PSUs burden on J&K’s fragile economy, losses hovering over Rs. 300 crore

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Pardeep Singh Bali

In staggering revelations, an official  audit report of India shows how gross administrative ineptitude have resulted in massive losses to tune of over Rs. 300 crores since 2010.

The report proves how J&K Cements, a company which was supposed to earn profit by manufacturing, procuring, selling cement and limestone, has proven to be a liability for the government by making it bleed financially and thus raising questions whether or not the company should henceforth exist.

Citing statistical data regarding the capacity utilisation of the company, the CAG report reads “Against total available hours, the old plant (in Khrew) was operated between 69 percent and 88 percent during the years 2010-11 to 2014-15. The low operation of old plant caused loss of production of 1010367 metric tonnes of clinker with consequent loss of production of cement valuing Rs 73.33 crore during the period 2010-15.”

It further states: “Similarly, against total available hours the new plant was operated between 43 percent and 87 percent during the years 2010-11 to 2014-15. The low operation of the news pant caused loss of production of 159596 metric tonnes of clinker with consequent loss of production of cement valuing Rs 113.88 crore during the period 2010-15. Thus due to low operation of kilns the company had to suffer loss of production of cement valuing Rs 187.21 crore.”

Surprisingly, as per CAG the management of J&K Cements attributed low operation to frequent repair and maintenance of kilns besides power failure, hartals.“The company has not been able to utilize the kilns to optimum level,” the report reads. In terms of production capacity, the company has seen gradual decrease since 2010. In producing clinker (raw material for cement), against  installed capacity of 3.80 lakh metric tonnes, the actual production in 2014-15 was only 0.95 lakh metric tonnes.

For years 2010-11, 2011-12, 2012-13, 2013-14, the actual production was1.15, 1.72, 1.52, 1.42 (lakh MTs) respectively which places the year over year clinker production growth at minus 33 percent. In cement production too, against the installed capacity of 4 lakh MTs, the company only produced 1.03 lakh MTs during 2014-15. For years 2010-11, 2011-12, 2012-13, 2013-14, the actual cement production was 1.37, 1.78, 1.68, 1.36 (lakh MTs) respectively which places the year over year cement production growth at minus 24 percent.

“Due to low production of clinker, the company had to purchase clinker from open market during the years 2010-11 and 2012-13 to the extent of 0.38 lakh MTs at a cost of Rs 23.18 crores,” says the CAG report. The report also reveals how excess consumption of coal (used to burn kilns which produce clinker) led to huge losses for the company.“Against a norm of 0.183 MTs in new plant, the consumption of coal was between 0.27 MT and 0.32 MT during 2010-11 to 2014-15 resulting in excess consumption of 377345 MTs to coal valuing Rs 36.80 crore.

Similarly in the old plant, excess consumption of coal to the extent of 20933 MTs valuing Rs 20.40crore. Thus excess consumption of 58278 MTs of coal caused extra burden of Rs 57.20 crore to the company.”From 2010-15, the company also consumed excess power to the extent of 658.04 lakh kWh causing extra burden of Rs 22.97 crore.

The accounts of the company, as per CAG report, have been in arrears since 2008-09 making it vulnerable to corruption given the risk of financial irregularities remaining undetected.“During the years 2013-14 and 2014-15, the company suffered loss of Rs 16.93 crore and Rs 26.28 crore respectively due to less production of clinker, less sales, increase in cost of power/fuel and steady increase in administrative expenditure. Despite refund of central excise duty of Rs 37.88 crore during the period of 2010-15 and assured captive market for cement, the company has failed to maintain and increase its profitability,” reads the CAG report.

The company has also failed to install pollution monitoring and dust control devices required as per norms of Ministry of Environment and Forests and in terms of Mines Act,1952.“The company was required to obtain Consent to operate (CTO) certificate from the State Pollution Control Board on a yearly basis. Audit observed that the said certificate had not been renewed since March 2014.

The company had not installed self pollution monitoring device, three Ambient Air Quality Monitoring Stations, Low Nox burners to control Nox emissions and vacuum dust cleaning system as required under the guidelines of Ministry of Environment and Forests, Government of India,” it says. The company also fares weakly when it comes to corporate governance and internal control system.

Against prescribed 20 Board of Directors’(BODs) meetings, only six meetings were held during the period 2010-15.The CAG audit reveals that no concrete action was taken by the company on BoD directions. It also noticed that relevant cost records on day to day basis and cost statements on yearly basis were not maintained by the company.“The company has not devised a proper management information system t evaluate the results and to monitor performance parameters and targets,” it reads.

CAG report says that the J&K Cements has not assessed requirement of staff on technical and non-technical basis. As on March 2015, a total of 749 employees (Head office: 102, Divisional Office Jammu: 85, Khrew factory: 562) remained posted in the company.“Of the 749 employees (543 were technical and 206 non-technical), the company had incurred expenditure of Rs 138.58 crore on remuneration during the period 2010-15,” says the report.

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