New Delhi, April 5, 2017
The Comptroller & Auditor General (CAG) has found several lapses in implementation of corporate governance norms by central PSUs, including absence of woman directors.
The CAG’s compliance audit report for the year ended March 31, 2016 tabled in Parliament today revealed that in as many as 16 central public sector enterprises, non-executive directors constituted less than 50 per cent of the total board strength.
These firms include ONGC, Oil India, Power Finance Corporation, NTPC, Indian Oil Corporation, NBCC (India) Ltd, Rashtriya Chemicals and Fertilisers, Shipping Corporation of India, among others.
The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 stipulates that the Board of Directors of a company shall have an optimum combination of executive and non-executive directors with not less than 50 per cent of the board of directors comprising non-executive directors.
The CAG report also found that the representation of independent directors was not adequate in 33 CPSEs, while there was no independent director on the board of 13 CPSEs.
Moreover, in 18 CPSEs, the vacancies of independent directors were not filled in time.
The report also revealed the absence of a whistleblower mechanism in three CPSEs, whereas in six CPSEs the audit committee did not review the whistleblower mechanism.
The report also found that four CPSEs did not disclose the composition of CSR (corporate social responsibility) Committee in the board’s report. Eight CPSEs either did not formulate CSR or sustainability policy or the policy of the CPSE was not duly approved by the board.
Besides, four CPSEs did not allocate the prescribed amount of at least 2 per cent of the average net profits of the company made during the three immediately preceding financial years towards budget for CSR expenditure.
Out of 36 CPSEs, which maintained information regarding actual expenditure incurred on Corporate Social Responsibility, 27 had spent the full amount earmarked for CSR activities and 9 CPSEs had an unspent amount of Rs 193 crore.
Out of the 384 government companies and corporations whose data has been analysed in this report, 197 government companies and corporations earned profits during the year 2015-16.
Total profit earned by 197 government companies and corporations was Rs 1,36,695 crore of which, 72.75 per cent (Rs 99,437 crore) was contributed by 47 government companies and corporations in three sectors viz., petroleum and natural gas, power and coal & lignite.
Out of 197 government companies and corporations which earned profit, 106 government companies and corporations declared dividend for 2015-16 amounting to Rs 71,887 crore. Out of this, Rs 41,185 crore were paid/payable to the government of India which represented 13.91 per cent return on the total investment by the Government of India (Rs 2,96,061 crore) in all government companies and corporations.
Thirteen government companies under the Ministry of Petroleum and Natural Gas contributed Rs 16,570 crore representing 23.05 per cent of the total dividend declared by all government companies.
However, non-compliance with government’s directive in the declaration of dividend by 37 government companies resulted in a shortfall of Rs 9,011 crore in the payment of dividend for 2015-16.
Besides, equity investment in 67 government companies was completely eroded by their accumulated losses. As a result, the aggregate net worth of these government companies had become negative to the extent of Rs 79,227 crore as on March 31, 2016.
[The Financial Express]