtain benefit of larger saleable area and would not incur expenditure on internal development.

The reply is not tenable in view of the following:

?? The procedure for sale through applications would have been appropriate only if a large number of plots were for sale and the price was already predetermined. This is not the case here. It is for this reason, while approving (April 2003) conversion of land use in respect of this plot from information technology to residential plus commercial, the Board of the Directors of the Company had specifically stated that disposal should be through open tender only.

?? Transparency demands that sale should have been through tender to obtain market rate for sale instead of disposing the plot at the rate of Rs.10,250 per square metre.

? Rs.20,791 – Rs.10,250 x 30,582.87 = Rs.32.24 crore less internal development cost (intimated by the Company) Rs.5.50 crore.

Allotment of plots to builder in prime locality below the market rate resulted in loss of revenue of Rs.26.74 crore.

Chapter-IV - Transaction Audit Observations

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?? The note (September 2003) submitted to the Board of Directors of the Company clearly indicated that the plots have full advantage of developed node in all respects. The loss has been worked out after taking into account the cost of internal infrastructure development of Rs.5.50 crore, as intimated by the Company.

Allotment of plots to a co-operative housing society

4.1.2 The Company allotted (December 2001) a plot of land measuring 4,186 square metres at Nerul, Navi Mumbai for a value of Rs.2.50 crore? to Prathamesh Co-operative Housing Society. The society was formed by 17 members who were senior officers of the Company including directors. The plot was sold at the rate of Rs.6,250 per square metre with floor space index-one which was far below the prevailing market rate of Rs.10,235? per square metre.

Audit observed that the allotment of plot was irregular as the plot allotted to the society was not earmarked for co-operative housing societies. Thus, the allotment of plot below the market rate resulted in revenue loss of Rs.1.57? crore to the Company.

Allotment of plots to a co-operative society 4.1.3 The Company allotted (June 2002) four? plots of land measuring 8,114.89 square metres situated in Nerul sector at Navi Mumbai to Shribaug Sahakari Madhyavarti Grahak Mandal Limited (Raigad Bazar), Alibaug at the rate of Rs.12,750 per square metre for setting up a departmental stores. Total sale price of the four plots was Rs.10.35 crore.


?? The rate received through tenders in December 2001 was Rs,13,700 per square metre for residential cum commercial plots situated in the sector. Yet the plots were allotted to the society at the rate of Rs.12,750 per square metre.

?? As per the policy laid down, initial payment being 10 per cent of agreed lease premium is to be paid by a buyer of plot of land alongwith application and balance 90 per cent was payable in two monthly equal instalments (45 per cent of agreed lease premium each) from the date of receipt of allotment letter from the Company. The time of payment of first instalment can be extended by two months based on the request of allottee by charging interest at the rate of 15 per cent per annum, provided the extended period does not exceed three months from the date of allotment. The time prescribed for the second instalment can be extended further for

? Arrived at after allowing discount of Rs.0.13 crore for prompt payment. ? The prevailing market rate for 1.5 floor space index (FSI) was Rs.15,353 which has been proportionately reduced for one FSI i.e. Rs.15,353 x 1/1.5 = Rs.10,235 per square metre. ? 4,186 square metres x Rs.10,235 – five per cent discount = Rs.4.07 crore minus value received on sale of plot Rs.2.50 crore = Rs.1.57 crore. ? No.88 to 91 Sector-19.

There was revenue loss of Rs.77.09 lakh due to charging rate below the market rate and short recovery of interest of Rs.1.30 crore as per terms of allotment.

Allotment of plots was grossly below the market rate.


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a period of 16 months. The extension can be granted by charging interest at the rate of 15 per cent per annum up to three months, 18 per cent per annum for the period between three and six months and 21 per cent per annum for the period beyond six months. The contract stands determined if the payment is not made in the extended period.

In the instant case, the offer letter was issued to the society on 11 October 2001 and initial payment of Rs.1.02 crore being 10 per cent value of agreed lease premium was to be made by November 2001. Instead, the Company issued letter of intent on 14 June 2002 asking the society to pay first instalment of Rs.4.67 crore on 15 July 2002 and second instalment of Rs.4.66 crore on 14 August 2002. Thus, there was a departure from the dates specified in the allotment letter. The society failed to make the payments even after these relaxation in dates and actual payment of first instalment was made on 16 December 2002 (after 154 days) and second instalment on 30 December 2003 after a delay of 501 days. As per terms of allotment, the society was liable to pay interest at the rate of 21 per cent for delay in payment beyond six months. The Company was therefore required to recover interest of Rs.1.34 crore from the society for delay of 501 days in payment of second instalment. However, the Company recovered only interest of Rs.3.99 lakh and a benefit of Rs.1.30 crore was passed to the co-operative society on account of non levy of interest.

Thus, the total benefit extended to the party was Rs.2.07 crore due to charging rate below the market rate (Rs.77.09 lakh) and not levying interest for delay in receipt of payment (Rs.1.30 crore).

The Company stated (July 2004) that the plots were not sold at market rate as the rate of Rs.12,750 per square metre was the negotiated rate and the interest was not recovered on second instalment as the extension for payment was given to the party.

The reply is not tenable in view of the following:

?? Sale at negotiated rates was violative of the principle of transparency. The sale should have been made at least at the rate of Rs.13,700 per square metre, the rate which was offered for the same plot by Ambica Associates, through its Board Member. The loss on this account was thus Rs.77.09 lakh.

?? In order to maintain the sanctity of laid down rules, the relaxation in payment should have been restricted to a maximum period of six months as per the terms of contract. Failure to do so resulted in passing on additional benefit of Rs.1.30 crore to the society.

Allotment of school plots to a trust

4.1.4 Shevantabai and Shankarrao Foundation, a trust, requested (September 2002) the Company for allotment of land to establish a residential school on Kharghar Hill plateau.


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Subsequently, the trust informed (March 2003) that they have decided to set up a day school and hence required a plot of land for composite school in Kharghar sector. The Company accepted (July 2003) the request of the trust and allotted a plot of 4,000 square metres for rupees three lakh at the rate of Rs.75 per square metre being the concessional rate of five per cent of the reserve price of Rs.1,500 per square metre. This resulted in concession of Rs.57 lakh to the trust.

As per the Company's policy, the plot reserved for schools was to be allotted only to the educational institutions having minimum 10 years experience in running a school, secondary school certificate results in past three years above 85 per cent and sound financial position to pay lease premium of plot so as to complete the project within stipulated time limit.

Audit noticed that the trust had no experience in establishing and running any school. As per the Company's policy, concessional rate was payable provided the trust fulfilled the eligibility criteria. The trust did not fulfil eligibility criteria and hence the concession of Rs.57 lakh was not justified.

The reply from the Company (July 2004) did not dispute the fact that the trust did not fulfil the eligibility criteria.

Excess discount to co-operative housing societies

4.1.5 Board of Directors (BOD) of the Company accorded (November 2002) approval for sale of 125 plots in Kharghar, Panvel and Kalamboli sectors of Navi Mumbai to co-operative housing societies (CHS) at fixed rates ranging from Rs.2,205 to Rs.4,800 per square metre.

Further, BOD specifically directed to allow prompt payment discount at two per cent on balance amount of 90 per cent of lease premium (after deducting earnest money deposit equivalent to 10 per cent of lease premium to be paid along with the application for allotment), if the balance amount was paid within 30 days from the date of acceptance of the offer to sale.

The Company allotted (January-March 2003) plots to 58 CHS and allowed discount of Rs.42.98 lakh to 24 CHS at the rate of five per cent instead of the rate of two per cent as per BOD's resolution. This was due to issue of a booklet by the Marketing Manager-II (MM-II), in charge of allotment of plots containing the conditions, inter-alia, that the prompt payment discount would be at five per cent in violation of the decision of the BOD to give two per cent discount. The Company had not taken any action against the erring staff for the loss of Rs.25.79 lakh.

The Company stated (July 2004) that the Board modified its earlier resolution of offering only two per cent rebate on the ground that the same was based on an inadvertent error in the proposal and the five per cent rebate was fixed in 1997.

The reply is not correct as the recorded reason for the modification was that it was difficult to recover the excess discount of five per cent as mentioned in

Concession of Rs.57 lakh was given to an ineligible trust.

Discount clause in booklet at variance with BOD's decision resulted in excess discount of Rs.25.79 lakh.


80

the booklet. The figure of two per cent was not an inadvertent error but was a conscious decision of the Board, as the interest rates in 2002 were much less than that in 1997.

Under recovery of transfer charges

4.1.6 The Company allotted (1987) 711 residential plots in Panvel at fixed rate of Rs.100 per square metre on lease basis to various steel merchants who had shifted their steel business from Mumbai to steel market, Kalamboli. The average area of each plot ranged between 200 and 400 square metres.

Audit scrutiny revealed that 74 steel merchants transferred 109 residential plots during April 1997 to March 2000. These transfers were outside the steel trade. As per rule 3VII(A) of New Bombay Disposal of Land Regulations 1975, in case of transfer of plots, transfer charges equivalent to 50 per cent of difference between declared premium on the date of transfer and premium actually paid at the time of purchase was to be recovered. The Board of Directors of the Company decided (March 1997) that if the transfer of plots is outside the steel trade additional 50 per cent of normal transfer charges was to be charged. The Company, however, did not recover the additional 50 per cent transfer charges from the merchants which resulted in short recovery of Rs.1.39 crore towards transfer charges.

The Company stated (May 2004) that these transfers were treated within steel trade on the basis of certificates of membership obtained by the purchasers from various steel associations in Mumbai. Total reliance on certificates issued by steel associations without further scrutiny by the Company was not acceptable as:

?? The concession involved for a trader was running into a few lakh. The Company was already aware of misuse in transfer of plots and had introduced the 50 per cent additional transfer charges to restrict the transfers to bonafide parties within steel trade. The Company should therefore also have done its own verification to ascertain the genuineness of the status of the transferee by verifying the business details such as sales tax registration number, shop and establishment licence number, turnover details etc.

?? The residential plots in Panvel are located near Kalamboli Steel Market (KSM). As the plots in Panvel were offered to steel merchants to decongest Mumbai by facilitating shifting their business to KSM the original allotment clearly stipulated that the purchasers of plots in Panvel had to possess a plot allotted by the Company at KSM. The Company failed to check up with Iron and Steel Market Committee, Kalamboli, Navi Mumbai to ensure that the purchaser had a steel business in Kalamboli steel market developed by the Company.

?? Audit scrutiny of 52 out of 109 plots revealed that the Company transferred 52 residential plots to 14 purchasers treating them as steel traders. However, there was no allotment/transfer of plots in KSM to

Incorrect rate of transfer charges led to short recovery of Rs.1.39 crore.


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them. The non levy of additional 50 per cent transfer charges was therefore irregular as these transfers were outside the steel trade.

The matter was reported to the Government in March-May 2004, but the replies of the Government in respect of all cases had not been received (December 2004).

4.2 Purchase of luxurious cars

The Company purchased two ''Skoda'' make luxury airconditioned cars (July 2003) for Chairman and Joint Managing Director.


?? The Company had already purchased two new cars (AC Ambassador and AC Lancer) one each for Chairman and Managing Director in April and August 2000 respectively for Rs.14.47 lakh. The purchase of the two new vehicles was in violation of the directives of the Finance Department issued in June 1998 to observe economy measures.

?? Given the austerity measures imposed by the Government, the purchase of vehicles should have been restricted to models of cars which are not too highly priced.

?? The purchase was made without prior approval of the Government of Maharashtra.

The Company while justifying the purchase of luxurious cars stated (May 2004) that the cars were malfunctioning; and the Company being a profit making was itself financing the cost. It further stated that the Government of Maharashtra was represented in the Board of Directors by the Principal Secretary and Secretary, Urban Development Department and the Board's approval for purchase was obtained on 7 January 2003. The decision of the Board was conveyed to the Government on 17 January 2003.

The reply is not tenable as subsequent to purchase of new cars, the old cars were in running condition and State Government's directives were applicable to all public sector undertakings including profit earning PSUs. The Principal Secretary and Secretary were present in the meeting as ex-officio Board members. It cannot be construed that due to their presence on the Board, all Board's decisions have automatic approval of the Government. Mere intimation to Government was not sufficient. Prior approval of Government should have been obtained as per austerity instructions.

The matter was reported to the Government (March 2004); the reply had not been received (December 2004).

The Company incurred expenditure of Rs.29.03 lakh in purchase of two luxurious cars in violation of Government’s directives.

There was violation of Government directives in purchase of cars.


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4.3 Irregular financial assistance to a private firm

Maharashtra Film, Stage and Cultural Development Corporation Limited (Company) entered into (August 2000) an agreement with a private firm Montage (firm) for conducting a cultural programme called 'Hum Ek Hain' (HEH) involving leading film personalities. As per the agreement, the Company was to render assistance in selection of programmes and artists and obtaining requisite permission from various Government departments. The Company was to receive service charges of Rs.25 lakh for the assistance rendered.


?? Prior approval of the Board of Directors for entering into this agreement was not obtained.

?? The agreement stipulated that the firm would organise the programme at its own risk and cost. In contravention of this clause, the Company extended financial assistance to the firm. The modus operandi included opening (September 2000) of a joint account in Bank of Maharashtra (BOM) in the name of 'HEH-Film City' to be operated by the proprietor? of the firm and the Company through its Financial Advisor & Chief Accounts Officer.

?? The Company transferred (February 2001) Rs.1.80 crore from its account in BOM to 'HEH-Film City' account. Subsequently, the proprietor withdrew (February 2001 to December 2002) this amount in the form of cash and cheques. Thus, opening of a joint account with a private party facilitated the proprietor of the firm to withdraw fund from the joint account.

?? The Managing Director of the Company authorised (January 2001) BOM to grant loans up to the limit of rupees seven crore to the firm against the security of Company's fixed deposits (FDs) of Rs.13.50 crore. On the basis of this authority, the firm availed (January-May 2001) a loan of Rs.6.72 crore. As the firm repaid only Rs.4.34 crore, BOM encashed (April-November 2001) Company's FDs worth Rs.2.38 crore to make good the shortfall.

? Shri Shahab Ahmed.

The Company extended irregular financial assistance of Rs.8.03 crore to a private firm in contravention of the agreement.

Joint account facilitated a private firm to withdrew Rs.1.80 crore.

The Company paid Rs.2.38 crore on irregular security for loans drawn by the firm.


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?? The matter of telecast of HEH programme was taken up (February 2001) with Prasar Bharati. Instead of the firm giving the bank guarantee of rupees four crore towards minimum guaranteed payment of Rs.80 lakh per telecast, the Company provided (March 2001), on the instructions from the then Managing Director, a bank guarantee of rupees four crore against security of its FDs with BOM. Subsequently, the firm failed to make payments to Prasar Bharati for telecast of HEH programme in April-May 2001. Prasar Bharati invoked the bank guarantee provided by the Company for rupees four crore. The firm repaid (February 2001) only Rs.15 lakh to the Company and the balance Rs.3.85 crore remained unrecovered (August 2004).

Thus, the Company extended (January-February 2001) irregular financial assistance of Rs.8.03 crore to a private firm in contravention of the agreement, which stipulated no financial involvement of the Company.

The Government/Company stated (May 2004) that action has been initiated against the officials concerned and the private firm.

4.4 Irregularities in production of Superstar dhamaka

Maharashtra Film, Stage and Cultural Development Corporation Limited (Company) entered into (April 2002) an agreement with SET India Private Limited (SET) to telecast between June 2002 and February 2003 star studded 13 episodes (Superstar dhamaka) to be produced by the Company. The exclusive selling rights would be with SET and in turn the Company was to receive Rs.12.78 crore from SET with effect from April 2002.


?? Approval of the Board of Directors was not obtained for this agreement.

?? Though the agreement was between the Company and SET, a handwritten amendment stipulated that the amounts payable by SET would be drawn in favour of 'Hum Ek Hain - Film City' (HEH) account, an account which was not exclusively operated by the Company but was a joint account operated by the proprietor of Montage, a private firm and Financial Advisor & Chief Accounts Officer of the Company.

It is not clear why this handwritten amendment was inserted into the agreement as no reasons were available on record. SET remitted (April-May 2002) rupees three crore to the account of HEH. Proprietor of Montage withdrew the amount in cash/cheque during April 2002 to December 2003.

The Company is stuck with a liability of Rs.4.50 crore payable to SET India Private Limited and Garnet Paper Mills Limited due to drawal of money by proprietor of Montage from joint account.

Handwritten amendment inserted in agreement facilitated drawal of money by proprietor of Montage.

Instead of the firm, the Company offered guarantee to Prasar Bharati which led to non recovery of Rs.3.85 crore.


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?? The Company produced only one out of the 13 episodes planned. The Company entered into (August 2002) an agreement with Garnet Paper Mills Limited (GPML) for obtaining finance for production of the balance episodes to the extent of rupees nine crore in three instalments of rupees three crore each. The Company was to pay service charges of Rs.35 lakh for every rupees three crore. A cheque of Rs.1.50 crore received from GPML in the name of the Company was credited (August 2002) into HEH account instead of the Company's exclusive account. Consequently, Rs.1.50 crore received from GPML was also withdrawn by Shri Shahab Ahmed.

The clause stipulating payment of money by SET into HEH account in the agreement entered into by the Company and SET and depositing of cheques received from GPML into HEH account although there was no agreement with Montage for the production of the 13 episodes, was highly objectionable.

None of the remaining 12 episodes was produced and the Company is struck with liability to repay Rs.4.50 crore to SET and GPML besides payment of service charges of Rs.17.50 lakh to GPML.

The Government/Company accepted (May 2004) that the agreement was not in the interest of the Company and action was being taken against the proprietor of Montage and the erring officials of the Company.

Haffkine Bio-Pharmaceuticals Corporation Limited

4.5 Non surrender of unutilised lease premises

The Fisheries Technological Laboratory (FTL) of Haffkine Bio-Pharmaceuticals Corporation Limited (Company) was functioning in the premises leased from Mumbai Port Trust (MbPT). The prevailing lease rent was Rs.22,242 per month plus municipal taxes. The Company shifted FTL to its own existing premises at Parel in April 1997.


?? Although the Company vacated the premises in April 1997 it decided to surrender the leased premises to MbPT only in December 1998. The decision was not implemented without any reasons on record as the premises continued to remain vacant but not surrendered.

?? Failure of the Company to surrender/utilise the leased premises resulted in rental liability of Rs.20.29 lakh including municipal taxes for July 1997 to March 2004.

The Company has struck with liability of Rs.4.50 crore.

The Company has not surrendered lease premises even after vacating it in 1997 thereby resulting in rental liability of Rs.20.29 lakh.

Failure of the Company to surrender lease premises resulted in rental liability of Rs.20.29 lakh.


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?? Further delay in surrendering leased premises would result in avoidable rental liability including municipal taxes of Rs.2.99 lakh per annum.

The Company stated (June 2004) that it has taken up the matter with MbPT and expressed its intention to hand over the vacant possession of the premises with a request to waive the arrears of rent on account of increase in rent. However, the MbPT insisted upon the payment of arrears of lease rent before taking over the vacant possession of the premises.

It was also stated that many of the lessees/tenants, approached the Honourable High Court against the unilateral decision of the MbPT to increase the rent manifold.

The reply is not tenable. The premises should have been surrendered way back in April 1997 by making full payment. The delay in making payment to MbPT only increased the rental liability. A reduction in rent, if any, arising out of Court decision would have resulted in getting the excess rent back from MbPT.

The matter was reported to the Government (April 2004); the reply had not been received (December 2004).

Maharashtra State Road Development Corporation Limited 4.6 Consultancy contract

The Company appointed (December 1998) M/s. Sverdrup (firm 'S') as prime consultant in respect of the Worli-Bandra sea link project of a single eight lanes link. The scope of work comprised survey, investigation, planning and design (Phase-I) and project management services (Phase-II). The Company paid (January 1999 to May 2003) Rs.16.65 crore (Phase-I:Rs.7.97 crore and Phase-II:Rs.8.68 crore) to firm 'S'. The contract was to be executed by March 2003. On expiry of the existing contract with firm 'S', the Company took a decision to revise the design and construct two carriageways of four lanes each and appointed (March 2003) M/s.DAR Consultants (firm 'D') as prime consultant (on the basis of offer received in October 1998). At the time of appointment of firm 'D', work relating to Phase-I was completed. The work relating to Phase-II was under progress and completed to the extent of 21.87 per cent, amounting to Rs.1.63 crore. While awarding the work to firm 'D', the work already executed was, however, not excluded from the scope of work. As per contract entered into by the Company, firm 'D' was to be paid Rs.20 crore (Phase-I: Rs.6.27 crore; Phase-II:Rs.7.44 crore and additional works: Rs.6.29 crore).

The Company incurred infructuous expenditure of Rs.7.97 crore due to non finalisation of basic design relating to type of link.


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?? The Company, after incurring Rs.7.97 crore on Phase-I, took (February 2003) a decision belatedly to revise the design and construct two carriageways of four lanes each instead of a single eight lanes link. Consequently, the entire work pertaining to Phase-I had to be taken up afresh by firm 'D'. Thus, the payment to firm 'S' on account of Phase-I i.e. Rs.7.97 crore proved to be infructuous.

The Company stated (August 2004) that the revision in design was effected because it would result in early realisation of benefits as the first four-lane carriageway completed could be utilised straightaway even before the project was completed fully. The reply is not tenable as the Company failed to firm up its design plans before entrusting the design contract to firm 'S'.

?? The Company did not invite fresh tenders for change of design and entrusted the work to firm 'D' on the basis of offer received in October 1998 for earlier design. Further, at the time of award of contract to firm 'S' in 1998, there were seven parties including firm 'D' whose offers were evaluated. The Committee while evaluating (1998) the tenders recommended that in the event of firm 'S' not accepting the contract, firm 'D' should not be invited. This was, however, ignored while awarding the contract to firm 'D' in 2003.

?? Phase-II of the work (Rs.8.68 crore) awarded to firm 'S' comprised project management charges in respect of packages I, II, III and IV of the sealink. At the time of award of contract to firm 'D', construction of packages I, II and III amounting to Rs.1.63 crore (21.87 per cent of the cost of the Phase-II) had been completed by firm 'S'. Work already completed by firm 'S' should have been eliminated from the scope of work awarded to firm 'D'.

The Company stated (August 2004) that an amount of Rs.30 lakh was reduced on this account and fees of Rs.6.27 crore was reduced from the total fees.

The reply is not correct as the reduction of Rs.30 lakh effected pertains to different items of work arising out of change of design. Records of the Company show that no such reduction in fees (Rs.6.27 crore) was made in the contract. There was no proportionate reduction in amount to be paid to firm 'D' for the work of Phase-II already completed by firm 'S'.

The matter was reported to Government (May 2004); the reply had not been received (December 2004).

4.7 Construction of Nagpur-Sinner-Ghoti-Mumbai Road

For construction of Nagpur-Sinner-Ghoti-Mumbai Road, Maharashtra State Road Development Corporation Limited (Company) awarded

Entrustment of consultancy work to firm 'D' was irregular.

Amount payable to firm 'D' was inflated by Rs.1.63 crore due to non exclusion of work already done from scope of work.

The Company paid for extra items at higher rates resulting in undue benefit of Rs.1.51 crore to contractors.

Belated change in design led to infructuous expenditure of Rs.7.97 crore.


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(February-December 2001) package-XII to Rajdeep Construction and package-XIV to Ajaydeep Constructions.

During construction, Audit observed that the material to be obtained from the excavated portion of the road way was not sufficient for embankment and there was a need to obtain material from borrow areas (other area than road way).

Clauses 51 and 52 of the contract provide for fixation of rates when there is change in the character, quality or kind of work. Since the term 'borrow area' was not included in the bid document, the Company paid the contractors for the two works at the rate of Rs.125 and Rs.136 per cum respectively.


?? Specifying the 'borrow area' for material required for embankment is a standard item of work, which is prescribed in such contracts but the Company failed to do so.

?? The Company, while fixing the rates, overlooked the fact that rates for these works as per the then prevailing District Schedule of Rates were only i.e. Rs.75 and Rs.78 respectively. Further, the Company failed to restrict the rates to its own estimated rates. The estimated rates were Rs.105 and Rs.98.93 per cum respectively.

Thus, payment at higher rates resulted in undue benefit of Rs.1.50 crore (package-XII : Rs.26.40 lakh? £ and package-XIV : Rs.1.24 crore£) to the contractors.

The Company stated (August 2004) that it could not be concluded that contractor would have quoted lower rates if the item had been included in the bid document. The reply is not tenable as the Company failed to incorporate such important item of work in the contracts as done in other cases and payments have not been correctly regulated as brought out above.

The matter was reported to the Government (May 2004); the reply had not been received (December 2004). 4.8 Payment of idling charges

Maharashtra State Road Development Corporation Limited (Company) awarded the construction work of phase-III of Bandra-Worli Sealink for a total amount of Rs.43 crore to Prakash Construction and Engineering Company. The work was commenced from July 1999 and stopped from January 2000 on

? £ Package-XII -Quantity cum 1,32,020 x (Rs.125 - Rs.105) = Rs.26.40 lakh. £ Package-XIV-Quantity cum 3,34,859 x (Rs.136 - Rs.98.93) = Rs.1.24 crore.

The Company incurred avoidable expenditure of Rs.2.72 crore due to stoppage of work despite having approval from Ministry of Environment and Forests.

The Company made payment ignoring District Schedule of Rates and own estimated rates.


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the directions from Government due to protests by NGOs on the ground that the Company reclaimed 27 hectares land instead of 4.7 hectares land permitted by Ministry of Environment and Forests (MOEF).

The Company had already received permission for reclaiming 22.3 hectares of land under coastal zone regulations and the permission of MOEF for balance 4.7 hectares was received in January 1999. Since the Company was having permission of reclaiming entire area, the fact should have been brought to the notice of Government and there was no necessity to stop the work.

The Company paid Rs.2.72 crore to the contractor on account of idling of plant and machinery for a period of 3.5 months (21 January-2 May 2000).

The Company stated (August 2004) that work was started on the understanding that the condition imposed by MOEF pertained to additional reclamation (4.7 hectares) only and not to total reclamation required for the project as permission for the remaining 22.3 hectares had already been obtained but the work was stopped due to the instructions of State Government.

The reply is not tenable. The stoppage of work was not justified as the permission for reclaiming entire 27 hectares was received by the Company and there was no necessity to make further reference to MOEF for revised approval.

The matter was reported to the Government (May 2004); the reply had not been received (December 2004).

4.9 Toll collection contract

The Maharashtra State Road Development Corporation Limited (Company) appointed (September 2002) Seema Construction and Kothari Enterprises as contractor for collecting toll at four toll stations at Nagpur. The contractor was to remit Rs.12.81 lakh per week to the Company with effect from May 2003. The first instalment was payable on 8 May 2003. The same was not paid. The party also defaulted on payment of second, third and fourth instalments due on 15, 22 and 29 May 2003, respectively.

Only on 2 June 2003 the first payment of Rs.20.46 lakh against the due amount of Rs.38.50 lakh was made. The total shortfall on that date was Rs.18.04 lakh. The Company did not take action for prompt receipt of the dues. The contractor continued to delay remittances and the amounts remitted were less than stipulated in the contract. As per the terms of contract the shortfall should have been immediately adjusted from the security deposit (SD) of Rs.77.49 lakh.

Avoidable expenditure of Rs.2.72 crore was incurred due to stoppage of work despite having approval from Ministry of Environment and Forests.

The Company passed on irregular benefit of the toll collection of Rs.41 lakh to the contractor in violation of the contract.


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By not taking timely action there was accumulation of dues to the extent of Rs.1.18 crore (October 2003). The adjustment from SD was made only in November 2003 i.e. after completion of contract. The amount recovered was only Rs.77.49 lakh and the balance dues of Rs.41 lakh was irregularly waived.

The Company stated (August 2004) that timely action was taken as stipulated in the contract and the rebate of Rs.41 lakh was due to various factors like reduction in toll rates etc.

The reply is not borne by facts. Though the contractor was a defaulter from the initial stage itself, the Company allowed dues to accumulate. The contractor was already given (May 2003) a substantial concession of Rs.63.70 lakh? in the form of reduction in toll and further rebate of Rs.41 lakh after closure of contract was not warranted.


Maharashtra State Textile Corporation Limited

4.10 Implementation of Voluntary Retirement Scheme

The State Government decided (January 2001) to close down all textile mills belonging to the Company including its subsidiaries and formulated a voluntary retirement scheme (VRS). Under the VRS, prescribed benefits in addition to normal retirement benefits payable to an employee were as follows:

?? Salary of 35 days for every completed year of service, and

?? For the remaining service, Rs.2,500 per year or 25 days salary per year whichever was higher. However, the minimum amount paid would be Rs.25,000 or 250 days salary, whichever was higher.

As the compensation was in addition to the normal terminal benefits, the VRS should have prescribed that the amount can not exceed the salary payable to them for the balance service period even if the employees had stayed at home. The Company however, did not fix such limit. As a result, the Company paid compensation of Rs.4.78 crore to 397 employees in excess of the salary that they would have earned, had they remained in service.

The Company stated (September 2004) that the VRS was implemented as per the cabinet decision of the Government of Maharashtra and the cabinet

? Toll reduced from Rs.15.26 lakh per week to Rs.12.81 lakh per week from May 2003 up to October 2003, Rs.15.26 - Rs.12.81 lakh = Rs.2.45 x 26 weeks = 63.70 lakh.

Irregular benefit of Rs.41 lakh of the toll collection was passed on to the contractor in violation of contract.

The Company incurred extra expenditure of Rs.4.78 crore in implementation of voluntary retirement scheme.

The Company incurred extra expenditure of Rs.4.78 crore due to VRS payments being higher than salary payable for remaining service.


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decision was not on the basis of any proposal moved by the Company. The Company further stated that they are in agreement in principle with audit's view with regard to fixing the limit on the VRS package and Government was informed to consider this aspect while formulating VRS in future.

The Government while accepting the view point of audit stated (October 2004) that the audit observation will be kept in view at the time of framing VRS in future for closure of any Government undertaking.

General

Statutory provisions for finalisation of accounts

4.11.1 According to the provisions of Section 210(3) read with Section 166 of the Companies Act, 1956, audited accounts of a company should be placed in the annual general meeting (AGM) of the shareholders within six months of the close of financial year. Further, as per provisions of Section 619A(3) of the Act, ibid, the State Government should place an annual report on the working and affairs of each State Government company together with a copy of the Audit Report and comments thereon made by the Comptroller and Auditor General of India (CAG) before the State Legislature within three months of AGM.

Management’s/Government’s responsibility for preparation of accounts

4.11.2 Under the provisions of Section 210(1) read with Section 216 and 218 of the Companies Act, 1956, the Board of Directors of a company is required to lay in every AGM an audited copy of the annual accounts i.e. balance sheet and profit and loss account for the financial year along with the Auditors' Report and other specified annexures. Therefore, it was the responsibility of the management of respective companies to finalise the accounts in time.

The administrative departments concerned have also to oversee and ensure that the accounts are finalised and adopted by the companies within the prescribed period.

Procedure for finalisation of accounts

4.11.3 The annual accounts prepared by the companies are approved by their Board of Directors and are then audited by the Statutory Auditors appointed by the CAG. As per provisions of Section 619(4) of the Companies Act, 1956 the CAG conducts supplementary audit of the accounts of the companies. Such accounts along with comments of the CAG and the report of Statutory Auditors are placed before the AGM of the companies for adoption.

4.11 Delay in finalisation of accounts by working Government companies


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Risk involved due to delay in finalisation of accounts

4.11.4 The finalised accounts of the companies reflect their overall financial health and efficiency to conduct their business. If the companies fail to finalise the accounts in time, the CAG cannot conduct the audit of the accounts of the PSUs and thus, Government's investment remains outside the scrutiny of State Legislature. Besides, the delay also makes the system prone to risk of fraud and leakage of public money.

Extent of arrears

4.11.5 Out of 55 working Government companies and five working Statutory corporations as on 31 March 2004, only nine working companies and four working Statutory corporations had finalised their accounts for the year 2003-04 within the stipulated period. The accounts of the remaining 46 working companies and one Statutory corporation were in arrears for one to 14 years as on 30 September 2004 (Annexure-12).

Comparative position of clearance of arrears

4.11.6 The table given below indicates the position of number of accounts in arrears and clearance thereof (up to September in each year) relating to working Government companies during the five years ending 2003-04.

Year Total No. of

accounts due No. of accounts

cleared Balance of accounts

in arrears Percentage of accounts cleared to accounts due

1999-2000 164 60 104 37

2000-01 147 31 116 21

2001-02 159 32 127 20

2002-03 175 27 148 15

2003-04 212 52 160 25

The above table reveals that the percentage of clearance of arrears of accounts of these companies ranged between 15 and 37 per cent.

Records of 18 Government companies whose accounts were in arrears ranging from two to 14 years were scrutinised and the position of delay in finalisation of accounts and holding of AGM in respect of these companies/corporation is detailed in Annexure-12.


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The extent of delay in respect of 18 PSUs is summarised below: Sl. No.

Name of the Company

No. of accounts in arrears as on 30 September

2004

Delay in finalisation of accounts (in months)

Delay in holding of

AGM (in months)?

1 2 3 4 5 1 Mahatma Phule Backward Class Development

Corporation Limited (MPBCDC) 14

164-171

167-172

2 Vasantrao Naik Vimukta Jatis and Nomadic Tribes Development Corporation Limited (VNVJNTDC)

11 120 124

3 Sant Rohidas Leather Industries and Charmakar Development Corporation of Maharashtra Limited (SRLICDCM)

9

78-100

80-84

4 Kolhapur Chitranagari Mahamandal Limited (KCML)

7 29 54

5 Lokshahir Annabhau Sathe Development Corporation Limited (LASDC)

14 142-145

146

6 The Maharashtra Fisheries Development Corporation Limited (MFDC)

9 52 52

7 Mahila Arthik Vikas Mahamandal Limited (MAVIM)

12 87-142 87

8 Maharashra Rajya Itar Magas Vargiya Vitta Ani Vikas Mahamandal Limited (MRIMVVM)

3 14 11-23

9 Maharashtra State Powerlooms Corporation Limited (MSPC)

4 40-51

47-53

10 Godavari Garments Limited (GGL) 5 37-63 37-50 11 Maharashtra State Farming Corporation

Limited (MSFC) 4 45-51

46-51

12 Punyashlok Ahilyadevi Maharashtra Mendhi Va Sheli Vikas Mahamandal Limited (PAMMSVM)

3 34-46

36-46

13 Development Corporation of Konkan Limited (DCKL)

7 49-82

51

14 Maharashtra Tourism Development Corporation Limited (MTDC)

4 28-52

43-44

15 Development Corporation of Vidarbha Limited (DCVL)

5 36-61 37-66

16 Shivshahi Punarvasan Prakalp Limited (SPPL) 5 43 ? 17 Anna Saheb Patil Arthik Magas Vikas

Mahamandal Limited (ASPAMVM) 5 59 ?

18 Shabari Adivashi Vitta Va Vikas Mahamandal Limited (SAVVM)

6 First accounts awaited

?

Factors responsible for delay/arrears

4.11.7 The management attributed the delay in finalisation of accounts to:

?? Shortage of experienced and qualified manpower (MPBCDC, SRLICDCM, MAVIM, DCVL and SAVVM).

? Delay has been computed after providing for the notice period of 21 days for calling Annual General Meeting. ? Information awaited.


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?? Non production of records by MPBCDC who transferred some of its projects to the Company and non availability of field level staff (MRIMVVM).

?? Dispute with Statutory Auditors with consequent delay in commencement of audit by Statutory Auditors (KCML, MFDC, GGL and SAVVM).

?? Delay in holding the Board of Directors’ meetings for approval of accounts (LASDC and MTDC).

?? Delay in holding the AGM for adoption of earlier year accounts (VNVJNTDC and ASPAMVM).

Steps taken by the State Government

4.11.8 The State Government exercises its control over the companies through the concerned Administrative/Finance department. In terms of the Memorandum and Articles of Association of the companies, the Government had the power to issue directives in the interest of companies. Besides, most of the directors of the companies are nominees of the State Government. So, in case of failure of the companies to finalise their accounts, the Government was expected to take concrete step to ensure that the accounts of the companies are finalised in time. Despite the position of arrears being pointed out by the Audit regularly to the Administrative departments, State Government had not taken concrete steps to liquidate the arrears in accounts.

The matter was reported to the Government (August 2004); the reply had not been received (December 2004).

Statutory corporations


4.12 Bulk discount to industrial consumers

Maharashtra State Electricity Board's (Board) tariff effective from May 2000 provides for bulk discount to industrial consumers having monthly consumption of more than one million units.

The bulk discount is payable at the rate of one per cent on the energy bill for every one million units subject to maximum of five per cent. The scheme was stated to have been introduced to dissuade consumers from switching to captive power generation. The incentive scheme is effective only if Board's power is costlier than captive power generation cost by less than one per cent

Due to improper formulation of bulk discount scheme the Board suffered loss of revenue of Rs.53 crore during 2000-03.


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in the range of 1-2 million units. Similarly, for consumption in the range of 2-3 million units, 3-4 million units, 4-5 million units and more than five million units, the scheme would be effective only if the price difference is less than two, three, four and five per cent respectively. There were no cost records to show that the Board's power was costlier than cost of captive generation.

The Board allowed (2000-03) discount of Rs.77.40 crore under this scheme. As per tariff, bulk discount was payable provided the energy bill is paid by the consumer within seven days from the date of bill as against the normal period of 15 days allowed for payment. The only benefit derived from the above scheme was thus early realisation of payments by eight days. Interest on cash credit availed by the Board was 14.5 per cent per annum. However, the rebate offered for early realisation of dues by just eight days works out to 46 per cent per annum at the lower end for one per cent rebate and 228 per cent per annum at the higher end for rebate of five per cent. Thus, the benefit of earlier realisation was much lower than the quantum of rebate allowed.

Despite the benefit of early realisation of payments by eight days the loss of revenue due to grant of bulk discount was more than Rs.53 crore? up to March 2003.

The Board in its reply (July 2004) endorsed by Government (August 2004) stated that the scheme was introduced by Maharashtra Electricity Regulatory Commission (MERC). However, the Board failed to point out the above lacunae in the scheme to MERC for remedial measures.

4.13 Non recovery of service line charges

Clause 31(f) of conditions and miscellaneous charges for supply of electrical energy, provides that the consumers shall at all times restrict their actual maximum demand within the sanctioned contract demand. In case, actual maximum demand of the consumer exceeds the contract demand three or more times in a calendar year, then the consumer is liable for payment of additional service line charges (ADSLC).

Audit observed (2002-03) that in six? operational and maintenance circles of the Board, 201 high tension consumers had exceeded contract demand by three to 19 times in a calendar year during 1999-2003 and were liable for payment of ADSLC of Rs.1.30 crore. The Board had not recovered ADSLC and as a result the Board was deprived of revenue of Rs.1.30 crore.

The Board stated (July 2004) that it was advantageous to levy penalty charges than to insist on payment of ADSLC. It stated that charging of ADSLC is linked with sanctioning of additional load on permanent basis which is further

?Rebate given was Rs.77.40 crore. Even if the 46 per cent interest is considered, the extra payment was Rs.77.40 x (46 - 14.5)/46 = Rs.53 crore. ? Bhandup, Kalyan, Osmanabad, Ratnagiri, Satara, Urban Zone and Vasai O&M.

The rebate offered for early payment worked out to interest rates of 46-228 per cent as against the interest rate of 14.5 per cent per annum on cash credit. The loss on this account was more than Rs.53 crore.

The Board did not recover the additional service line charges of Rs.1.30 crore from high tension consumers.

The Board failed to recover additional service line charges of Rs.1.30 crore from high tension consumers.


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linked to the required infrastructure capacity being available on permanent basis and unless load is sanctioned, ADSLC cannot be recovered.

The reply is not tenable. The procedure adopted above is violative of the principle behind insisting of ADSLC whenever the actual load exceeds the contracted demand. The purpose of this rule is to ensure that the load management is not adversely affected. Levy of penalty is only an interim measure for discouraging overdrawal whereas ADSLC is a tool for better load management.


4.14 Procurement of 630 KVA distribution transformers

The Board placed (September 2000) a purchase order for supply of 30 numbers of 630 KVA dry type distribution transformers on Shriram Switchgears, Akola (firm) at the rate of Rs.3.38 lakh per transformer. The firm supplied only 10 transformers during October 2000 to January 2001.


Even though the firm defaulted in supplies of 20 transformers against the purchase order placed in September 2000, the Board did not take any action against the supplier either for recovery of liquidated damages or procurement of material at the risk and cost of the defaulting supplier. On the contrary, the Board procured in subsequent tender (April 2002) these transformers from the same defaulting firm at higher rate of Rs.5.49 lakh per transformer and incurred extra expenditure of Rs.40.09 lakh.? Thus, the benefit was passed on to the defaulting supplier and the Board failed to safeguard its financial interests.

The Board in its reply (July 2004) endorsed by Government (August 2004) stated that risk purchase action could not be taken against the firm due to delay in payment for quantity already supplied. From the details furnished by the Board, it is seen that only after opening of tenders in April 2002, the party sought (July 2002) for the cancellation of previous order (September 2000). The party was to supply three transformers in October 2000 and six transformers every month thereafter. Except for the first lot of three transformers there was enormous delay in supply and the party supplied seven transformers only in January 2001. The delays in payment by the Board facilitated the party to offer an excuse to get out of its contractual obligations right at the beginning (November 2000). After the first default, the Board should have initiated action against the supplier.

? Rs.5.49 lakh - Rs.3.38 lakh x 19 transformers.

Procurement of transformers from a supplier who defaulted in an earlier order resulted in extra expenditure of Rs.40.09 lakh.

Procurement of transformers from a supplier who defaulted in an earlier order resulted in extra expenditure of Rs.40.09 lakh.


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4.15 Lack of transparency in procurement of transformers

The Board invited tenders for procurement of 34 power transformers (220 KV) of eight different capacities which include procurement of seven transformers of 25 MVA 132/22/33 KV to meet the requirement of EHV transmission sub stations and placed (October 2001) orders as detailed below:

Distribution of Quantities

Rate Extra expendi

–ture

Sl. No.

Description of capacity of power

transformer

Quantity ordered

and procured

No. of offers

received

No. of parties

on whom orders placed

Name of the firm

No. of transfo -rmer

(Rupees in lakh)

Remarks

IMP Power Limited (L-1)

2 48.71 - 1 25 MVA 132/22 KV

3 8 2

Bharat Bijli (L-2)

1 51.69 2.98

L-2 = Rs.51.69 lakh but did not match L-1 rate.

IMP Power Limited (L-1)

2 52.77 -

Andrew Yule (L-2)

1 57.45 4.68

25 MVA 132-110/33 KV

4 8 3

Bharat Bijli (L-3)

1 57.85 5.08

L-2 = Rs.57.45 lakh L-3 = Rs.57.85 lakh but did not match L-1 rate.

2

Total 7 - - 7 - 12.74

Audit observed that:

?? There was lack of transparency as the number of parties on whom the orders were to be placed and quantities thereagainst was not pre decided and recorded in the file prior to issue of NIT.

?? The placement of orders on other than the lowest tenderer despite not matching L-1 rate is objectionable and resulted in extra expenditure of Rs.12.74 lakh to the Board. It also resulted in L-1 not supplying the ordered quantity.

The Board stated (July 2004) that performance of L-1 was not satisfactory and hence orders were placed on L-2 and L-3 firms. It was further stated that views of audit on transparency requirements are noted and the tender conditions would be suitably modified. The Board’s reply regarding placement of orders on L-2 and L-3 is not tenable since orders on all three firms were placed simultaneously and without getting the prices of L-2 and L-3 matched with L-1.


The Board exhibited lack of transparency besides incurring extra expenditure of Rs.12.74 lakh in procurement of transformers.

Besides lack of transparency there was extra expenditure of Rs.12.74 lakh in procurement of transformers.


97

Maharashtra State Road Transport Corporation

4.16 Investment of contributory provident fund and gratuity fund

The Vice Chairman & Managing Director of Maharashtra State Road Transport Corporation (Corporation) is the Chairman of the Maharashtra State Road Transport Corporation's Contributory Provident Fund and Gratuity Fund Trust (CPF/GFT). The Chief Accounts Officer of the Corporation is the Secretary of the trust. The entire loss caused to the trust in investments must be made good alongwith up to-date interest by the Corporation in accordance with the provisions of Employees Provident Fund Act.

CPF/GFT invested (April-July 1998) Rs.11.78 crore in 15.75 per cent bonds of Uttar Pradesh Co-operative Spinning Mills Federation Limited (UPCSMFL). The trust further invested (December 1999) Rs.4.26 crore in 16 per cent bonds of UPCSMFL through an intermediary. UPCSMFL defaulted in payment of interest from 20 August 1999 and the total interest not paid up to March 2004 was Rs.12 crore.

The Corporation stated (June 2004) that investment in UPCSMFL was made by the trust considering high rate of return and as it had made profits during 1996-97 and 1997-98. It further stated that a suit would be filed for invoking the Government guarantee for recovery of the amounts invested.

The reply is not tenable as:

?? Security of investment was of prime importance. The 15.75 per cent bonds of UPCSMFL were not only unsecured but also did not have any rating. UPCSMFL had incurred a huge loss of Rs.33.97 crore during 1995-96. The profit of Rs.9.99 crore during 1996-97 and Rs.14.54 crore for the period 1997-98 (up to December 1997) was due to prior period adjustment of Rs.29.61 crore for 1996-97 and Rs.30.65 crore for 1997-98. But for these adjustments the loss during these years would be Rs.19.62 crore and Rs.16.11 crore. Hence, investment in UPCSMFL was not in the interest of the Trust/Corporation.

?? The investment was in violation of the investment guidelines (July 1998) which stipulate investment up to 10 per cent of total investment during the year in private sector bonds/securities which are risk free and must have an investment grade rating from atleast two credit rating agencies. Audit scrutiny revealed that there were AAA rated bonds giving interest between 13-14 per cent and fit for consideration as the interest was above the interest rate of 12 per cent payable to the subscribers of CPF.

?? Further investment of Rs.4.26 crore in the 16 per cent bond of UPCSMFL was made on the ground that it was guaranteed by Government of

The Corporation is liable to bear losses due to injudicious investment of Rs. 16.04 crore made by its contributory provident fund and gratuity fund trust.


98

Uttar Pradesh. However, the guarantee has not been invoked to recover this part of the investment made.

Thus, the Corporation would be liable to bear the total loss of Rs.28.04 crore (principal : Rs.16.04 crore and interest : Rs.12 crore) due to injudicious investment made in UPCSMFL by the Trust.


4.17 Provision of buses to a political party

Maharashtra State Road Transport Corporation (Corporation) provided 62 buses on contract carriage to the Secretary, Maharashtra Pradesh Congress Committee, Mumbai for Youth Congress rally to be held at Sabarmati, Gujarat on 30 January 2000. The instructions (November 1999) on contract carriage provided that the Corporation was to collect a deposit of 120 per cent of the estimated bill before providing buses on contract carriage.

In the instant case, instead of collecting Rs.31.96 lakh (being 120 per cent of estimated charges amounting to Rs.26.63 lakh) in advance, the Corporation obtained (29 January 2000) only one cheque of rupees nine lakh. Even this cheque was dishonoured but no action was taken under section 138 of Negotiable Instrument Act, 1938. The Corporation received another cheque of rupees nine lakh on 31 January 2000 after release of buses. The Corporation preferred (8 March 2000) a final claim of Rs.26.63 lakh including interest against the party. Due to further interest implication, the balance amount increased to Rs.27.15 lakh (principal: Rs.17.63 lakh, interest: Rs.9.52 lakh). The Corporation stated (May 2004) that full amount was not insisted upon because the activities of the Corporation were supervised and controlled by the Government of Maharashtra. As the Corporation's efforts to recover the amount failed, a summary suit was filed for recovery of dues in the Mumbai High Court.

The reply is not tenable as the provision of buses merely on the basis of the verbal assurance was in violation of the laid down instructions.


4.18 Accident compensation

Section 168(3) of the Motor Vehicles Act, 1988 prescribes payment of accident compensation within 30 days of the date of announcing the award by Motor Accident Claims Tribunal (MACT). In case of delay in payment of accident compensation claims, interest is payable as prescribed in the award.

The Corporation has not recovered dues of Rs.27.15 lakh from a political party for providing buses on contract carriage.

The Corporation failed to discharge its statutory obligation to make timely payment to accident compensation claimants.


99

Test check of payment of 1,099 claims in 18 divisions during 1999-2003 revealed that there were delays in payment up to three years (beyond 30 days from the date of award). There was delay of more than one year in 40 cases, up to one year in 397 cases and up to 90 days in 662 cases. The Corporation had to incur interest cost of Rs.5.08 crore.

The Corporation stated (October 2003) that the rate of interest charged by the MACT was less than the rate of interest paid by the Corporation on borrowings. The reply is not tenable. The Corporation should not have tried to take advantage of the rate of interest on delayed payment being less than its own cost of funds. The Corporation being a public sector unit had failed to discharge its statutory obligation to make timely payment.

The Corporation in its reply further stated (July 2004) that efforts are being made to make the statutory payments in time.


4.19 Lack of transparency in procurement of tyres and tubes The Corporation invited tenders for procurement of tyres and tubes and placed orders during April 2003 as detailed below:

Distribution of Quantities

Rate Extra

expend-iture

Sl. No.

Description of tyres and

tubes

Quantity ordered

and procured

No. of offers

received

No. of parties

on whom orders placed

Name of the firm

No. of tyres

(Rupees in lakh)

Remarks

MRF (L-1) 27,950 4,705.00 - J.K. Industries (L-2)

6,450 4,856.67 9.78 1 Nylon

crossply tyres 9 x 20

43,000 5 3

Vikrant (L-2) 8,600 4,856.67 13.05

L-2 = Rs.4,856.67 per tyre did not match L-1 rate.

MRF (L-1) 3,500 6,901.84 - 2 Radial tyres 9x 20

5,000 5 2 Vikrant (L-2) 1,500 7,481.33 8.69

L-2 = Rs.7,481.33 per tyre but did not match L-1 rate.

Vikrant (L-1) 6,000 537.33 - 3 Tubes for radial tyres 9 x 20

7,500 5 2 MRF (L-2) 1,500 568.34 0.46

L-2 = Rs.568.34 but did not match L-1 rate.

MRF (L-1) 400 2,977.04 - 4 Nylon tyres 7.50 x 16

2,000 5 2 Vikrant (L-2)?

1,600 3,072.09 0.57 L-2 = Rs.3,072.09 but did not match L-1 rate.

Vikrant (L-1) 8,600 423.67 - Tubes for nylon crossply tyres

15,050 5 2 J.K. Industries (L-2)

6,450 439.16 1.00 L-2 = Rs.439.16 but did not match L-1 rate.

5

Total 72,550 - - 72,550 - 33.55

?Actually supplied 600 tyres only and extra expenditure calculated on actual supplied quantity.

The Corporation exhibited lack of transparency besides incurring extra expenditure of Rs.33.55 lakh in procurement of tyres and tubes.


100

Audit observed that:

?? There was lack of transparency as the number of parties on whom the orders were to be placed and quantities thereagainst was not pre decided and recorded in the file prior to issue of NIT.

?? The placement of orders on other than the lowest tenderer despite not matching L-1 rate was objectionable and resulted in extra expenditure of Rs.33.55 lakh to the Corporation.

The Corporation stated (September 2004) that as the quantity offered by tenderer was uncertain, it was difficult to freeze the number of sources prior to opening of tender and for procurement from multiple sources the necessary provisions as suggested would be incorporated in NIT henceforth.

Reply is not tenable as any problem arising on account of the parties not having the capacity to supply the quantity as determined by pre-fixed formula could be taken care of by distribution of balance quantities to the remaining parties in the order of price quoted by them subject to their matching with L-1 party.


4.20 Procurement of tarpaulin

Maharashtra State Road Transport Corporation (Corporation) invited (February 2002) tenders and entered (June 2002) into rate contract with Kohinoor Proofing Industries, Pune (firm) for procurement of 1,965 tarpaulin at total value of Rs.30.08 lakh (533 Type-I tarpaulin? at the rate of Rs.1,950 per piece and 1,432 Type-III at the rate of Rs.1,375 per piece).


?? The Corporation's past experience with the firm was unsatisfactory. Therefore, payment terms should have stipulated release of amount only after thorough testing of material and not merely by visual inspection. Instead, as per the terms of payment of rate contract, 90 per cent payment (Rs.22.32 lakh) was made (5–23 July 2002) on acceptance of material based merely on visual inspection. The Corporation should have at least safeguarded its interests by taking bank guarantee for the amount released without lab report. The Corporation took bank guarantee for only Rs.3.20 lakh.

? Used to cover the luggage of passengers.

Besides lack of transparency there was extra expenditure of Rs.33.55 lakh in procurement of tyres and tubes.

The Corporation failed to recover Rs.33.17 lakh towards rejected tarpaulin.


101

?? The samples were sent (7 August 2002) for laboratory testing and test results received on 26 August 2002. The samples failed in testing. The dimensions and thickness of the tarpaulin were considerably different from that prescribed and water penetration test revealed wetting of the lower surface. The material did not meet nine out of 16 parameters.

Out of the total rejected quantity valuing Rs.22.32 lakh, the firm paid Rs.10.39 lakh (February 2003) and the Corporation encashed the bank guarantee of Rs.3.20 lakh. The balance amount of Rs.8.73 lakh was still (September 2004) to be recovered from the firm.

?? As per the terms of rate contract, the rejected material was to be replaced by the firm within 30 days, otherwise interest at the rate of 21 per cent and ground rent at the rate of one per cent per week on the net value of rejected material in addition to interest was to be charged. The Corporation was yet to recover Rs.5.69 lakh towards interest and Rs.18.75 lakh towards ground rent from the firm. Thus, total amount recoverable from the firm towards rejected material was Rs.33.17 lakh? as on 30 April 2004.

The Corporation stated (June 2004) that the matter of recovery of damaged tarpaulin was being pursued and would be followed by legal action against the supplier in the event of non recovery.


Maharashtra Industrial Development Corporation

4.21 Leasing of buildings

Maharashtra Industrial Development Corporation (Corporation) entered into (March 1999) Memorandum of Understanding (MOU) with Rolta India Limited (firm) for lease of two buildings for total lease premium of Rs.10.60 crore? in Millennium Business Park (MBP) at Mahape, Thane district under exchange? scheme.

? Rs.8.73 lakh + Rs.5.69 lakh + Rs.18.75 lakh. ? Worked out as Rs.8.80 crore (80,000 square feet x Rs.1,100 per square feet) + (20,000 square feet x Rs.900 per square feet) ? In exchange of plots, the built up area in the building at MBP was allotted to the firm.

The Corporation had not recovered Rs.33.17 lakh towards rejected tarpaulin.

Non collection of premium in terms of Memorandum of Understanding from Rolta India Limited resulted in outstanding dues of Rs.9.37 crore.


102

The firm was to pay Rs.10.60 crore as total lease premium of two buildings as under:

Five per cent of the lease premium at the time of signing of MOU, five per cent at the time of allotment, 10 per cent at the time of handing over the possession and 80 per cent in quarterly instalments spread over seven years with interest of 14 per cent on reducing balance. The licencee was liable to pay interest at the rate of 16 per cent on all delayed payments.


?? As per the terms of MOU, the firm was to pay total lease premium of Rs.10.60 crore. Accordingly, the firm paid Rs.53 lakh (five per cent of Rs.10.60 crore) at the signing of MOU. But the Corporation wrongly mentioned (April 1999) the total premium payable as Rs.8.40 crore in the allotment letter instead of Rs.10.60 crore as per MOU. This was a clear benefit of Rs.2.20 crore to the firm.

?? Further, the Corporation carried out (February-May 2001) customisation of buildings as per the requirement of the firm and spent Rs.85 lakh on it. The firm paid (January 2002) Rs.6.23 lakh only towards customisation work. The balance amount of Rs.78.77 lakh has not been recovered from the firm so far (July 2004).

?? As on 31 March 2004 premium of Rs.7.87 crore remained to be collected from the firm. The interest due on unpaid premium works out to Rs.71.42 lakh.

The Corporation in its reply (July 2004) endorsed by Government (July 2004) stated that there was no under recovery of Rs.2.20 crore and intimated that it decided to cancel the allotment in April 2004 but could not do so because of case filed by the firm in High Court against the cancellation. The reply is not tenable as the allotment order clearly stated the total premium payable as Rs.8.40 crore instead of Rs.10.60 crore as mentioned in MOU.

4.22 Construction of common effluent treatment plant

In order to set up common effluent treatment plant (CETP) at an estimated cost of rupees seven crore at Butibori Industrial Area, Nagpur, Maharashtra Industrial Development Corporation (Corporation) entered into Memorandum of Understanding (MOU) in April 1999 with Butibori Manufacturers' Association (BMA) and Green Spice India Limited (GSIL). The total investment of Rs.4.27 crore made by the Corporation on CETP remained idle as the work was still (March 2004) incomplete.

Non collection of premium from the firm resulted in outstanding dues of Rs.9.37 crore.

Defective Memorandum of Understanding led to non completion of common effluent treatment plant despite expenditure of Rs.4.27 crore.


103

As per the terms of MOU, the project was to be financed as under:

Name of the party Percentage of contribution

Maharashtra Industrial Development Corporation (Corporation) 25 Green Spice India Limited (GSIL) 25 Maharashtra Pollution Control Board (MPCB) 5 Butibori Manufacturers' Association (BMA) 15 Loan fund to be raised by GSIL from financial institutions 30

Thus, a major part of the fund forming 75 per cent of the cost was to come from GSIL, BMA and MPCB. The Corporation spent Rs.4.27 crore without any contribution from BMA, the major beneficiary of the project and other agencies. They failed to fulfil their obligation in funding the project. The work was suspended in October 2001 after termination of MOU.

The Corporation in its reply (July 2004) endorsed by Government (August 2004) stated that it plans to complete the project by selecting a new joint venture partner.

The fact however, remains that CETP has not been utilised so far despite expenditure of Rs.4.27 crore. The MOU should have prescribed that initial funding should have been by the beneficiaries and followed by the Corporation. This would have ensured their commitment to the project.

4.23 Payment of intermediary charges

The Corporation availed loan of Rs.60 crore (Rs.35 crore in November 2001 and Rs.25 crore in June 2002) from Jammu & Kashmir Bank Limited, Mumbai (bank) at the interest rate of 11.4 per cent per annum.

The Corporation paid (June 2002) intermediary charges of Rs.30 lakh to Chartered Financial Management Limited (firm) at the rate of 0.5 per cent on the amount of loan availed. The payment was made to the firm on the ground that loan proposal was initially brought (February 2001) by the firm from the bank and to fulfill the oral commitment to the firm.

The Corporation in its reply (July 2004) endorsed by the Government (November 2004) stated that the proposal given by the firm was beneficial and Corporation saved interest payable to the bank. The reply is not tenable. Payment of charges to an intermediary would have been justified had the money been raised from a large number of sources as in the case of public issue of bonds where the intermediary renders services commensurate with the commission paid. This was not the case here. The loan was secured by hypothecation of receivables from Millennium Business Park and water charges receivable by the Corporation. The payment of Rs.30 lakh to the private party was, therefore, unwarranted.

The Corporation made an unwarranted payment of Rs.30 lakh to an intermediary for availing loan from a Government bank.

Defective MOU led to non completion of CEPT despite expenditure of Rs.4.27 crore.


104

4.24 Allotment of plots

The Corporation sold (February 2002 to October 2003) 28 plots measuring 29,340.10 square metres in infotech park at Nagpur to industrial units at the rate of Rs.2,000 per square metre.

Audit observed that during 2001-02, the ready reckoner rate of Town Planning Department (TPD) of the State Government indicated minimum market rate applicable in that area as Rs.3,000 per square metre. The infotech city is located in the heart of the city. The Corporation sold 28 out of 46 plots measuring 29,340.10 square metres below the minimum market price of Rs.3,000 per square metre and incurred loss of revenue of Rs.2.93 crore. The reasons for fixing the sale rate below the TPD rate were not on record.

The Corporation in its reply endorsed by the Government stated (July 2004) that the rates of land premium in developed and semi developed part of the State are higher compared to rates in developing and backward regions. The infotech park was stated to be in a backward area hence placed under 'D' category where lesser premium is chargeable. The reply is not acceptable. The methodology adopted in fixing the price lacked transparency as there was no laid down policy for fixing the sale price of plots on the basis of predetermined percentage of concession with reference to market price in each of the zones.

4.25 Construction of flatted building at Satpur

The Corporation constructed flatted building (ground plus three) with 13 galas? on each floor in Satpur Industrial Area, Nasik. The construction was completed in December 2002 at a cost of Rs.74.55 lakh. Twenty five galas situated on second and third floor were not allotted till May 2004.


?? Location of units on second and third floor is disadvantageous due to difficulties in transporting raw materials. For this reason, the normal practice was to restrict construction of galas with only one storey (ground plus one). Departing from this practice, the construction of galas on second and third floor was undertaken without ascertaining firm demand for galas on second and third floor.

? Commercial blocks.

Allotment of plots of Infotech Park, Nagpur by the Corporation below the minimum market rate resulted in loss of revenue of Rs.2.93 crore.

Construction of 25 galas on second and third floor of flatted building at Satpur, Nasik without ascertaining firm demand led to idle investment of Rs.35.84 lakh.


105

?? As per administrative approval for the project, construction was to be taken up only after ascertaining firm demand. Pursuant to press release, the Corporation received 66 applications alongwith earnest money deposit (EMD) of Rs.5,000 each. However, the press release did not specify that the flatted building would be of ground plus three structures as against ground plus one structure in existing four flatted buildings.

The Corporation in its reply (May 2004) endorsed by Government (June 2004) stated that more galas would have been allotted but for the industrial recession. The reply is not tenable as some of the applicants withdraw the deposits as they wanted allotments for galas on ground or first floor only. As a result, the proportionate investment of Rs.35.84 lakh remained blocked from December 2002.

General

4.26 Follow up action on Audit Reports

Outstanding action taken notes

4.26.1 Audit Reports of the Comptroller and Auditor General of India represent culmination of the process of scrutiny starting with initial inspection of accounts and records maintained in the various public sector undertakings (PSUs). It is, therefore, necessary that they elicit appropriate and timely response from the executive. Finance Department, Government of Maharashtra issues instructions every year to all administrative departments to submit replies to paragraphs and reviews included in the Audit Reports within a period of three months of their presentation to the Legislature in the prescribed format.

Though the Audit Report for the year 2001-02 was presented to the State Legislature in July 2003, four out of eight departments did not submit replies to 17 out of 24 paragraphs/reviews as on 31 March 2004. Audit Report for 2002-03 was presented to State Legislature on 8 June 2004.

The Government did not respond even to reviews/paragraphs highlighting important issues like system failure, mismanagement and inadequacy of recovery system. Departments largely responsible for non-submission of replies were Industries, Energy and Labour and Trade and Commerce.

Status of compliance to Reports of Committee on Public Undertakings (COPU)

4.26.2 Replies (Action Taken Notes) to 152 paragraphs pertaining to 23 Reports of the COPU presented to the State Legislature between April 1995


106

and March 2004 had not been received (31 March 2004) as indicated below:

Year of COPU Report Total no. of Reports involved No. of paragraphs where replies not received 1994-95 4 32 1995-96 2 10 1996-97 2 10 1997-98 3 24 1998-99 1 20 2000-01 1 5 2001-02 6 26 2002-03 1 10 2003-04 3 15

Total 23 152

These reports of COPU contain recommendations in respect of paragraphs pertaining to 12 departments* which appeared in the Comptroller and Auditor General of India's Audit Reports for the years 1989-90 to 2000-01.

Action taken on the persistent irregularities

4.26.3 With a view to assist and facilitate discussion of paras of persistent nature by the State COPU, an exercise has been carried out to verify the extent of corrective action taken by the auditee organisation concerned and results thereof are given in Annexure-13.


4.26.4 The irregularities having financial implications of Rs.14.85 crore in unfruitful investment in construction of tenements, shops and banking complex by City and Industrial Development Corporation of Maharashtra Limited without assessing firm demand were included in the Reports of the Comptroller and Auditor General of India for the years 1999-2000 to 2000-01 (Commercial) - Government of Maharashtra. As seen from the Annexure-13 action was yet to be taken by the Company/State Government on the irregularities pointed out.

Statutory corporations

4.26.5 The irregularities having financial implication of Rs.61.84 crore in purchase of meters, switch gears and grinding balls at higher rates by Maharashtra State Electricity Board, construction of financially unviable depots/bus stations by Maharashtra State Road Transport Corporation and acceptance of doubtful and inadequate securities for sanction of loans by Maharashtra State Financial Corporation were included in the Reports of the Comptroller and Auditor General of India for the years 1999-2000 to 2002-03 (Commercial) - Government of Maharashtra. As seen from the Annexure-13 persistent irregularities noticed during audit indicate that the Corporations are yet to improve their procedures.

The matter was reported to the Government (August 2004); the reply had not been received (December 2004). *Agriculture, Animal Husbandry, Dairy Development & Fisheries; Revenue and Forest; Medical, Education and Drugs; Industries, Energy and Labour; Social Welfare; Women and Child Welfare; Co-operation and Textiles; Home (Transport); Cultural Affairs; Urban Development Home (Police) and Home (Tourism).


107

Response to inspection reports, draft paras and reviews

4.27 Audit observations noticed during audit and not settled on the spot are communicated to the heads of PSUs and concerned departments of State Government through Inspection Reports. The heads of PSUs are required to furnish replies to the Inspection Reports through respective heads of departments within a period of six weeks. Inspection Reports issued up to March 2004 pertaining to 61 PSUs disclosed that 2,506 paragraphs relating to 582 Inspection Reports remained outstanding at the end of September 2004. The department-wise break-up of Inspection Reports and Audit observations outstanding as on 30 September 2004 is given in Annexure-14.

Similarly, draft paragraphs and reviews on the working of PSUs are forwarded to the Principal Secretary/Secretary of the administrative department concerned seeking confirmation of facts and figures and their comments thereon within a period of six weeks. It was, however, observed that 22 draft paragraphs and four draft reviews forwarded to the various administrative departments during March-August 2004, as detailed in Annexure-15, have not been replied to so far (December 2004).

It is recommended that the Government should ensure that (a) procedure exists for action against officials who failed to send replies to inspection reports/draft paragraphs/reviews as per the prescribed time schedule; (b) action to recover loss/outstanding advances/overpayment is taken in a time bound schedule; and (c) the system of responding to the audit observations is revamped.

MUMBAI (G. N. SUNDER RAJA) Accountant General The 4 March 2005 (Commercial Audit), Maharashtra

Countersigned

NEW DELHI (VIJAYENDRA N. KAUL) Comptroller and Auditor General of India The 11 March 2005

ANNEXURES

111

Annexure-1 Statement showing particulars of up-to-date paid-up capital, equity, loans received out of budget and loans

outstanding as on 31 March 2004 in respect of Government companies and Statutory corporations (Referred to in paragraphs No.1.2,1.3,1.4,1.5,1.17)

(Figures in columns 3(a) to 4(f) are Rupees in lakh)Paid-up capital as at the end of the current year Equity/Loans

received out of budget during the

year

Loans @ outstanding at the close of 2003

Sl.No.

Sector and name of the Company

State Govern-

ment

Central Govern-

ment

Holding Companies

Others Total

Equity Loans

Other loans

received during the

year Govern-ment

Oth

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

A. Working Government companies:

AGRICULTURE & ALLIED SECTOR


300.00 250.00 --- --- 550.00 --- --- --- --- --

2 Maharashtra Insecticides Limited

--- --- 100.00 --- 100.00 --- --- --- --- ---

3 Mafco Limited 503.57 --- --- --- 503.57 --- --- --- 363.15 ---

4

The Maharashtra Fisheries Development Corporation Limited

171.94 --- --- --- 171.94 --- --- --- 109.85 ---

5 Punyashlok Ahilyadevi Maharashtra Mendhi Va Sheli Vikas Mahamandal Limited

138.33 270.66 --- --- 408.99 --- --- --- 8.91 ---

6 Maharashtra Land Development Corporation Limited?

300.00 100.00 --- --- 400.00 --- --- --- 2677.56 165.36

7 Maharashtra State Farming Corporation Limited

275.00 --- --- --- 275.00 --- --- --- 4405.68 ---

@ Loans outstanding at the close of 2003-04 represents long-term loans only. ? Information as furnished by Company (Sl.No.A-6) in earlier years.


112

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

8 Maharashtra Co-operative Development Corporation Limited

295.31

3.44*

--- --- 282.98

45.22*

578.29 48.66*

13.75 --- --- --- 11384.00

TOTAL 1984.15

3.44*

620.66 100.00 282.98

45.22*

2987.79 48.66*

13.75 --- --- 7565.15 11549.36

INDUSTRY SECTOR

9 Sant Rohidas Leather Industries and Charmakar Development Corporation Limited

2321.00 --- --- --- 2321.00 --- --- ---- --- ---

10 Leather Industries Corporation of Marathwada Limited?

--- --- 63.50 --- 63.50 --- 21.92 --- --- 484.49

11 Maharashtra Small Scale Industries Development Corporation Limited

978.90 --- --- --- 978.90 --- --- --- --- ---

12 Maharashtra Petrochemicals Corporation Limited

895.66 --- --- --- 895.66 --- --- --- --- ---

TOTAL 4195.56

--- 63.50 --- 4259.06 --- 21.92 --- --- 484.49

ELECTRONICS SECTOR

13 Maharashtra Electronics Corporation Limited*

968.60 --- --- --- 968.60 --- 554.15 --- 2992.00 323.00

TOTAL 968.60 --- --- --- 968.60 --- 554.15 --- 2992.00 323.00

TEXTILES SECTOR

14 Godavari Garments Limited* --- --- 24.00 --- 24.00 --- --- --- --- 405.01

15 Maharashtra State Textile Corporation Limited

23615.75 --- --- --- 23615.75 --- --- --- 27231.01 ---

16 Maharashtra State Powerlooms Corporation Limited

1123.30 --- ---- --- 1123.30 --- --- --- 20.00 --

TOTAL 24739.05 --- 24.00 --- 24763.05 --- --- --- 27251.01 405.01

? Information as furnished by Company (Sl.No.A-10,13,14) in earlier year.

113

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

HANDLOOM AND HANDICRAFTS SECTOR

17 Maharashtra State Handlooms Corporation Limited

6919.23 189.69 --- --- 7108.92 --- --- --- 200.00 ---

TOTAL 6919.23 189.69 --- --- 7108.92 --- --- --- 200.00 ---

FOREST SECTOR

18 Forest Development Corporation of Maharashtra Limited

2766.49 --- --- --- 2766.49 --- 40.13 --- 15861.85 ---

TOTAL 2766.49 --- --- --- 2766.49 --- 40.13 --- 15861.85 ---

MINING SECTOR

19 Maharashtra State Mining Corporation Limited

206.69 --- --- --- 206.69 --- --- --- 457.46 ---

TOTAL 206.69 --- --- --- 206.69 --- --- --- 457.46 ---

CONSTRUCTION SECTOR

20 Maharashtra State Police Housing and Welfare Corporation Limited

795.91 --- --- --- 795.91 --- --- --- --- 9626.00

21 Maharashtra State Road Development Corporation Limited

500.01 --- --- --- 500.01 --- --- --- --- 394891.79

22 City and Industrial Development Corporation of Maharashtra Limited

395.00 --- --- --- 395.00 --- --- --- 5961.42 72676.27

23 Shivshahi Punarvasan Prakalp Limited

11500.00 --- --- --- 11500.00 --- --- --- --- 2453.84

24 Maharashtra Urban Infrastructure Development Company Limited

5.00 --- --- --- 5.00 --- --- --- --- ---


114

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

25 Maharashtra Urban Infrastructure Fund Trustee Company Limited

5.00 --- --- --- 5.00 --- --- --- --- ---

26 Satara Kagal Highway Construction Company Limited

--- --- 5.00 --- 5.00 --- --- --- --- 11876.48

27 Solapur City Integrated Road Development Limited

--- --- 5.00 --- 5.00 --- --- --- --- 504.71

28 Pune City Integrated Road Development Limited

--- --- 5.00 --- 5.00 --- --- --- --- ---

29 Aurangabad City Integrated Road Development Limited

--- --- 5.00 --- 5.00 --- --- --- --- ---

30 Nagpur City Integrated Road Development Limited

--- --- 5.00 --- 5.00 --- --- --- --- ---

31 Nandurbar City Integrated Road Development Limited

--- --- 5.00 --- 5.00 --- --- --- --- ---

32 Maharashtra State Highway Construction Company Limited

--- --- 5.00 --- 5.00 --- --- --- --- 2.00

33 Maharashtra Airport Development Corporation Limited

--- --- 5.00 --- 5.00 --- --- --- --- ---

TOTAL 13200.92 --- 40.00 --- 13240.92 --- --- --- 5961.42 492031.09

AREA DEVELOPMENT SECTOR

34 Development Corporation of Konkan Limited?

880.99 --- --- --- 880.99 --- --- --- 615.73 ---

35 Development Corporation of Vidarbha Limited

716.84 --- --- --- 716.84 --- --- --- 311.74 ---

36 Marathwada Development Corporation Limited

1016.94 --- --- --- 1016.94 --- 42.66 --- 4119.56 0.02

37 Western Maharashtra Development Corporation Limited

305.77 --- --- --- 305.77 --- --- --- --- ---

TOTAL 2920.54 --- --- --- 2920.54 --- 42.66 --- 5047.03 0.02

? Information as furnished by Company (Sl.No.A-34) in earlier year.

115

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

DEVELOPMENT OF ECONOMICALLY WEAKER SECTION SECTOR

38 Lokshahir Annabhau Sathe Development Corporation Limited

2290.03 33.95 --- --- 2323.98 800.00 --- --- --- 859.78

39 Mahatama Phule Backward Class Development Corporation Limited

5537.16 4776.14 --- --- 10313.30 --- --- --- 2911.27 ---

40 Vasantrao Naik Vimukta Jatis and Nomadic Tribes Development Corporation Limited?

2000.00 --- --- --- 2000.00 --- 63.93 --- 102.27 168.00

41 Maharashtra Rajya Itar Magas Vargiya Vitta Ani Vikas Mahamandal Limited

1287.95 --- --- --- 1287.95 200.00 --- --- --- ---

42 Anna Saheb Patil Arthik Magas Vikas Mahamandal Limited#

500.00 --- --- --- 500.00 --- --- --- --- ---

43 Shabari Adivashi Vitta Va Vikas Mahamandal Limited#

1500.00 --- --- --- 1500.00 --- --- --- --- 599.00

44 Maulana Azad Alpansankyak Arthik Vikas Mahamandal Limited

1400.00 --- --- --- 1400.00 --- --- --- --- ---

45 Maharashtra State Handicapped Finance and Development Corporation Limited#

70.00 --- --- --- 70.00 --- --- --- --- ---

TOTAL 14585.14 4810.09 --- --- 19395.23 1000.00 63.93 --- 3013.54 1626.78

TOURISM SECTOR

46 Maharashtra Tourism Development Corporation Limited

1462.38

46.50*

--- --- --- 1462.38

46.50*

16.50 --- --- 440.30 --

TOTAL 1462.38

46.50*

--- --- --- 1462.38

46.50*

16.50 --- --- 440.30 ---

? Information as furnished by Company (Sl.No.A-40,42,43,45).


116

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

DRUGS, CHEMICALS AND PHARMACEUTICALS SECTOR

47 Haffkine Bio-Pharmaceuticals Corporation Limited?

862.91 --- --- --- 862.91 5.00 --- --- --- ---

48 Haffkine Ajintha Pharmaceuticals Limited#

--- --- 13.65 4.00 17.65 --- --- --- --- 65.00

TOTAL 862.91 --- 13.65 4.00 880.56 5.00 --- --- --- 65.00

MISCELLANEOUS SECTOR

49 Krupanidhi Limited# 0.62 0.24 --- 0.14 1.00 --- --- --- --- ---

50 Kolhapur Chitranagri Mahamandal Limited

323.64 --- --- --- 323.64 --- --- --- --- ---

51 Mahila Arthik Vikas Mahamandal Limited#

182.28 46.65 --- 1.00 229.93 --- --- --- --- ---

52 Maharashtra Film, Stage and Cultural Development Corporation Limited

462.64 --- --- --- 462.64 --- --- --- 56.47 2042.64

53 Maharashtra Patbandhare Vittiya Company Limited

5.60 --- --- --- 5.60 --- --- --- --- 24775.00

54 Maharashtra Ex-servicemen Corporation Limited

5.00 --- --- --- 350.00*

5.00 350.00*

--- --- --- --- ---

55 Chitali Distillary Limited?

--- --- --- --- --- --- --- ---- --- ---

TOTAL 979.78 46.89 --- 1.14 350.00*

1027.81 350.00*

--- --- --- 56.47 26817.64

Total A (All sector - wise Government companies)

75791.44 49.94*

5667.33 241.15 288.12 395.22*

81988.04 445.16*

1035.25 722.79 --- 68846.23 533302.39

B. Working Statutory corporations

POWER SECTOR 1 Maharashtra State Electricity

Board 346462.00 --- --- --- 346462.00 --- 17964.00 --- 323251.00 654243.00

TOTAL 346462.00 --- --- --- 346462.00 --- 17964.00 --- 323251.00 654243.00

? Information as furnished by Company (Sl.No.A-47,48,49,51) in earlier year. ? Information awaited.

117

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

TRANSPORT SECTOR 2 Maharashtra State Road

Transport Corporation 14338.74? 45727.03*

5677.43 --- --- 20016.17 45727.03*

12129.00 -- -- -- 17300.00

TOTAL 60065.77 5677.43 --- --- 20016.17 45727.03*

--- --- --- --- 17300.00

FINANCING SECTOR 3 Maharashtra State Financial

Corporation? 3427.69 --- --- 2835.81 6263.50 -- -- -- -- 71587.52

TOTAL 3427.69 --- --- 2835.81 6263.50 --- --- --- --- 71587.52

AGRICULTURE AND ALLIED SECTOR

4 Maharashtra State Warehousing Corporation

435.56 --- --- 435.56 871.12 -- -- -- -- 2275.00

TOTAL 435.56 --- --- 435.56 871.12 --- --- --- --- 2275.00


5 Maharashtra Industrial Development Corporation

--- --- --- --- --- --- --- --- --- 760.00

TOTAL --- --- --- --- --- --- --- --- --- 760.00

TOTAL B (all sector wise Statutory corporations)

364663.99 45727.03*

5677.43 --- 3271.37 373612.7945727.03*

12129.00 -- --- 323251.00 746925.52

Grand total (A+B) 440455.43 45776.97*

11344.76 241.15 3559.49 395.22*

455600.8346172.19*

13164.25 722.79 ---- 392097.23 1280227.91

C. Non-working companies


1 Dairy Development Corporation of Marathwada Limited

--- 20.00*

--- 18.00 --- 18.00 20.00*

--- --- --- --- 188.86

2 Ellora Milk Products Limited --- --- 5.00 --- 5.00 --- --- --- --- 115.29

3 Irrigation Development Corporation of Maharashtra

Limited•#

1992.64 --- --- --- 1992.64 --- --- --- --- ---

4 Konkan Sea Foods Limited --- --- 19.99 5.00 24.99 --- --- --- --- 60.76

? Includes non interest bearing capital contribution of Rs.518.40 lakh. ? Information as furnished by Company (Sl.No.B-3,C-3).


118

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)

5 Parbhani Krishi Gosamvardhan Limited

--- --- 14.00 5.00 19.00 --- --- --- --- 164.26

6 Vidarbha Quality Seeds Limited --- --- 10.00 --- 10.00 --- --- --- --- 27.78

TOTAL 1992.64 20.00*

--- 66.99 10.00 2069.63 20.00*

--- --- --- --- 556.95

INDUSTRY SECTOR

7 Abhijat Samayadarshika (Maharashtra) Limited$

--- --- 12.50 --- 12.50 --- --- --- --- 168.24

8 Kinwat Roofing Tiles Limited --- --- 19.00 --- 19.00 --- --- --- --- 124.64

9 Marathwada Ceramic Complex Limited

--- --- 68.00 --- 68.00 --- --- --- --- 35.26

10 Sahyadri Glass Works Limited•#

--- --- 26.85 18.29 45.14 --- --- --- --- 866.83

11 The Gondwana Paints and Minerals Limited

--- --- 9.97 --- 9.97 --- --- --- --- 95.02

12 Vidarbha Tanneries Limited --- --- --- 10.00 10.00 --- --- --- --- ---

TOTAL --- --- 136.32 28.29 164.61 --- --- --- --- 1289.99

ELECTRONIC SECTOR

13 Meltron Instrumentation Limited$? --- ---- 57.00 --- 57.00 --- --- --- --- 355.82

TOTAL --- --- 57.00 --- 57.00 --- --- --- --- 355.82

TEXTILES SECTOR

14 Textile Corporation of Marathwada Limited

30.00 --- 140.00 40.00 210.00 --- --- --- 11230.32 200.90

15 Devgiri Textiles Mills Limited --- --- --- --- ---- --- --- --- --- ----

16 Kalameshwar Textiles Mills Limited

--- --- --- --- ---- --- --- --- --- ----

17 Pulgaon Cotton Mills Limited 50.00 --- 2168.52 --- 2218.52 --- --- --- --- 3430.60

? Information as furnished by Company (Sl.No.C-13).

119

(1) (2) 3(a) 3(b) 3(c) 3(d) 3(e) 4(a) 4(b) 4(c) 4(d) 4(e)18 The Pratap Spinning, Weaving

and Manufacturing Company Limited

--- --- 2315.73 1.00 2316.73 --- --- --- --- 2331.34

TOTAL 80.00 --- 4624.25 41.00 4745.25 --- --- --- 11230.32 5962.84

CONTRUCTION SECTOR

19 Maharashtra State Housing Corporation Limited#

1.00 --- --- --- 1.00 --- --- --- --- ---

TOTAL 1.00 -- --- --- 1.00 --- --- --- --- --


20 Maharashtra Rural Development Corporation Limited#

5.00 --- --- --- 5.00 --- --- --- --- ---

TOTAL 5.00 --- --- --- 5.00 --- --- --- --- ---


21 The Overseas Employment and Export Promotion Corporation

of Maharashtra Limited· #

12.23 --- --- --- 12.23 --- --- --- 57.90 ---

TOTAL 12.23 --- --- --- 12.23 --- --- --- 57.90 ---

Grand Total-C (all sector wise Government companies)

2090.87 20.00*

--- 4884.56 79.29 7054.72 20.00*

--- --- --- 11288.22 8165.60

Grand Total (A+B+C) 442546.30 45796.97*

11344.76 5125.71 3638.78 395.22*

462655.55 46192.19*

13164.25 722.79 --- 403385.45 1287633.51

Note: Except in respect of companies which finalised their accounts for the current year figures are provisional and as given by the companies/corporations

* Shares sold by holding company to private company on 29-03-2004 (Sl. No.15) and 17-11-2003 (Sl.No.16)

$ Company filed for winding up under simplified exit scheme on 30-12-2003

# Information as furnished by Company (Sl.No.C-19,20,21). · # Under liquidation. * Represent share application money.


120

Annexure - 2 Summarised financial results of Government companies and Statutory corporations for the latest year for which accounts were finalised

(Referred to in paragraphs No.1.6, 1.7,1.10, 1.11,1.13,1.19,1.20 and 1.23) (Figures in columns 7 to 12 and 15 are rupees in lakh

Sl No.

Sector and name of the company

Name of Department

Year of Incorpora-

tion

Period of

accounts

Year in which

accounts finalised

Net Profit or Loss (-)

Net impact of Audit comm-

ents

Paid-up capital

Accumula-ted

profit/ loss(-)

Capital employed

(A)

Total return on capital employed

Percentage of total

return on capital

employed

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

A. Working Government companies

AGRICULTURE & ALLIED SECTOR


Agriculture, Animal Husbandry and Dairy Development

1965 2002-03 2004-05 (-) 157.58 (-) 21.96 550.00 5791.91 5998.09 (-) 185.52 ---

2 Maharashtra Insecticides Limited


1984 2002-03 2003-04 (-) 27.15 --- 100.00 1134.28 1398.97 12.84 0.92

3 MAFCO Limited Agriculture, Animal Husbandry and Dairy Development

1970 2002-03 2003-04 (-) 118.38 --- 503.57 (-) 375.51 552.68 (-) 55.74 ---

4 The Maharashtra Fisheries Development Corporation Limited

Fisheries, Animal Husbandry & Dairy Development

1973 1994-95 1999-2000 (-) 18.34 --- 93.01 (-) 216.04 (-) 40.97 (-) 13.55 ---



1978 2000-01 2004-05 (-) 6.75 --- 372.03 (-) 19.33 389.71 (-) 6.14 ---

6 Maharashtra Land Development Corporation Limited

Irrigation 1973 2001-02 2002-03 (-) 1.30 --- 400.00 (-) 1771.92 3614.99 12.21 0.34

7 Maharashtra State Farming Corporation Limited

Revenue and Forest 1963 1999-00 2003-04 (-) 627.38 --- 275.00 (-) 4435.16 492.61 (-) 261.57 ---


Co-operation and Textile

2000 2003-04 2004-05 18.96 5.92 626.96 (-) 242.42 12019.70 1471.67 12.24

TOTAL (-) 937.92 (-) 16.04 2920.57 (-) 134.19 24425.78 974.20 ---

INDUSTRY SECTOR

9 Sant Rohidas Leather Industries and Charmakar Development Corporation Limited

Social Welfare Cultural affairs Sports and Tourism

1974 1994-95 2003-04 18.52 --- 361.31 (-) 66.76 316.19 22.95 7.26

10 Leather Industries Corporation of Marathwada Limited

Industries, Energy and Labour

1974 2001-02 2004-05 (-) 43.07 --- 63.50 (-) 560.73 (-) 41.47 (-) 43.89 ---

121

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

11 Maharashtra Small Scale Industries Development Corporation Limited

Trade and Commerce

1962 2001-02 2003-04 (-) 413.85 10.68 931.03 (-) 11.01 4172.22 (-) 7.80 ---

12 Maharashtra Petrochemical Corporation Limited


1981 2003-04 2004-05 212.68 --- 895.66 706.41 1493.04 218.07 14.61

TOTAL (-) 225.72 10.68 2251.50 67.91 5939.98 189.33 ---

ELECTRONICS SECTOR

13 Maharashtra Electronics Corporation Limited


1978 2002-03 2003-04 (-) 1979.75 --- 968.60 (-) 10811.78 (-) 4007.92 (-) 785.35 ---

TOTAL (-) 1979.75 --- 968.60 (-) 10811.78 (-) 4007.92 (-) 785.35 ---

TEXTILE SECTOR

14 Godavari Garments Limited Industries, Energy and Labour

1977 1998-99 2004-05 (-) 44.63 --- 24.00 (-) 314.51 (-) 13.35 (-) 36.40 ---

15 Maharashtra State Textile Corporation Limited


1966 2003-04 2004-05 (-) 16054.58 --- 23615.75 (-) 61522.86 (-) 11213.82 (-) 12581.05 ---



1972 1999-00 2004-05 (-) 442.44 --- 1123.30 (-) 1684.66 (-) 157.70 (-) 580.76 ---

TOTAL (-) 16541.65 --- 24763.05 (-) 63522.03 (-) 11384.87 (-) 13198.21 ---

HANDLOOM AND HANDICRAFT SECTOR



1971 2002-03 2004-05 (-) 788.31 68.52 1511.67 (-) 7634.52 (-) 2600.53 (-) 262.74 ---

TOTAL (-) 788.31 68.52 1511.67 (-) 7634.52 (-) 2600.53 (-) 262.74 ---

FOREST SECTOR


Revenue and Forest 1974 2003-04 2004-05 3544.90 --- 2766.49 16319.42 52073.20 2595.31 4.98

TOTAL 3544.90 --- 2766.49 16319.42 52073.20 2595.31 ---

MINING SECTOR

19 Maharashtra State Mining Corporation Limited

Trade and Commerce

1973 2003-04 2004-05 (-) 58.40 --- 206.69 (-) 699.42 21.22 (-) 58.50 ---

TOTAL (-) 58.40 --- 206.69 (-) 699.42 21.22 (-) 58.50 ---

CONSTRUCTION SECTOR


Home 1974 2002-03 2003-04 --- (-) 0.86 795.91 --- --- --- ---


122

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)


Public Works 1996 2002-03 2004-05 (-) 38820.70 7.55 500.01 (-) 55415.98 387545.01 (-) 413.46 ---


Urban Development

1970 2002-03 2003-04 243.77 --- 395.00 9185.60 88579.36 1009.70 1.14


Housing and Special Assistance

1998 25-09-98 to 31-12-99

2003-04 (-) 1098.18 (-) 1.17 11500.01 (-) 1098.18 10251.68 (-) 880.31 ---

24 Maharashtra Urban Infrastructure Development Company Limited

Urban Development

2002 2003-04 2004-05 (-) 0.43 --- 5.00 (-) 1.00 2.55 (-) 0.43 ---

25 Maharashtra Urban Infrastructure Fund Trustee Company Limited

Urban Development

2002 2003-04 2004-05 (-) 0.01 --- 5.00 (-)0.03 4.73 0.01 0.21

26 Maharashtra Airport Development Corporation Limited

Public Works Department

2002 26-08-02 to 31-03-03

2004-05 (-) 0.04 --- 5.00 (-) 0.04 4.92 (-) 0.04 ---

27 Maharashtra State Highway Construction Company Limited


2002 17-12-02 to 31-03-03

2004-05 (-) 0.03 --- 5.00 (-) 0.03 4.97 (-) 0.03 ---

28 Aurangabad City Integrated Road Development Limited


2002 19-12-02 to 31-03-03

2003-04 (-) 0.03 --- 5.00 (-) 0.03 4.97 (-) 0.03 ---

29 Satara Kagal Highway Construction Company Limited


2002 19-12-2002 to 31-03-03

2003-04 (-) 0.03 --- 5.00 (-) 0.03 4.97 (-) 0.03 ---

30 Nagpur City Integrated Road Development Limited


2002 21-12-02 to 31-03-03

2003-04 (-) 0.03 --- 5.00 (-) 0.03 4.97 (-) 0.03 ---

31 Pune City Integrated Road Development Limited


2002 30-12-02 to 31-03-03

2003-04 (-) 0.03 --- 5.00 (-) 0.03 4.97 (-) 0.03 ---

32 Nandurbar City Integrated Road Development Limited


2002 30-12-02 to 31-03-03

2003-04 (-) 0.03 --- 5.00 (-) 0.03 4.97 (-) 0.03 ---

33 Solapur City Integrated Road Development Limited


2002 31-12-02 to 31-03-03

2003-04 (-) 0.43 --- 5.00 (-) 0.43 4.97 (-) 0.43 ---

TOTAL (-) 39676.20 (-) 15.52 13240.93 (-) 47330.24 486423.04 (-) 285.14 ---


34 Development Corporation of Konkan Limited


1970 1996-97 2003-04 (-) 46.29 --- 881.00 (-) 736.18 762.06 (-) 43.40 ---



1970 1998-99 2004-05 (-) 69.56 --- 716.84 (-) 624.44 127.32 (-) 68.48 ---

36 Marathwada Development Corporation Limited


1967 2002-03 2003-04 (-) 79.62 --- 1016.94 (-) 944.01 3442.32 (-) 76.23 ---

123

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

37 Western Maharashtra Development Corporation Limited


1970 2003-04 2004-05 (-) 1150.02 --- 305.77 (-) 2292.62 1772.93 (-) 1046.66

TOTAL (-) 1345.49 --- 2920.55 (-) 4597.25 6104.63 (-) 1234.77

DEVELOPMENT OF ECONOMICALLY WEAKER SECTION SECTOR


Social Welfare 1985 1989-90 2002-03 (-) 0.73 --- 61.12 (-) 34.40 60.73 (-) 0.73

39 Mahatma Phule Backward Class Development Corporation Limited

Social Welfare 1978 1989-90 2003-04 41.66 0.71 847.42 (-) 0.25 1129.77 26.67 2.36

40 Vasantrao Naik Vimukta Jatis and Nomadic Tribes Development Corporation Limited

Social Welfare 1984 1992-93 2002-03 (-) 30.12 --- 339.95 (-) 135.27 411.28 (-) 30.12


Vimukta Jatis Nomadic Tribes other backward class special backward classes welfare

1999 2000-01 2002-03 (-) 1.12 --- 559.00 (-) 13.67 382.59 (-) 1.12

42 Anna Saheb Patil Arthik Magas Vikas Mahamandal Limited

Employment and Self-Employment

1998 1998-99 2003-04 (-) 0.10 --- 500.00 (-) 0.10 0* (-) 0.10

43 Shabri Adivasi Vitta Va Vikas Mahamandal Limited $

Tribal Development

1999 First account awaited

from 15.01.99

--- --- --- --- --- --- ---

44 Maulana Azad Alpansankyak Arthik Vikas Mahamandal Limited

Employment and self-employment

2000 2001-02 2004-05 (-) 1.29 --- 500.00 (-) 9.86 265.79 (-) 1.29

45 Maharashtra State Handicapped Finance and Development Corporation Limited

Social Justice, Cultural Affairs, Sports and Special assistance

2002 2002-03 2003-04 (-) 14.75 --- 70.00 (-) 14.75 70.00 (-) 14.61

TOTAL (-) 6.45 0.71 2877.49 (-) 208.30 2320.16 (-) 21.30

TOURISM SECTOR


Home (Tourism) 1975 1999-00 2004-05 (-) 70.80 --- 1433.24 (-) 1189.19 730.35 (-) 99.89

TOTAL (-) 70.80 --- 1433.24 (-) 1189.19 730.35 (-) 99.89

DRUGS, CHEMICALS AND PHARMACEUTICALS SECTOR

47 Haffkine Bio-Pharmaceuticals Corporation Limited

Medical Education and Drugs

1974 2002-03 2003-04 (-) 71.76 --- 862.91 1877.71 3235.27 (-) 33.01

48 Haffkine Ajintha Pharmaceuticals Limited

Medical Education and Drugs

1977 2002-03 2003-04 (-) 26.37 --- 17.65 116.33 449.47 (-) 26.37

TOTAL (-) 98.13 880.56 1994.04 3684.74 (-) 59.38


124

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)


49 Krupanidhi Limited Trade and Commerce

1964 2003-04 2004-05 --@ --- 1.00 ---@ --- --- ---

50 Kolhapur Chitranagri Mahamandal Limited

Cultural Affairs 1985 1996-97 1999-00 (-) 16.75 --- 267.77 (-) 129.41 159.40 (-) 16.47 ---

51 Mahila Arthik Vikas Mahamandal Limited

Women and Children Welfare

1975 1991-92 2003-04 6.42 (-) 12.77 130.03 (-) 22.05 237.13 3.63 1.53

52 Maharashtra Film, Stage and Cultural Development Corporation Limited

Cultural Affairs 1977 2001-02 2003-04 231.47 --- 462.64 4.78 3056.82 553.96 18.12

53 Maharashtra Pathbandhare Vittiya Company Limited

Planning 2002 2002-03 2003-04 --- --- 5.60 1.15 0* --- ---

54 Maharashtra Ex-servicemen Corporation Limited

General Administration Department

2002 2002-03 2004-05 6.56 --- 355.00 6.56 262.74 6.56 2.50

55 Chitali Distillary Limited $ Planning 2002 First accounts awaited

from 10-03-2003

--- --- --- --- --- --- ---

TOTAL 227.70 (-) 12.77 1222.04 (-) 138.97 3716.09 547.68 ---

Total – A (Working Government companies) (-) 57956.22 (-) 45.58 57963.38 (-) 117884.52 567445.87 (-) 11698.76 ---

B. Working Statutory Corporations

POWER SECTOR

1 Maharashtra State Electricity Board

Industries, Energy and Labour (Energy)

1960 2002-03 2003-04 (-) 25469.00 (-) 14740.00 346462.00 (-) 55535.00 1596845.00@ 92360.00 5.78

TOTAL (-) 25469.00 (-) 14740.00 346462.00 (-) 55535.00 1596845.00 92360.00 ---

TRANSPORT SECTOR

2 Maharashtra State Road Transport Corporation

Home (Transport) 1961 2003-04 Provisional

2004-05 (-) 18604.63 --- 65743.20 (-) 95478.06 10115.10 (-) 15732.98 ---

TOTAL (-) 18604.63 --- 65743.20 (-) 95478.06 10115.10 (-) 15732.98 ---

FINANCING SECTOR

3 Maharashtra State Financial Corporation

Industries, Energy and Labour (Industries)

1962 2003-04 2004-05 (-) 8519.15 --- 6263.51 (-) 57069.68 30875.64 (-) 544.94 ---

TOTAL (-) 8519.15 --- 6263.51 (-) 57069.68 30875.64 (-) 544.94 ---




1960 2003-04 2004-05 150.14 --- 871.12 0.09 13812.18 212.27 1.54

TOTAL 150.14 --- 871.12 0.09 13812.18 212.27 ---

@ deficit is recoverable from share holders hence there is no loss/accumulated loss.

125

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)



Industries, Energy and Labour (Industries)

1962 2003-04 Provisional

2004-05 10.30 --- --- 476.36 7406.22 218.78 2.95

TOTAL 10.30 --- --- 476.36 7406.22 218.78 ---

Total – B (Working Statutory corporations) (-) 52432.34 (-) 14740.00 419339.83 (-) 207606.29 1659054.14 76513.13 ---

Grand Total (A + B) (-) 110388.56 14785.58 477303.21 (-) 325490.81 2226500.01 64814.37 ---

C. Non-working companies


1 Dairy Development Corporation of Marathwada Limited


1974 2002-03 2003-04 (-) 12.68 --- 38.00 (-) 240.91 (-) 5.85 (-) 12.68 ---

2 Ellora Milk Products Limited Industries, Energy and Labour

1985 2001-02 2004-05 (-) 6.16 --- 5.00 (-) 146.45 (-) 5.39 (-) 19.58 ---

3 Irrigation Development Corporation of Maharashtra Limited

Irrigation 1973 2001-02 2002-03 (-) 0.28 --- 1992.64 (-) 2029.62 (-) 36.98 (-) 0.28 ---

4 Konkan Sea Foods Limited Industries, Energy and Labour

1977 1997-98 2004-05 0.02 --- 24.99 (-) 85.99 0.08 0.02 25.00

5 Parbhani Krishi Gosamvardhan Limited


1977 2002-03 2003-04 (-) 11.28 --- 19.00 (-) 206.81 6.47 (-) 11.27 ---

6 Vidarbha Quality Seeds Limited Industries, Energy and Labour

1973 2003-04 2004-05 (-) 0.05 --- 10.00 (-) 38.87 3.85 (-) 0.05 ---

TOTAL (-) 30.43 --- 2089.63 (-) 2748.65 (-) 37.82 (-) 43.84 ---

INDUSTRY SECTOR

7 Abhijat Samayadarshika (Maharashtra) Limited #


1978 2003-04 2003-04 33.64 168.24 12.50 180.74 --- 33.64 ---

8 Kinwat Roofing Tiles Limited Industries, Energy and Labour

1977 2002-03 2003-04 (-) 2.10 --- 19.00 (-) 169.49 (-) 25.32 (-) 2.17 ---



1981 2002-03 2003-04 (-) 36.73 --- 68.00 (-) 670.55 (-) 10.77 (-) 52.18 ---

10 Shahyadri Glass Works Limited Industries, Energy and Labour

1974 1993-94 1995-96 (-) 41.44 --- 45.14 (-) 921.74 (-) 247.52 (-) 38.19 ---

11 The Gondwana Paints and Minerals Limited


1979 2000-01 2004-05 (-) 1.22 --- 9.97 (-) 101.93 6.31 (-) 1.22 ---

12 Vidarbha Tanneries Limited Industries, Energy and Labour

1973 1999-2000 2004-05 0.11 --- 10.00 (-) 119.27 (-) 4.73 0.11 ---

TOTAL (-) 47.74 168.24 164.61 (-) 1802.24 (-) 282.03 (-) 60.01 ---


126

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

ELECTRONICS SECTOR

13 Meltron Instrumentation

Limited


1981 2001-02 2003-04 (-) 82.01 --- 57.00 (-) 823.59 (-) 373.06 (-) 27.71 ---

TOTAL (-) 82.01 --- 57.00 (-) 823.59 (-) 373.06 (-) 27.71 ---

TEXTILE SECTOR 14 The Pratap Spinning, Weaving

and Manufacturing Company Limited


1906 2003-04 2004-05 (-) 351.10 --- 2316.73 (-) 6000.48 (-) 1355.92 (-) 2.89 ---

15 Pulgoan Cotton Mills Limited Co-operation and Textile

1938 2003-04 2004-05 (-) 2539.70 --- 2218.52 (-) 6507.90 (-) 837.47 (-) 2222.72 ---

16 Textile Corporation of Marathwada Limited


1970 2003-04 2004-05 (-) 49.47 --- 210.00 (-) 11880.00 (-) 231.34 (-) 50.50 ---

17 Devgiri Textile Mills Limited ̂ Co-operation and Textile

1976 2002-03 2003-04 (-) 643.76 --- 1469.27 (-) 5878.45 (-) 530.61 (-) 143.85 ---

18 Kalmeshwar Textile Mills

Limited^


1979 2002-03 2003-04 (-) 1988.82 172.45 1635.59 (-) 3841.81 (-) 1170.18 (-) 1903.16 ---

TOTAL (-) 5572.85 172.45 7850.11 (-) 34108.64 (-) 4125.52 (-) 4323.12 ---CONSTRUCTION SECTOR 19 Maharashtra State Housing

Corporation Limited Housing and Special assistance

1974 1994-95 2004-05 2.82 --- 1.00 19.81 20.98 5.56 26.50

TOTAL 2.82 --- 1.00 19.81 20.98 5.56 AREA DEVELOPMENT SECTOR

20 Maharashtra Rural Development Corporation Limited

Rural Development 1982 1985-86 1993-94 0.17 --- 5.00 0.70 5.28 0.17 3.22

TOTAL 0.17 --- 5.00 0.70 5.28 0.17 ---

MISCELLANEOUS SECTOR 21 The Overseas Employment and

Export Promotion Corporation of Maharashtra Limited

Education and Employment

1979 1989-90 1990-91 (-) 11.35 --- 12.23 (-) 30.51 75.85 (-) 6.81 ---

TOTAL (-) 11.35 --- 12.23 (-) 30.51 75.85 (-) 6.81 ---

Total – C (-) 5741.39 340.69 10179.58 (-) 39493.12 (-) 4716.32 (-) 4455.76 ---Grand Total (A + B + C) (-) 116129.95 15126.27 487482.79 (-) 364983.93 2221783.69 60358.61 ---

A - Capital employed represents net fixed assets (including capital works-in-progress) plus working capital except in case of finance companies/corporations where the capital employed is worked out as a mean of aggregate of the opening and closing balances of paid up capital, free reserves, bonds, deposits and borrowings (including refinance).

* Being first accounts, capital employed not worked out. ## Information in respect of earlier years. $ First accounts awaited. # Company filed for winding up under simplified exit scheme. ^ Shares sold by the holding company (MSTC) to private party w.e.f. 29 March 2004 in case of Company at Sl.No.C-17 and w.e.f. 19 November 2003 in case of Company

at Sl.No.C-18. NF - Information not furnished.

Annexure

127

Annexure - 3 Statement showing grants and subsidy received/receivable, guarantees received, waiver of dues, loans on which moratori

and loans converted into equity during the year and guarantees outstanding at the end of March 2004(Referred to in Paragraph No.1.5 and 1.17)

(Figures in column 3(a) to 7 are in rupees in lakh)Subsidy and grants received during the year Guarantees received during the year and outstanding

at the end of the year Waiver of dues during the year

Central Government State Government Others Total

Sl. No

Name of the Public Sector Undertaking

Grant Subsidy Grant Subsidy Grant Subsidy Grant Subsidy Cash

Credit from

banks

Loans from other

sources Letters of credit

opened by banks in

respect of imports

Payment obligation

under agree-

ment with foreign consult-ant or

contracts

Total Loans repay-ment

written off

Interest waived

1 2 3(a) 3(b) 3(c) 3(d) 4(a) 4(b) 4(c) 4(d) 4(e) 5(a)

A Working Government companies 1 Maharashtra

Insecticides Limited --- --- --- --- --- --- --- --- 700.00 --- --- --- 700.00 ---


--- --- 200.00 --- --- --- 200.00 --- --- --- --- --- --- ---


--- --- --- --- --- --- --- --- --- 1384.00

--- --- 1384.00 --

4 Sant Rohidas Leather Industries and Charmakar Development Corporation of Maharashtra Limited

--- --- --- --- --- --- --- --- --- ---

(1500.00)

--- --- ---

(1500.00)

---


--- --- --- --- --- --- --- --- 400.00

(400.00)

350.00

(350.00)

--- --- 750.00

(750.00)

---


25.55 --- 65.69 --- --- --- 91.24 --- --- --- --- --- --- ---


--- --- --- --- --- --- --- --- --- 664.46 --- --- 664.46 ---


--- --- --- --- --- --- --- --- --- ---

(314436.00)

--- --- ---

(314436.00)

---


128

1 2 3(a) 3(b) 3(c) 3(d) 4(a) 4(b) 4(c) 4(d) 4(e) 5(a)


--- --- --- --- --- --- --- --- --- --- (17000)

--- --- --- (17000)

---


--- --- --- --- --- ---- --- --- --- --- (2453.84)

--- --- --- (2453.84)

---


--- 250.00 --- 80.00 --- --- --- 330.00 --- ---

(414.03)

--- --- ---

(414.03)

---

12 Mahatma Phule Backward Class Development Corporation Limited

--- 1475.00 172.53 --- --- --- 172.53 1475.00 --- ---

(3742.82)

---

--- ---

(3742.82)

---


--- --- --- --- --- --- --- --- --- 2500.00 (1751.00)

--- --- 2500.00 (1751.00)

---

14 Maulana Azad Alpasankyak Arthik Vikas Mahamandal Limited

--- --- --- --- --- --- --- --- --- 500.00 --- --- 500.00 ---


40.00 --- 678.26 --- --- --- 718.26 --- --- --- --- --- --- ---

16 Maharashtra Film Stage and Cultural Development Corporation Limited

--- --- --- --- --- --- --- --- --- --- (1577.82)

--- --- --- (1577.82)

---

17 Maharashtra Pathbandhare Vittiya Company Limited

--- --- 535.62 --- --- --- 535.62 --- --- 100000.00 (74775.00)

--- --- 100000.00 (74775.00)

---

Total – A 65.55 1725.00 1652.10 80.00 --- --- 1717.65 1805.00 1100.00 (400.00)

105398.46 (418000.51)

--- --- 106498.46 (418400.51)

---

Annexure

129

1 2 3(a) 3(b) 3(c) 3(d) 4(a) 4(b) 4(c) 4(d) 4(e) 5(a)

B. Working Statutory corporations 1 Maharashtra State

Electricity Board --- --- 2250.00 71159.00 35.28 --- 2285.28 71159.00 --- 115877.09

(522111.26) --- --- 115877.09

(522111.26)


--- --- --- --- --- 271.85 --- 271.85 --- --- --- --- ---


1150.00 --- --- --- --- --- 1150.00 --- --- ---

(760.00)

--- --- ---

(760.00)

Total-B 1150.00 --- 2250.00 71159.00 35.28 271.85 3435.28 71430.85 --- 115877.09

(522871.26)

--- --- 115877.09 (522871.26)

Grand Total (A+B) 1215.55 1725.00 3902.10 71239.00 35.28 271.85 5152.93 73235.85 1100.00 (400.00)

221275.55 (940871.77)

--- --- 222375.55 (941271.77)

C. Non-working Government companies


--- --- --- --- --- --- --- --- --- (78.17)

--- --- --- --- (78.17)

Total – C --- --- --- --- --- --- --- --- --- (78.17)

--- --- --- --- (78.17)

Grand Total (A+B+C)

1215.55 1725.00 3902.10 71239.00 35.28 271.85 5152.93 73235.85 1100.00 (478.17)

221275.55 (940871.77)

--- --- 222375.55 (941349.94)

Note : Figures in brackets indicate guarantees outstanding at the end of the year.


130

Annexure - 4

Statement showing financial position of working Statutory corporations (Referred to in paragraph No.1.7)

(Rupees in crore) 1. Maharashtra State Electricity Board

Particulars 2000-2001 2001-2002 2002-2003

A. Liabilities

Equity capital 3,464.62 3,464.62 3,464.62

Loans from Government 2,630.94 3,052.88 3,232.51

Other long-term loans (including bonds) 7,054.10 7,386.82 7,457.70

Deposits from public 5.41 5.07 4.87

Reserves and surplus 3,047.24 3,120.90 3,436.55

Current liabilities and provisions 7,654.61 8,081.55 8,713.19

Total-A 23,856.92 25,111.84 26,309.44

B. Assets

Gross fixed assets 22,600.20 23,727.07 24,830.66

Less: Depreciation 9,281.32 10,739.31 12,180.15

Net fixed assets 13,318.88 12,987.76 12,650.51

Capital works-in-progress 1,669.50 1,666.94 1,536.63

Deferred cost 42.71 27.84 58.50

Current assets 7,745.75 8,987.74 10,494.50

Subsidy due from State Government -- -- --

Investments 1,012.64 1,055.48 972.31

Miscellaneous expenditure 67.44 85.42 41.64

Deficits -- 300.66 555.35

Total – B 23,856.92 25,111.84 26,309.44

C. Capital employed? 15,079.52 15,560.89 15,968.45

? Capital employed represents net fixed assets (including works-in-progress) plus working capital. While working out working capital the element of deferred cost and investments are excluded from current assets.

Annexure-4

131

(Rupees in crore)


Particulars 2001-2002 2002-2003 2003-2004 (Provisional)

A. Liabilities

Capital (including capital loan and equity capital)

415.27 536.14 657.43

Borrowings (Government) -- --- ---

(Others including deposits) 281.27 259.98 265.52

Funds/Reserves and surplus* 108.99 119.84 134.49

Trade dues and other current liabilities (including provisions)

385.73 300.37 341.65

Total 1,191.26 1,216.33 1,399.09

B. Assets

Gross block 1,562.45 1667.00 1,772.90

Less: Depreciation 1,333.64 1471.27 1,600.07

Net fixed assets 228.81 195.73 172.83

Capital works-in-progress (including cost of chassis)

36.77 41.74 36.87

Investments 20.03 4.44 1.51

Current assets, loans and advances 228.92 225.78 233.10

Accumulated losses 676.73 748.64 954.78

Total 1,191.26 1,216.33 1,399.09

C. Capital employed? 120.37 162.88 101.15

* Excluding depreciation funds and including Reserves and surplus and capital grant. ?Capital employed represents net fixed assets (including works-in-progress) plus working capital excluding gratuity provision.


132

(Rupees in crore)


Particulars 2001-2002 2002-2003 2003-2004

A. Liabilities

Paid-up capital 62.81 62.64 62.64

Share application money -- -- --

Reserve fund and other reserves and surplus

41.73 41.73 41.73

Borrowings:

(i) Bonds and debentures 408.95 385.57 360.33

(ii) Fixed Deposits 1.77 0.13 0.07

(iii) Industrial Development Bank of India and Small Industries Development Bank of India

-- -- --

(iv) Reserve Bank of India -- -- --

(v) Loan towards share capital

(a) State Government 2.06 2.06 2.06

(b) Industrial Development Bank of India

2.05 2.05 2.05

(vi) Others (including State Government)

353.49 350.17 350.17

Other Liabilities and provisions 32.13 33.67 32.19

Total - A 904.99 878.02 851.24

B. Assets

Cash and bank balances 42.64 51.96 47.97


Loans and advances 378.27 294.22 186.43

Net fixed assets 2.35 1.98 1.71

Other assets 46.47 50.75 43.17

Profit and loss account 429.96 475.19 570.70

Total - B 904.99 878.02 851.24

C. Capital employed$ 627.44 406.03 308.76

$Capital employed represents the mean of the aggregate of opening and closing balances of paid-up capital, reserves (other than those which have been funded specifically and backed by investments outside), loans in lieu of capital, seed money, debentures, bonds, deposits and borrowings (including refinance) and excluded amount of dividend of Rs.3.72 crore for 1999-2000 from reserves. Capital employed for the year 2001-02 and 2002-03 are calculated without considering accumulated losses.

Annexure-4

133

(Rupees in crore)


Particulars 2001-2002 2002-2003 2003-2004

A. Liabilities

Paid-up capital 8.71 8.71 8.71

Reserves and surplus 99.75 104.90 106.21

Borrowings

- (Government) -- -- --

- (Others) -- -- 22.75

Trade dues and current liabilities (including provision)

13.82 20.05 23.27

Total - A 122.28 133.66 160.94

B. Assets

Gross block 80.04 91.17 118.70

Less: Depreciation 17.64 19.92 22.70

Net fixed assets 62.40 71.25 96.00

Capital works-in-progress 2.84 21.60 20.86


Current assets, loans and advances 57.03 40.80 41.35

Profit and loss account -- -- --

Total - B 122.28 133.66 160.94


?Capital employed represents net fixed assets (including capital works-in-progress) plus working capital excluding provision for gratuity.


134

(Rupees in crore)



A. Liabilities

Loans - Issue of Bonds 143.23 131.10 7.60

Reserves and surplus/funds 66.26 66.41 66.51

Deposits 2,973.96 3,254.39 3,784.59

Current liabilities and provisions 136.98 136.12 58.21

Total - A 3,320.43 3,588.02 3,916.91

B. Assets

Gross fixed assets 352.17 367.14 382.85

Less: Depreciation 91.64 102.23 112.52

Net fixed assets 260.53 264.91 270.33

Other assets 2,148.92 2,283.09 2,371.73

Investments 89.70 76.24 14.21

Current assets, loans and advances 821.28 963.78 1,260.64

Total – B 3,320.43 3,588.02 3,916.91


? Capital employed represents the mean of the aggregate of opening and closing balances of long term loans (including bonds), Development Rebate Reserves and other free reserves and surplus (excluding sinking and Assets Replacement Fund).

Annexure-5

135

Annexure - 5

Statement showing working results of working Statutory corporations (Referred to in paragraph No.1.7)

(Rupees in crore) 1. Maharashtra State Electricity Board

Sl. No.

Particulars 2000-2001 2001-2002 2002-2003

1. (a) Revenue receipt 12,261.55 12,702.33 13,447.09 (b) Subsidy/Subvention from

Government (-)373.85? -- --

Total 11,887.70 12,702.33 13,447.09 2. Revenue expenditure (net of

expenses capitalised) including write off of intangible assets but excluding depreciation and interest

11,372.86 1,0840.12 11,045.36

3. Gross surplus (+)/deficit(-) for the year (1-2)

514.84 1,862.21 2,401.73

4. Adjustments relating to previous years

(-) 859.52 190.53 (-) 39.46

5. Final gross surplus(+)/deficit(-) for the year (3 + 4)

(-) 344.68 2,052.74 2,362.27

6. Appropriations (a) Depreciation (less capitalised) 1,328.49 1,437.62 1,438.67 (b) Interest on Government loans 446.09 343.57 365.85 (c) Interest on other, bonds,

advance, etc. and finance charges 883.89 912.13 910.22

(d) Total interest on loans and finance charges (b+c)

1,329.98 1,255.70 1,276.07

(e) Less: Interest capitalised 161.64 101.12 97.78 (f) Net interest charged to revenue

(d-e) 1,168.34 1,154.58 1,178.29

(g) Total appropriations (a+f) 2,496.83 2,592.20 2,616.96 7. Surplus(+)/deficit(-) before

accounting for subsidy from State Government {5 - 6(g) - 1(b)}

(-)2,467.66 (-) 539.46 (-) 254.69

8. Net surplus(+)/deficit(-) {5 - 6(g)} (-)2,841.51 (-) 539.46 (-) 254.69 9. Total return on capital employed T (-)1,673.17 615.12 923.60 10. Percentage of return on capital

employed -- 3.95 5.78

?No subsidy received during the year and as State Government approved only 3 per cent surplus on net fixed assets under section 59 of the Electricity (Supply) Act, 1948, MSEB withdrew the earlier subsidy accounted for considering 4.5 per cent surplus. Hence, the minus balances. TTotal return on capital employed represents net surplus/deficit plus total interest charged to profit and loss account (less interest capitalised).


136

(Rupees in crore)



Operating :-

(a) Revenue 2,589.31 2,673.78 2,685.22

(b) Expenditure 2,669.27 2,761.28 2,882.93

(c) Surplus (+)/deficit (-) (-) 79.96 (-) 87.50 (-) 197.71

Non-operating :-

(a) Revenue 52.18 53.73 62.64

(b) Expenditure 41.75 47.53 50.98

(c) Surplus (+)/deficit (-) 10.43 6.20 11.66

Total:-

(a) Revenue 2,641.49 2,727.51 2,747.86

(b) Expenditure@ 2,696.87 2,799.43 2,954.00

(c) Net profit (+)/loss (-) (-) 55.38 (-) 71.92 (-) 206.14

Interest on capital and loans 40.39 46.17 48.81

Total return on Capital employed* (-) 14.99 (-) 25.75 (-) 157.33

@Including prior period adjustments. *Total return on capital employed represent net surplus/deficit plus total interest charged to profit and loss account (less interest capitalised).

Annexure-5

137

(Rupees in crore)


Sl. No.

Particulars 2001-2002 2002-2003 2003-2004

1. Income

(a) Interest on loans 78.64 47.96 34.37

(b) Other income 6.13 5.46 3.75

Total - 1 84.77 53.42 38.12

2. Expenses

(a) Interest on long term and short term loans

82.85 80.95 90.05

(b) Provision for non performing assets

-- -- --

(c) Other expenses 19.80 26.19 33.26

Total - 2 102.65 107.14 123.31

3. Profit before tax (1-2) (-) 17.88 (-) 53.72 (-) 85.19

4. Provision for tax -- -- --

5. Other appropriations 313.63 (-) 8.5 10.31

6. Amount available for dividend# (-) 331.50 (-) 45.22 (-) 95.50

7. Dividend paid/payable -- -- --

8. Total return on capital employed (-) 248.65 33.19 (-) 5.45

9. Percentage of return on capital employed

-- 3.87 --

#Representing profit of current year available for dividend after considering the specific reserves and provision for taxation.


138

(Rupees in crore)


Sl. No.

Particulars 2001-2002 2002-2003 2003-2004 (Privisional)

1. Income (a) Warehousing charges 34.44 32.21 30.06 (b) Other income 21.74 18.46 20.46 Total - 1 56.18 50.67 50.52

2. Expenses (a) Establishment charges 17.69 15.50 16.33 (b) Other expenses 29.24 26.06 32.54 Total - 2 46.93 41.56 48.87

3. Profit (+)/loss (-) before tax 9.25 9.11 1.65 4. Provision for tax -- 2.85 0.15 5. Prior period adjustments (+) 0.86 0.23 0.02 6. Other appropriations 8.37 5.16 1.31 7. Amount available for dividend 1.74 1.33 0.17 8. Dividend for the year? 1.74 1.33 0.17

9. Total return on capital employed 10.12 9.11 2.30 10. Percentage of return on capital

employed 9.17 7.99 1.67

(Rupees in crore)


Sl. No.


1. Income 205.88 185.31 148.36 2. Expenditure 205.67 185.16 148.26 3. Surplus 0.21 0.15 0.10 4. Interest charged to income and

expenditure account 1.67 1.64 2.08

5. Return on capital employed (3 + 4) 1.88 1.79 2.18 6. Percentage of return on capital

employed 1.6 1.26 2.94

? Including Tax on dividend.

Annexure-6

139

Annexure - 6 Statement showing operational performance of working Statutory corporations

(Referred to in paragraph No.1.12)

1. Maharashtra State Electricity Board Particulars 2000-2001 2001-2002 2002-2003

Installed capacity - (MW) (a) Thermal 6,425 6,425 6,425 (b) Hydro 2,430 2,434 2,434 (c) Gas 912 912 912 (d) Other -- -- --

Total 9,767 9,771 9,771 Normal maximum demand on the system (MW) 12,702 12,917 12,238 Power generated (MKWH) (a) Thermal 38,718.764 41,650.576 40,304.188 (b) Hydro 3,738.436 3,675.181 4,184.110 (c) Gas 3,473.124 3,691.750 3,891.168 (d) Other --- --- ---

Total 45,930.324 49,017.507 48,379.466 Less: Auxiliary Consumption (a) Thermal 3,327.256 3,674.540 3,550.776 (percentage) (96.87) (97.03) (96.76) (b) Hydro 22.905 23.928 29.802 (percentage) (0.67) (0.63) (0.81) (c) Gas 84.484 88.691 88.982 (percentage) (2.46) (2.34) (2.42) (d) Other --- --- --- (percentage) --- --- ---

Total 3,434.645 3,787.159 3,669.560 Net power generated (a) 42,495.679 45,230.348 44,709.906 Power purchased (MKWH) a) Within the State 5,855.466 4,216.585 4,169.884 b) Other States 1,377.145 1,845.230 c) Central Grid 12,381.767 12,789.180 16,956.02 Total power purchased (b) 19,616.378 18,850.995 21,125.904 Total power available for sale (a + b) 62,112.057 64,081.343 65,835.81 Power sold a) Within the State 39,817.550 38,673.033 41,883.959 b) Outside the States 176.000 62.000 17.000 Transmission and distribution losses 22,118.507 25,346.310 23,934.851 Plant load factor (percentage) 72.78 74.34 71.93 Percentage of transmission and distribution losses to total power available for sale

34.79 39.55 38.59


140

Particulars 2000-2001 2001-2002 2002-2003

Number of villages/towns electrified 4,0685 40,687 40,687

Number of pump sets/wells energised 23,27,716 23,67,075 24,17,075

Number of sub-stations 1,512 1,592 1,630

Transmission/distribution lines (in kms.)

(a) High/medium voltage 2,33,615.5 2,38,003.3 2,42,093.8

(b) Low voltage 4,33,504.2 4,38,261.8 4,44,618.0

Connected load (in MW) 24,549 27,490 28,853

Number of consumers (in lakh) 129.73 130.43 133.12

Number of employees 1,11,660 1,11,653 1,21,175

Consumer/employees Ratio 116:1 117:1 109:1

Total expenditure on staff during the year (Rupees in crore)

1,659.52 1,769.67 1,746.84

Percentage of expenditure on staff to total revenue expenditure

10.99 12.87 12.75

Units sold (MKWH)

(a) Agriculture 9,502 8,310 10,202

(percentage of share to total units sold) (23.76) (21.46) (24.35)

(b) Industrial 15,487 14,678 15,593

(percentage of share to total units sold (38.72) (37.89) (37.21)

(c) Commercial 1,473 1,636 1,643


(d) Domestic 6,750 7,282 7,411


(e) Others 6,782 6,829 7,052


Total 39,994 38,735 41,901

(Paise per KWH)

(a) Revenue (excluding subsidy from Government)

306.58 327.93 320.93

(b) Expenditure? 368.29 341.86 298.34

(c) Profit (+)/loss (-) (-) 61.71 (-) 13.93 22.59

(d) Average subsidy claimed from Government (in Rupees)

(-) 0.09 -- 0.00

(e) Average interest charges (in Rupees) 0.33 0.32 0.29

? Revenue expenditure includes depreciation but excludes interest on long -term loans.

Annexure-6

141


Particulars 2001-2002 2002-2003 2003-2004

Average number of vehicles held 16,794 16,522 16,124

Average number of vehicles on road 15,804 15,513 15,177

Percentage of utilisation of vehicles 94.11 93.90 94.13

Number of employees 1,08,946 1,07,783 1,02,825

Employee vehicle ratio 6.49 6.95 6.77

Number of routes operated at the end of the year 19,429 18,838 17,837

Route kilometres (in lakh) 13.44 13.08 12.81

Kilometres operated (in lakh)

(a) Gross 17,993.76 17,812.66 17,812.38

(b) Effective 17,826.66 17,656.39 17,562.20

(c) Dead 167.10 156.27 160.18

Percentage of dead kilometres to gross kilometres 0.94 0.88 0.91

Average kilometres covered per bus per day 310.77 311.82 317.78

Average operating revenue per kilometre (paise) 1,452.50 1,514.34 1,521.18

Increase over previous year's income (per cent) 5.06 4.26 0.45

Average expenditure per kilometre (paise) 1,497.35 1,563.90 1,633.18

Increase in operation expenditure per kilometre over previous year's expenditure (per cent)

3.65 4.42 4.43

Loss(-) per kilometre (paise) (-) 44.85 (-) 49.56 (-) 112.00

Number of operating depots 243 242 248

Average number of break-down per lakh kilometres

3.09 3.09 3.04

Average number of accidents per lakh kilometres 0.21 0.20 0.19

Passenger kilometre operated (in crore) 5,595.83 5,405.65 5,086.11

Occupancy ratio 60.05 58.99 55.98

Kilometres obtained per litre of

(a) Diesel oil 4.70 4.76 4.81

(b) Engine oil 660 723 788


142

(Amount: Rupees in crore) 3. Maharashtra State Financial Corporation

2001-2002 2002-2003 2003-2004 Particulars Number Amount Number Amount Number Amount

Applications pending at the beginning of the year

28 21.17 11 6.87 2 3.40

Applications received 193 34.83 3 0.29 10 5.02

Total 221 56.00 14 7.16 12 8.42

Applications sanctioned 156 23.62 1 0.20 6 2.49

Applications cancelled/ withdrawn/rejected/reduced

54 22.84 11 3.57 3 3.61

Applications pending at the close of the year

11 6.87 2 3.40 3 2.32

Loans disbursed -- 30.35 5.55 1.57

Loans outstanding at the close of the year

14,866 1,273.77 13,751 1,335.57 12,394 1,238.42

Amount overdue for recovery at the close of the year

(a) Principal 382.31 385.84 332.60

(b) Interest 625.50 776.75 776.43

(c) Expenses 6.91 7.80 7.05

Total 1,014.72 1,170.39 1,116.08

Percentage of default to total loans outstanding

79.70 87.63 90.10


Particulars 2001-2002 2002-2003 2003-2004

Number of stations covered 156 158 162

Storage capacity created up to the end of the year (tonne in lakh)

(a) Owned 9.48 9.60 11.08

(b) Hired 0.94 0.63 0.80

Total 10.42 10.23 11.88

Average capacity utilised during the year (tonne in lakh) 7.51 6.96 6.20

Percentage of utilisation 74 68 57

Average revenue per metric tonne per year (in Rupees) 748.44 728.24 815.26

Average expenses per metric tonne per year (in Rupees) 625.24 597.36 789.10

Annexure-6

143

5. Maharashtra Industrial Development Corporation ?

Particulars 2000-2001 2001-2002 2002-2003

A. Area (area in hectares)

Area planned for development 87,246 87,634 86,822

Area acquired 52,173 52,223 52,654

Area plotted 20,199 20,621 21,007

Area allotted 17,840 18,076 18,348

Area not allotted 2,359 2,545 2,659

Percentage of : (per cent)

- area acquired to area planned for development

59.7 59.6 60.6

- area plotted to area acquired 38.7 39.5 39.9

- area allotted to area plotted 88.3 87.7 87.3

- area allotted to area acquired 34.2 34.6 34.8

B. Sheds and flatted factory buildings (in numbers)

Constructed 5,118 6,023 6,031

Allotted 4,522 4,970 5,010

Not allotted 596 1,053 1,021

(per cent) Percentage of sheds and flatted factory buildings allotted to sheds constructed

88.4 82.5 83.1

? Information for 2003-2004 not received.


144

Annexure - 7

Statement showing paid-up capital, investment and summarised working results of 619-B companies as per their latest finalised accounts

(Referred to in paragraph No.1.36)

(Figures in column 5 to 19 are in Rupees in lakh)Equity by

*

Loans by Grants by Total investment by way of equity, loans and grants

Sl. No.

Name of company

Status (work-

ing/ non-

work-ing)

Year of account

Paid-up capital

State Govern-

ment

State Govern-

ment companies and others

Central Govern-

ment and their

compan-ies

State Govern-

ment

State Govern-

ment compan-ies and others

Central Govern-

ment and their compan-

ies

State Govern-

ment

State Govern-

ment compan-ies and others

Central Govern-ment and

their compan-

ies

State Govern-

ment

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) 1. Maharashtra

State Seeds Corporation Limited

Work-ing

2003-04 418.44 205.00 (48.99)

65.11 (15.56)

148.33 (35.45)

500.00 --- --- ---

---

58.96

705

2. Maharashtra Power Development Corporation Limited

Work-ing

2002-03 45.13 --- 45.13?

(100) --- --- 94,782.00?

(MSEB) --- --- --- --- ---

3. Maharashtra Vikrikar Rokhe Pradhikaran Limited New Company 14 June 2001

Work-ing

2002-03 5.00 --- 5.00 (100)

--- --- 21,647.25 --- 2,727.00 --- --- 2,727.00

*Figures in brackets indicate percentage. ?Figures are for the year 2003-04.

Annexure-8

145

Annexure-8 Statement showing the financial position and working results of Maharashtra Agro

Industries Development Corporation Limited (Referred to in paragraph 2.6)

Financial position (Rupees in crore)

Particulars 1999-2000 2000-01 2001-02 2002-03

2003-04 (Provisional)

Liabilities:

Paid up capital 5.50 5.50 5.50 5.50 5.50

Reserve and surplus 67.02 58.10 60.10 58.17 58.48

Borrowings: cash credit 8.11 8.24 3.51 --- ---

Current liabilities and provisions

200.38 197.56 168.51 166.34 129.68

Total 281.01 269.40 237.62 230.01 193.66

Assets:

Gross block 19.97 20.91 24.10 24.44 24.74

Less depreciation 9.04 9.96 10.80 11.69 12.58

Net fixed assets 10.93 10.95 13.30 12.75 12.16

Capital work in progress 0.51 0.81 0.09 0.14 ---

Investment 1.22 1.22 1.22 1.22 5.91

Current assets, loans and advances

268.35 256.42 220.47 213.42 173.64

Miscellaneous expenditure not written off

-- -- 2.54 2.48 1.95

Total 281.01 269.40 237.62 230.01 193.66

Capital employed? 79.41 70.62 65.35 59.97 56.12

Net worth? 72.52 63.60 63.06 61.19 62.03

?Capital employed represents net fixed assets (including capital work-in-progress) plus working capital. ? Net worth represents paid up capital plus reserve and surplus less intangible assets.


146

Working results (Rupees in crore)


A) Income

Sales 471.41 441.29 424.82 332.33 342.99

Other income 5.30 12.24 10.09 7.95 10.09

Closing stock 117.62 120.05 99.47 94.27 57.17

Total (A) 594.33 573.58 534.38 434.55 410.25

B) Expenditure

Opening stock 102.54 117.62 120.05 99.46 94.27

Purchase of finished product

272.63 246.34 214.12 188.46 147.85

Raw material consumed 147.78 144.08 139.50 96.29 115.16

Manufacturing and other expenses

40.42 36.71 34.55 29.03 29.62

Salaries and other benefits 21.33 23.34 22.60 21.08 20.77

Depreciation 0.93 0.98 1.06 0.98 0.96

Interest 0.45 0.17 0.29 0.07 0.02

Bad debts/provision for doubtful debts

0.40 0.27 0.53 0.74 0.93

Total (B) 586.48 569.51 532.70 436.11 409.58

C) Profit (+)/loss (-) for

the year (A-B)

(+)7.85 (+)4.07 (+)1.68 (-)1.56 (+) 0.67

D) Prior period adjustments : income (+)/expenses (-)

(-)0.31 (-)12.97 (-)0.65 (-)0.74 (-) 0.85

E) Profit (+)/loss (-) before tax

(+)7.54 (-)8.90 (+)1.03 (-)2.30 (-) 0.18

F) Profit (+)/loss (-) after tax

(+)4.52 (-)8.91 (+)0.98 (-)2.31 (-) 0.18

G) Percentage of profit before tax to:

Sales 1.60 N.A. 0.24 N.A. N.A.

Gross fixed assets 37.76 N.A. 4.27 N.A. N.A.

Capital employed 9.50 N.A. 1.58 N.A. N.A.

Annexure-9

147

Annexure-9 Statement showing dealerwise amount recoverable during last

three years up to 2003-04 (January 2004) vis-à-vis amount of bank guarantees submitted but not encashed.

(Referred to in paragraph 2.22)

(Rupees in lakh) Amount outstanding as on

Dealer

Amount of bank

guarantee 31 March 2002

31 March 2003

31 January 2004

Regional Office, Nanded

Balaji Agro Agencies 5.00 19.21 20.51 72.42

Santosh Trading Company

2.00 19.26 20.87 12.24

Trimurti K.S.K. Mahur 6.00 24.99 15.02 22.29

Shetkari K.S.K. Basmat 1.00 0.23 4.14 19.81

Vyenkatesh Krishi Kendra Parbhani

2.00 0.09 12.53 63.31

Regional Office, Akola

Deepa Agro Service Chikhali

7.00 34.46 40.64 30.34

Sahyandri Krishi Kendra 5.00 33.51 50.53 38.71

Mangal K.S.K. 2.00 7.46 13.02 38.92

Total 30.00 139.21 177.26 298.04


148

Annexure-10 Statement showing Sources and Application of funds of Maharashtra State

Electricity Board during 1999-2004 (Referred to in paragraph 3.1.4)

(Rupees in crore)


Sources of funds Surplus* 1,939.14 0.00 1,253.68 1,551.58 1,377.54

Fresh Borrowings 1,967.44 2,003.94 1,802.55 1,500.88 1,734.05 Decrease in working capital

0.00 2,745.78 0.00 0.00 289.31

Equity capital 0.00 1,986.00 0.00 0.00 0.00 Increase in payment due on capital liabilities

424.01 0.00 0.00 254.84 0.00

Increase in reserve and Reserve funds

14.33 4.58 0.00 0.00 5.35

Decrease in investments

0.00 51.66 0.00 83.17 0.00

Total inflow of funds 4,344.92 6,791.96 3,056.23 3,390.47 3,406.25 Application of funds Capital Expenditure 2,092.27 1,102.40 1,144.14 1,007.19 1,048.86

Increase in working capital

1,237.48 0.00 812.73 847.53 0.00

Repayment of loans 939.63 3,412.36 1,048.27 1,533.11 2,048.43 Increase in investment 75.54 0.00 42.84 0.00 98.46

Deficit* 0.00 1,171.05 0.00 0.00 0.00 Decrease in payment due on capital liabilities

0.00 1,106.15 2.48 0.00 210.50

Decrease in Reserves and Reserve funds

0.00 0.00 5.77 2.64 0.00

Total outflow of funds 4,344.92 6,791.96 3,056.23 3,390.47 3,406.25

*Deficit/Surplus has been arrived at after adjusting non-cash expenditure in profit/loss for the year.

Annexure-11

149

Annexure-11 Statement showing the financial position and working results of

Maharashtra State Financial Corporation (Referred to in paragraph 3.3.4)

Financial position (Rupees in crore) Particulars 1999-2000 2000-01 2001-02 2002-03 2003-04

Liabilities

Paid –up capital 61.40 61.40 62.81 62.64 62.64

Share application money 1.45 1.45 - - -

Reserves 41.73 41.73 41.73 41.73 41.73

Borrowings

?? Loans (to be converted into share capital)

4.11 4.11 4.11 4.11 4.11

?? Bonds and debentures 383.45 406.50 408.95 385.57 360.33

?? Deposits 6.57 2.66 1.77 0.13 0.07

?? Others (IDBI,SIDBI and Scheduled banks)

467.39 392.58 353.49 350.17 350.17

Subvention paid by State Government on account of dividend

5.51 9.23 9.23 9.23 9.23

Other Liabilities and provisions

41.82 51.69 22.90 24.44 22.96

Total 1,013.43 971.35 904.99 878.02 851.24

Assets

Cash and bank balances 21.17 21.09 42.64 51.96 47.97

Investments 5.38 5.38 5.30 3.92 1.26

Loans and advances 876.59 805.67 378.27 294.22 186.43

Net fixed assets 3.52 2.85 2.35 1.98 1.71

Dividend deficit account 5.51 9.23 9.23 9.23 9.23

Other assets 40.29 28.67 37.24 41.52 33.94

Profit and Loss Account 60.97 98.46 429.96 475.19 570.70

Total 1,013.43 971.35 904.99 878.02 851.24

Net worth 1.89 (-)35.59 (-)367.14 (-)412.55 (-)508.05

Capital employed* 969.95 858.55 627.44 406.03 308.76

Return on capital employed**

122.78 75.01 (-)248.65 33.19 (-)5.45

Percentage of return on capital employed

12.66 8.74 - 8.17 -

*Capital employed represents mean of the aggregate of opening and closing balances of paid-up capital, loan in lieu of capital seed money, debentures, reserves (other than those which have been funded specifically and backed by investments outside), bonds, deposits and borrowings (including refinance). **Return on capital employed represents profit/(loss) before tax plus interest on long term loans.


150

Working results (Rupees in crore) Particulars 1999-2000 2000-01 2001-02 2002-03 2003-04

Income

Interest on loans

139.14 88.49 78.64 47.96 34.37

Other income 8.70 8.64 6.13 5.46 3.75

Total 147.84 97.13 84.77 53.42 38.12

Expenses

Interest on long and short term loans

130.06 112.50 82.85 80.95 90.05

Other expenses 25.06 22.12 19.80 26.19 33.26

Total 155.12 134.62 102.65 107.14 123.31

Profit/(loss) before tax

(7.28) (37.49) (17.88) (53.72) (85.19)

Other appropriations (provision for non performing assets)

- - 313.63 (-)8.5 10.31

Net profit/(loss)

(7.28) (37.49) (331.50) (45.22) (95.50)

Return on capital employees

122.78 75.01 (-)248.65 33.19 (5.45)

Annexure-12

151

Annexure-12 Statement showing delay in finalisation of accounts and holding

of Annual General Meetings ? (Referred to in paragraph No.4.11)

Sr. No.

Name of the Company Year of receipt of accounts

Year of accounts

Delay in finalisation of accounts (in months)

Delay in holding of AGM (in months)

1 2 3 4 5 6 1 Mahatma Phule

Backward Class Development Corporation Limited

2002-2003 2002-2003 2003-2004

1987-1988 1988-1989 1989-1990

171 166 164

172 167

@

2 Vasantrao Naik Vimukta Jatis and Nomadic Tribes Development Corporation Limited

2002-2003 1992-1993 120 124

3 Sant Rohidas Leather Industries and Charmakar Development Corporation of Maharashtra Limited

1999-2000 2000-2001 2003-2004

1992-1993 1993-1994 1994-1995

80 78

100

84 80 @

4 Kolhapur Chitranagari Mahamandal Limited

1999-2000 1996-1997 29 54


2001-2002 2001-2002

1988-1989 1989-1990

145 142

146 @

6 The Maharashtra Fisheries Development Corporation Limited

1999-2000 1994-1995 52 52

7 Mahila Arthik Vikas Mahamandal Limited

1998-1999 2003-2004

1990-1991 1991-1992

87 142

87 @

8 Maharashra Rajya Itar Magas Vargiya Vitta Ani Vikas Mahamandal Limited

2000-2001 2002-2003

1999-2000 2000-2001

-- 14

11 23


1998-1999 1998-1999 2000-2001 2001-2002 2001-2002 2003-2004 2004-2005

1993-1994 1994-1995 1995-1996 1996-1997 1997-1998 1998-1999 1999-2000

50 47 51 48 47 50 40

50 47 53 48 48 53 @

10 Godavari Garments Limited

1998-1999 1999-2000 1999-2000 2000-2001 2001-2002 2004-2005

1993-1994 1994-1995 1995-1996 1996-1997 1997-1998 1998-1999

56 49 42 40 37 63

@ 50 42 40 37 @

? Accounts received up to 30 September 2004 considered.


152

1 2 3 4 5 6 11 Maharashtra State

Farming Corporation Limited

1998-1999

1999-2000 2001-2002 2002-2003 2003-2004 2003-2004

1994-1995

1995-1996 1996-1997 1997-1998 1998-1999 1999-2000

45

47 51 50 49 47

46

47 51 51 50 @


1998-1999 1999-2000 2000-2001 2000-2001 2001-2002 2003-2004 2004-2005

1994-1995 1995-1996 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001

46 41 40 36 34 39 38

46 41 40 37 36 39 @

13 Development Corporation of Konkan Limited

1999-2000 2000-2001 2003-2004

1994-1995 1995-1996 1996-1997

50 49 82

51 51 @


1999-2000 2001-2002 2002-2003 2004-2005

1996-1997 1997-1998 1998-1999 1999-2000

28 42 41 52

43 44 43 @


2000-2001

2002-2003 2004-2005

1996-1997

1997-1998 1998-1999

36

53 61

37

66 @

16 Shivshahi Punarvasan Prakalp Limited (SPPL)

2003-04 1998-99 43 @

17 Anna Saheb Patil Arthik Magas Vikas Mahamandal Limited (ASPAMVM)

2003-04 1998-99 59 @

18 Shabari Adivashi Vitta Va Vikas Mahamandal Limited (SAVVM)

--- First accounts awaited

--

@

@Information awaited

153

Annexure-13

Status of action taken on the cases of persistent irregularities pertaining to Government Companies and Corporations appeared in the Report of the Comptroller and Auditor General of India for the years 1999-2000 to 2002-03 (Commercial) - Government of Maharashtra

(Referred to in paragraphs No.4.26.3,4.26.4 and 4.26.5)

Sr.No.

Gist of persistent irregularities

Year of Audit Report/ Para No.

Money Value (Rs. in crore)

Gist of audit observations Actionable points/Action to be taken

(1) (2) (3) (4) (5) (6)

Government Companies

City and Industrial Development Corporation of Maharashtra Limited (Company):

Unfruitful investment in construction of tenements

1999-2000 4A.1.1

2.48 Construction of tenements at Nashik without adequate demand resulted in idle investment of Rs.4.03 crore and consequential loss of interest of Rs.2.48 crore

COPU in their 11th Report for the year 2002-03 recommended the Company to dispose of the tenements at the earliest and investigate how construction of houses was taken up without assessment of proper demand.

Injudicious investment in a second banking complex

2000-01 4A.3.1

12.37 Injudicious decision to construct a second banking complex without firm commitment from banks resulted in idle investment of Rs.17.49 crore for four years with consequential loss of interest of Rs.12.37 crore till August 2001.

The Company needs to take prompt action for early disposal of the second banking complex.

1

Total 14.85


154

(1) (2) (3) (4) (5) (6)

Statutory corporations: Maharashtra State Electricity Board (Board): 2 Purchase of meters at higher rates

1999-2000 4B.1.1

3.25 Rejection of lowest acceptable offer for purchase of solid-state single phase meters resulted in avoidable extra expenditure of Rs.3.25 crore

COPU in their 13th Report (2002recommended that MSEB should have conducted inquiry into the case and responsibility fixed on the officials involved in the matter. Such lapses should be avoided in future.

Procurement of L.T. Meters at higher cost

2002-03 III.3.1.7

4.42 Board incurred extra expenditure of Rs.4.42 crore on purchase of 5-20 A one lakh Meters instead 5-30 A Meters

All purchases need thorough investigation and responsibility fixed on the officials who approved purchase of Meters with low AMP range at higher rate.

Procurement of special type single phase electro mechanical LT Meters at higher cost.

2002-03 III.3.1.8

37.64 Purchase of eight lakh Meters at higher rate resulted in avoidable extra expenditure of Rs.37.64 crore.

Responsibility needs to be fixed for the lapse.

Procurement of LT Static three phase energy meters at higher rate

2002-03 III.3.1.9

0.21 Purchase of 10,000 Meters at higher rate resulted in extra expenditure of Rs. 21.32 lakh

Responsibility needs to be fixed on persons who placed orders at higher rates with two suppliers instead of getting requirement executed through seven tenderers who had quoted lower rates.

Maharashtra State Road Transport Corporation (Corporation):

Loss in operation of two new depots

1999-2000 4B.2.1

1.26 0.59

Establishment of financially and commercially unviable new depots at Pulgaon and Saoner resulted in unfruitful capital expenditure of Rs.1.26 crore besides operational loss of Rs.58.71 lakh.

The construction should be restricted strictly to viable depots.

3

Idle investment in construction of bus station

2000-01 4B.2.1

1.25 Decision to construct bus station at a far away location despite permission received for constructing bus station within town resulted in idle investment of Rs.1.25 crore.

Responsibility should be fixed for selection of wrong site.

155

(1) (2) (3) (4) (5) (6) Idle investment in construction of bus depot

2000-01 4B.2.2

0.79 Construction of unviable bus depot at a cost of Rs.0.79 crore and non availability of required manpower resulted in idle investment.

The Corporation should avoid such lapses on future.

Idle investment in construction of depots

2001-02 4B.2.3

0.49 Five depots constructed between 1999 and 2001 at a cost of Rs.4.11 crore remained idle. This resulted in loss of interest of Rs.49.32 lakh.

The construction should be restricted to viable depots.

Maharashtra State Financial Corporation (Corporation):

Sanction of terms loan with defective securities

1999-2000 4B.3.2

0.77 Acceptance of doubtful collateral securities and personal guarantees resulted in non-recovery of Rs.77.08 lakh.

Responsibility to be fixed for the lapse.

4

Non recovery of loan due to inadequate security

2001-02 4B.3.1

2.67 Release of loan by relaxing the pre-disbursement conditions and without inadequate security resulted in non recovery of dues of Rs.2.67 crore.


Loss due to defective agreement and absence of security

2001-02 4B.3.2

7.79 Release of loan to a Non-banking finance Company without security resulted in non-recovery of dues of Rs.7.79 crore.


Non recovery of loan due to insufficient security

2001-02 4B.3.4

0.71 As the directors did not hold any immovable property, the Corporation could not initiate action to invoke personal guarantee, thereby resulting in short recovery of Rs.0.71 crore.

Responsibility to be fixed for the insufficient security.

Total 61.84


156

Annexure - 14 Statement showing the department-wise outstanding inspection reports (IRs)

(Referred to in paragraph No.4.27) Sl. No.

Name of Department Number of PSUs

Number of outstanding

I.Rs

Number of outstanding paragraphs

Years to which outstanding paragraphs pertain to

A. Working Companies and Corporations 1. Industries, Energy and Labour i) Energy 2 424 1849 1991-92 to 2003-04 ii) Industries 10 23 131 1994-95 to 2003-04

2. Agriculture and Animal Husbandry

6 10 39 2000-01 to 2003-04

3. Co-operation and Textile i) Co-operation 1 3 12 2000-01 to 2002-03 ii) Textile 3 7 21 2000-01 to 2003-04

4. Social Welfare, Cultural Affairs and Sports

9 22 112 1992-93 to 2003-04

5. Medical Education and Drugs

2 6 14 1994-95 to 2002-03

6. Trade, Commerce and Mining

2 3 9 2000-01 to 2003-04

7. Home i) Transport 1 44 177 2001-02 to 2003-04 ii) Others 2 7 21 2000-01 to 2003-04

8. Public Works 1 2 7 2000-01 to 2002-03 9. Urban Development 1 3 38 2002-03 to 2003-04 10. Housing and Special

Assistance 1 2 5 2001-02 to 2002-03

11 Revenue and Forest i) Revenue 1 1 5 2002-03 ii) Forest 2 4 9 1991-92 to 2003-04

12. Irrigation 1 3 10 1998-99 to 2003-04 13. Woman and Child

Welfare 1 2 6 2000-01 to 2002-03

Total : A 46 566 2465 B. Non-working companies 1. Industries, Energy and

Labour 7 7 19 2000-01 to 2003-04

2. Agriculture & Allied 1 1 1 2002-03 3. Co-operation and Textile i) Textile 5 6 14 1999-00 to 2003-04

4. Housing and Special Assistance

1 1 5 2003-04

5. Women and Child Welfare

1 1 2 2001-02

Total : B 15 16 41 Grand Total : (A + B) 61 582 2506

Annexure-15

157

Annexure–15 Statement showing the department wise draft paragraphs/reviews

to which replies were awaited (Referred to in paragraph No.4.27)

Sl. No.

Name of Department Number of draft paragraphs

Number of reviews

Period of issue

1. Industries, Energy and Labour (Energy)

3 1 March to August 2004

2. Home (Transport) 5 1 March to May 2004

3. Industries, Energy and Labour (Industries)

-- 1 May 2004

4. Agriculture, Animal Husbandry and Dairy Development

-- 1 May 2004

5. Public works 4 -- May 2004

6. Urban Development 7 -- March to April 2004

7. Medical Education and Drugs

1 -- April 2004

8. Finance 2 -- August 2004

Total 22 4

158

Audit Report (Commercial)-Government of Maharashtra 2003-04

maharashtra - report of the comptroller and auditor...

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