Government of Gujarat

SCAM in the Government of Gujarat, 2009

Sector Transport & Infrastructure, Power & Energy, Industry and Commerce, Agriculture and Rural Development

Government companies are governed by Section 619 of the Companies Act, 1956. Statutory Auditors appointed by CAG audits the accounts of Government companies. These accounts are also subject to supplementary audits conducted by CAG. Their respective legislations govern the audit of Statutory corporations. As of 31 March 2009, the State of Gujarat had 57 working PSUs(53 companies and 4 Statutory corporations) and 13 non-working PSUs (all companies), which employed 1.16 lakh employees. The working PSUs registered a turnover of Rs. 50,289.48 crore for 2008-09 as per their latest finalised accounts. This turnover was equal to 13.90 per cent of State GDP, indicating an important role of State PSUs in the economy. The working PSUs earned a profit of Rs. 2,404.89 crore for 2008-09 and had aggregate accumulated profit of Rs. 2,176.11 crore.

As of 31 March 2009, the investment(Capital and long term loans) in 70 PSUs was Rs. 48,137.78 crores. It grew by 24.82 per cent from Rs. 38,565.15 crore in 2003-04. Power, Finance and Manufacturing Sectors together accounted for 35.73 per cent of total investment in 2008-09 whereas other Sectors accounted for 64.27 per cent. The Government contributed Rs. 9,201.10 crore towards equity, loans and grants/subsidies during 2008-09.

During the year 2008-09, out of 57working PSUs, 40 PSUs earned a profit of Rs. 2,586.06 crore, and seven PSUs incurred a loss of Rs. 181.17 crore. Major contributors to the profit were Gujarat State Fertilizers and Chemicals Limited (Rs. 739.18 crores), Gujarat State Petroleum Corporation Limited (Rs. 628 crores) and Gujarat Mineral Development Corporation Limited (Rs. 369.90 crores). The heavy losses were incurred by Gujarat State Financial Corporation (Rs. 109.13 crores) and Gujarat State Road Transport Corporation (Rs. 66.10 crores).

Though the PSUs were earning profits, there were instances of various deficiencies in the functioning of PSUs. A review of three years’ Audit Reports of CAG shows that the State PSUs’ losses of Rs. 1,723.63 crore and infructuous investments of Rs. 204.91 crore were controllable with better management.

Missing Links analysis
2.10.3 As per audit analysis, major reasons for missing links were:
• Work awarded without acquiring requisite land;
• Poor quality of work execution (discussed in the paragraph );
• Delay in taking up repairing work;
• Undue favour to the contractors
Inspection report of Superintending Engineer (QC), Vadodara (June
2007) on Sarbhan Minor of Miyagam Branch, which was constructed by the
in 2003, revealed that the contractor used black soil (CH type) in
embankments that were not recommended as a construction material as per IS:
and the works were not carried out as per the tender specifications
and designs. As a result, the canal was damaged (2003) and the estimated
reconstruction cost is Rs. 1.30 crore. Despite this, the Company had not taken
any step towards the recovery of reconstruction costs from the contractor.
The canal network created had got different components viz., NMC,
branch canals, distributaries, minors and sub-minors with a huge investment of
Rs. 18,515.58 crore. As such, it is imperative to ensure proper maintenance of
the network. The Company, however, had never closed NMC for maintenance
work since the commencement of flow in July 2002 as observed (October
2008) by High Power Committee (HPC) appointed by GoG. The Committee,
in its report further observed that Storm Drainage arrangements made in the
NMC was unsatisfactory, and the repairable and restorable works of the canal
Company totally
ignored the
maintenance of
NMC and other
canal network.
Company has no
MIS system to
know impact of
SSP on agriculture.
Chapter II, Performance review relating to Government company

They were left unattended, and the stop-lock gates on the NMC were never tested.
The above observations are clearly indicative of the laxity of the Company in
safeguarding its valuable assets besides posing a threat to life/property in the
canal vicinity.
Audit observed that the Company was not undertaking any repairs and
maintenance work of other canals completed before 2001 in Phase I leading to
vegetation growth, cracks and breaches in the linings and beds of canals. The
photographs given below are indicative of the status of repairs and maintenance of

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