State public enterprises' aggregate profitability likely to fall in FY23

Thiruvananthapuram: Notwithstanding the claims the respective governments have been making year after year on the performance of public enterprises, these state level public enterprises (SLPEs) continue to be a burden to the state exchequer.

The fact is that these SLPEs have been rolling out net losses year after year (on an aggregate basis), and worryingly, according to the public sector experts myfinpoint.com talked to, Kerala’s SLPEs in the given context are unlikely to report profit on a ‘net basis’ in the near future.

An analysis of the performance of the SLPEs in the financial year 2021-22 (FY22), using the statistics provided by the Government departments, Kerala’s public sector undertakings closed the year FY22 with a combined net loss of Rs1,718.95 crore against a much larger loss of Rs3,601.65 crore during the year before – 2020-21 (FY21).

A further break-down reveals that while 60 enterprises reported net profits during the year 2021-22 (FY22) amounting to Rs1,570.21 crore, 61 enterprises incurred net losses amounting to Rs3,289.16 crore, dwarfing the profitability and thus resulting in an effective net loss of Rs1,718.94 crore for the year 2021-22.

However, it was quite relieving that the profitability has improved substantially during 21-22 compared with the previous year (20-21) which had only 52 profit-making companies earning a combined net profit of just Rs429.58 crore.

But what takes the sheen off FY22’s combined profit, though far less than the combined loss, is the fact that 90.23 per cent of the profit earned in the year has come from just three companies – KSEBL at Rs736.27 crore (46.89 per cent), Kerala Minerals and Metals Ltd (KMML) at Rs226.91 crore (14.45 per cent) and Kerala State Financial Enterprises Ltd (KSFE) at Rs210.86 crore (13.43 per cent).

What must be worrying the government most at this juncture could be the poor performance of KSEBL, the ‘kingpin’ that has contributed close to half of the combined net profit in FY22.

In the place of Rs736.27 net profit KSEBL reported for FY22, the company has incurred a cumulative loss to the tune of Rs79.36 crore so far, during the first nine months of the current financial year, leaving one guessing whether the company could earn a profit at all during FY23.

Moreover, the auditors of KSEBL had in the past two years raised doubts about the way the company had treated the profit & loss (P&L) account especially on the sloppy provisioning on the company’s properties amounting to thousands of crores of rupees.

New initiatives

The Industries Minister, P Rajeev, has recently announced that a ‘Master Plan’ is being prepared for the revival of SLPEs with short-term and long-term strategies to ensure the units turn profitable at the earliest possible.

He said efficient persons with professional background will be inducted onto the board as independent directors. The master plan will chalk out ways to raise funds outside the budget.

“A meeting was convened for the top officials of private and public sector banks as well as other financial institutions to discuss ways to finance the growth of SLPEs,” Rajeev had informed the assembly recently.

He also said a working group of nine banks has been formed to spearhead the funding initiatives meant to support the public sector undertakings in Kerala.