Kerala's PSUs exhibit a mixed bag of financial performance - Some experience remarkable profits while others grapple with substantial losses.
Published Oct 26, 2024 | 8:00 PM ⚊ Updated Oct 26, 2024 | 8:00 PM
Kerala PSUs with huge profits and substantial loss
The financial performance of Kerala’s Public Sector Undertakings (PSUs) reveals a tale of contrasting fortunes, as highlighted in the recent State Finances Audit Report prepared by the Comptroller and Auditor General of India (CAG).
Four of the 149 PSUs in the state have emerged as significant due to their financial impact – two show a sharp rise in profits while two are reeling under substantial losses, each crossing ₹100 crore.
The Kerala State Electricity Board Limited (KSEB) and the Kerala State Financial Enterprises Limited (KSFE) reported profits above ₹100 crore, exemplifying success stories within the sector.
However, the Kerala State Road Transport Corporation (KSRTC) and the Kerala State Civil Supplies Corporation (Supplyco) reported considerable losses, highlighting the ongoing challenges faced by these entities.
KSEB, one of the largest contributors to Kerala’s economy according to the report, posted a net profit of ₹736.27 crore in 2021-22. Similarly, KSFE, which focuses on chitty-based saving schemes and loans, registered a profit of ₹105.49 crore in the same period.
Together, these two PSUs accounted for ₹841.76 crore – constituting 61.50 percent of the total profit generated by 58 profitable PSUs till 30 September 2023.
Top two PSUs which contributed maximum profit. Courtesy – State Finances Audit Report
According to officials, the profitability of these enterprises reflects their resilience and strategic management. KSFE’s performance is a testament to the popularity of its financial services among the public.
Meanwhile, KSEB’s profitability despite energy sector challenges, reflects the PSU’s ability to manage operations efficiently amidst a rising demand for electricity in the state.
On the flip side, KSRTC continues to bleed financially, with the latest finalised accounts revealing a staggering loss of ₹1,007.18 crore for the fiscal year 2015-16.
Similarly, Supplyco reported a loss of ₹106.81 crore in its 2017-18 accounts, reflecting struggles related to market volatility, subsidies, and operational inefficiencies.
PSUs that incurred loss of more than ₹ 100 crore. Courtesy – State Finances Audit Report
These two PSUs alone accounted for ₹1,113.99 crore loss, forming a significant chunk of the total losses incurred by 66 PSUs, wput hich together comes to ₹1,873.89 crore in total.
KSRTC’s losses raise concerns about the sustainability of its operations, as it faces stiff competition from private operators and struggles with high operational costs.
Similarly, Supplyco, which plays a critical role in the state’s food distribution system, has been facing financial pressures due to subsidies and inefficiencies in procurement.
While the profits of 58 PSUs almost doubled from ₹654.99 crore in 2021-22 to ₹1,368.72 crore by September 2023, the broader performance of the PSU sector remains concerning.
The overall Return on Equity (RoE) for these profitable PSUs improved from 10.32 to 32.37 percent, reflecting better financial management. However, when considering all 131 working PSUs, the net income remained negative, eroding their shareholders’ funds.
Out of the 131 working PSUs, 77 reported accumulated losses amounting to ₹18,026.49 crore. Alarmingly, the net worth of 44 PSUs had been completely eroded, with these companies showing a negative net worth of ₹11,227.04 crore despite equity investments of ₹5,954.33 crore.
Number of PSUs that incurred losses during the three year period ending 31 March 2023 Courtesy – State Finances Audit Report
This financial erosion has raised concerns about the future viability of these PSUs, many of which have been sustaining losses for years.
The financial impact of Kerala’s PSUs on the state’s economy is diminishing, as reflected in the declining ratio of PSU turnover to Gross State Domestic Product (GSDP).
While PSU turnover increased by 8.43 percent from ₹35,767.90 crore in 2021-22 to ₹38,781.41 crore in 2022-23, the GSDP growth rate outpaced this, and expanded by 11.95 percent during the same period.
Consequently, the turnover as a percentage of GSDP declined from 4.51 in 2020-21 to 3.71 percent in 2022-23, indicating a reduced economic contribution from PSUs.
Despite the erosion of net worth in 44 PSUs, a silver lining emerged: Their total receipts slightly exceeded their expenses. This indicates the potential for financial recovery if operational and financial strategies are realigned.
However, the report underscores the urgency for comprehensive reforms to address the operational inefficiencies and financial mismanagement plaguing several PSUs.
With the state government investing ₹3,546.30 crore in equity across 54 loss-making PSUs, the focus must now shift to ensuring accountability, restructuring efforts, and exploring new revenue streams.
For KSRTC and Supplyco, in particular, the road to recovery requires urgent interventions to mitigate further financial deterioration.
According to the Economic Review 2023 released in January 2024, the state’s PSUs, particularly those under the Department of Industries, have made significant strides, but challenges persist in ensuring profitability and modernisation.
The report also outlined an ambitious vision to enhance the efficiency and performance of PSUs as a key driver of the state’s economic and industrial growth.
Kerala hosts a combination of State and Central PSUs across various sectors, including chemicals, electronics, engineering, and textiles. The financial year 2022-23 saw 42 PSUs under the Department of Industries and Commerce achieve a cumulative turnover of ₹4,310.99 crore, with an operating profit of ₹60.71 crore.
However, this represented a 5.1 percent decline in turnover compared to the previous year, underscoring the need for operational efficiency.
While 13 PSUs reported profits in 2022-23, an improvement from 12 in the prior year, losses from the textile sector pulled down overall performance. Textile PSUs reported a net loss of ₹146.09 crore, exacerbating the challenge of balancing sectoral performance.
Conversely, PSUs in the chemical and electronics sectors showed promise, generating profits of ₹78.38 crore and ₹15.55 crore respectively. Notably, Travancore Cochin Chemicals achieved a record turnover of ₹371 crore with an operating profit of ₹87 crore.
The Kerala government stated in the report that, the state has adopted a multi-pronged strategy to modernise PSUs and align them with Kerala’s industrial ambitions.
Despite pockets of success, Kerala’s PSUs face challenges in achieving sustained profitability, particularly in legacy sectors like textiles. To overcome these challenges, the report highlighted that the government is pushing for industrial diversification and emphasising the importance of research, innovation, and continuous upskilling.
“The PSUs in Kerala are no longer just profit-making entities—they are emerging as catalysts of industrial modernisation and facilitators of technological progress. With proactive government policies, capital infusion, and a focus on sustainable growth, the PSUs are poised to play a crucial role in Kerala’s economic development,” said an official of Industries Department.
The financial performance of PSUs paints a picture of stark contrasts, with notable successes in select enterprises like KSEB and KSFE alongside ongoing struggles in others such as KSRTC and Supplyco.
For Kerala’s PSU sector to thrive, operational efficiencies, strategic management, and accountability must take center stage, ensuring that these entities remain relevant contributors to the state’s socio-economic fabric.
(Edited by Neena)
