MANISH GUPTA
Ranchi, Aug 5: The Comptroller and Auditor General of India (CAG) in its latest audit report on the finances of the Jharkhand government has revealed major inefficiencies in the state power sector that are impacting the sustainability of state finances.
Of the long-term loan of Rs 18,775 crore outstanding in 10 State Public Sector Enterprises (SPSEs) as on 31 March 2021, 99.73 per cent was outstanding with the power sector. The non-power sector accounted for only Rs 50 crore, CAG said.
“None of the companies (in both power and non-power sectors) had repaid the principal as well as interest amount during the year 2018-19 to 2020-21 to the state government,” said the CAG report, which was tabled in the Jharkhand assembly on Thursday.
The total number of SPSEs in Jharkhand is 31 whereas CAG has covered 16 SPSEs (six power sector and 10 non-power sector companies) based on latest finalised accounts for the three financial years from 2018-19 till 31 March 2021, the auditor said.
Not just the large amount of loans outstanding on the state power companies, the real concern is that many of these are incapable of paying back either the principal or the interest on their loans as they are incurring huge losses year after year.
“Out of the total loss of Rs 2,143.77 crore incurred by 10 SPSEs/ government controlled other company, loss of Rs 2,093.22 crore was attributed to two SPSEs which functioned in power sector,” the CAG report said. Six SPSEs made profit in the three years.
The two biggest loss-making SPSEs are Jharkhand Bijli Vitran Nigam Ltd (JBVNL) and Jharkhand Urja Sancharan Nigam Ltd (JUSNL), as per the CAG report.
Interest Coverage Ratio (ICR) is a financial ratio that determines how well a company can (at least) pay the interest on its outstanding debts. An ICR below one indicates that the company was not generating sufficient revenues to pay the interest.
The apex auditor said that it was found that the ICR of three SPSEs was less than one. “All the three are power sector SPSEs. It indicates that these SPSE’s earnings were not sufficient to pay their interest which also indicates high risk of insolvency,” it said.
The three power companies with ICR less than one are JBVNL, JUSNL and Jharkhand Urja Utpadan Nigam Ltd (JUUNL). As on 31 March 2021, the interest outstanding on the long term loans of these three power sector SPSEs is Rs 3,676.63 crore.
Besides, Return on Capital Employed (ROCE), ratio to assess profitability and efficiency of a company, worsened for power sector SPSEs from a negative 4.66 per cent in 2018-19 to a negative 6.42 per cent during financial years of 2019-20 and 2020-21.
Ironically, in two of the 10 SPSEs with long term loan outstanding the value of total assets was less than the loans outstanding raising doubts about their solvency. The companies are Karnpura Energy Ltd (KEL) and Jharbihar Colliery Ltd (JCL).
