CAG Flags PSE Failures

The CAG's report on Jammu and Kashmir's public sector enterprises, tabled in the Assembly, raises too many concerns. It deserves far more attention than a day's headlines. Of 42 enterprises under the CAG's jurisdiction, only 11 made a profit. Twenty reported combined losses of Rs 252.53 crore. Accumulated losses have wiped out the entire net worth of fourteen enterprises, rendering them insolvent in all but name. Six are wholly inactive. Aggregate profit did rise to Rs 1,286.79 crore by 11 PSEs, but that is flattering arithmetic: only one enterprise, J&K Bank, declared or paid a dividend. Strip it out, and little remains. The power sector, which absorbs 78 per cent of total investment, cannot disguise a portfolio in which failure is the norm and success the exception. More troubling is that public money keeps flowing towards enterprises that have long stopped delivering. A functioning organisation that loses money is a management problem. One that is insolvent, inactive and still on the Government's books is a policy failure. It is hard to resist the conclusion that nobody wants either to revive these entities or to close them.

The audit evasion is the most damning part. Of 34 enterprises whose 2022-23 accounts were due, only four presented financial statements by 30 September 2023. Nineteen are three or more years in arrears. As the CAG warned, without finalised accounts the Government's investment sits outside legislative oversight. Taxpayers' money disappears into entities that cannot say what they have done with it, and the Assembly cannot ask.

The governance picture explains why. Company Secretary is a rare sight. Just nine of 33 held the required number of board meetings, and 24 skipped their Annual General Meetings. Of the enterprises required to appoint independent directors, only J&K Bank complied, and it alone constituted the mandatory Audit and Nomination and Remuneration Committees. Corporate social responsibility fared little better. If J&K Bank is the one enterprise following the rules, then the rules are not being enforced on anyone else, and that is an administrative choice, not an accident.

The same pattern appears beyond the PSEs. The NABARD-funded rural infrastructure programme is a case study in how a finance-starved Union Territory squanders cheap credit. The Centre consented to borrowing Rs 3,900 crore, yet J&K drew only Rs 2,316.37 crore, or 59 per cent. Of the Rs 844.17 crore released between 2018 and 2023, only Rs 382.50 crore was spent, leaving Rs 461.67 crore idle. By March 2023, just 32 of 263 projects due for completion were finished. A territory that pleads for resources has left hundreds of crores unused while roads, bridges and water schemes remain half-built. Unfinished works are worse than none: they block funds, deny communities the benefit and damage the credibility needed to secure future loans.

The Integrated Financial Management System tells a similar story. Only four of twelve proposed modules were fully operational, and implementation is more than a decade behind schedule. The Union Territory lost Rs 11.88 crore of central assistance, and the system has weak access controls, no complete audit trail and no disaster recovery plan.

None of these failures means public enterprises should simply be shut. Many are the backbone of the Administration and, in places, indispensable. The SRTC is the obvious example: on unprofitable routes that no private operator will serve, commuters have nothing else. Other enterprises support farmers, cooperatives and self-help groups who have no alternative source of help. If they go dormant, that support vanishes, and the people who suffer will be those least able to bear it. The employees, too, are caught from every direction, with neither a viable employer nor a dignified exit.

That is why the CAG's recommendations should be treated as an action programme. Inactive enterprises should go through liquidation, with their assets sold and the proceeds recovered. Loss-making ones need credible turnaround plans with deadlines and accountability. Every defaulting enterprise must finalise its accounts. This is a moment for a U-turn, not another round of explanations. The Administration must handle it professionally, on a war footing, with named officers answerable for outcomes. Otherwise, the next audit will repeat this one, with larger losses and fewer options left to bailout.