Net worth of 40 Karnataka govt companies including BMTC and Bescom fully eroded, says CAG report

Bengaluru: Forty public sector enterprises (PSE), including BMTC and Bescom, are worth nothing as their net worth is “completely eroded” due to accumulated losses of Rs 33,992.96 crore, the Comptroller & Auditor General (CAG) said in its report Wednesday.

The CAG’s report, tabled in the Assembly, noted that 60 out of 127 PSEs have an accumulated loss of Rs 46,814.47 crore.

“The net worth of 40 out of 60 PSEs had been completely eroded by accumulated losses and their net worth was either zero or negative,” the CAG said in its report for the fiscal that ended March 31, 2023. “The net worth of these 40 PSEs was Rs (-) 23,297.91 crore against paid up equity of Rs 10,695.05 crore,” it added.

In 19 out of 40 PSEs whose capital was eroded, the outstanding government loans as on March 31, 2023 amounted to Rs 3,231.65 crore.

“The government needs to evaluate the business models of loss-making PSEs to address the underlying cause of their financial losses,” the CAG said. “If the business model is not sustainable, the government may review and consider shutting down/divesting its stake in such companies, especially in those whose net worth has been completely eroded,” the CAG said.

The 40 PSEs worth nothing also include Karnataka State Tourism Development Corporation, the Rajiv Gandhi Housing Corporation, the Mysore Paper Mills Ltd, KSRTC, NWKRTC, KKRTC among others.

There were 57 PSEs that reported profits of Rs 3,132.14 crore in 2022-23.

More skeletons in Keonics closet

The CAG found irregularities in the supply of equipment worth Rs 1,544.50 crore by Keonics to different government departments and other institutions between 2018-19 and 2022-23.

The Siddaramaiah administration is already investigating a scam in Keonics when the BJP was in power.

Keonics got these orders without any tender process under Section 4(g) of the KTPP Act, which the CAG noted was ‘misused’.

From a sample of 347 purchase orders audited, the CAG found that 18 orders valuing Rs 154 crore were split into 195 orders of less than Rs 1 crore to avail tender exemption.

Further, Keonics procured non-IT equipment such as RO purifiers, chapati makers, chillers and washing machines in violation of the law and against the company’s mandate.

Keonics was also found to have inflated price estimates. “...inflated price estimates followed by submission of bids by only few (vendors) is suggestive of cartelization,” the CAG said.