Investments rate of return down drastically

BHUBANESWAR: The Orissa Government is losing heavily on its investment in State-run corporations, rural banks and cooperative bodies. With the rate of return plummeting, the Finance Department has asked all the departments to take note and find out the reason behind the decline. In the fiscal 2010-11, the Government’s investment stood at Rs. 2190.36 crore registering a 4.64 per cent return amounting to Rs. 101.58 crore. It is a steep fall considering the return of the previous year when the rate was 11.9 per cent. The Government had invested Rs. 2106.95 crore and its return was Rs. 205.78 crore. “The AG, Orissa, has pointed out the decline in return and requested to intimate the reason to be included in the CAG Report,” the Finance Department stated. During the period 2006-2009, the average return to the Government on its investment was 8.54 per cent whereas it paid interest in the range between 7.44 per cent and 8.18 per cent on its borrowings during the period. Interestingly, the return rate seems to be plummeting over the last half a decade or so as against a steady  interest paid by the Government. A comparison shows that during 2004-05, the Government investment stood at Rs. 1610.4 crore with a 4.29 per cent rate of return while the average rate of interest on its borrowing was 9.51 per cent. During 2005-06, it received at the rate of 7.39 per cent whereas it paid at 9.92 per cent. Then there was a turnaround. During 2007-08 and 2008-09, the rate of return exceeded the rate at which the Government paid. The reasons are not far to seek. Barring a handful, most of the PSUs, cooperatives and rural banks failed to make any impact in terms of economic activity. The CAG Report for the year ending 2009 noted that during 2008-09, the Government investment in 83 government companies was Rs. 1217.42 crore whereas in three statutory corporations, it was Rs. 198.27 crore. Only two corporations announced a combined dividend of ` 252.51 crore besides a corporation and a cooperative body. The net profit of three major PSUs __ Gridco, Orissa State Transport Corporation and Orissa State Financial Corporation __ is nil. Their combined loss was 81 per cent of the total accumulated commercial losses of Rs. 2,034 crore by all government companies and corporations.