CAG Critiques 's Public Sector Investments: Rs 4,300 Crore Yielding Almost Nothing

Shillong, India Aug 29, 2026 ALN: The Comptroller and Auditor General of India (CAG) has raised significant concerns regarding the quality of investments made by the state in its public sector enterprises (PSEs). The CAG's report warns that public funds are languishing in poorly performing entities, yielding almost no returns and exacerbating fiscal stress for the state.

The report reveals that the government has invested a staggering Rs 4,322.52 crore into 11 State Public Sector Enterprises (SPSEs) up to the fiscal year 2024-25. Alarmingly, among these entities, only the State Warehousing Corporation generated any return, amounting to a mere Rs 0.06 crore—effectively zero percent on the capital locked in. This situation raises serious questions about the management and operational efficiency of these enterprises, which are expected to contribute positively to the state's economy.

Furthermore, the CAG highlights a concerning mismatch between the cost of capital and the returns generated. The investments were financed at an average borrowing rate of 5.31 percent, which raises questions about the efficiency of these investments. The disparity between the cost of capital and the returns produced by these enterprises reflects a troubling trend that could have long-term implications for the state's fiscal health.

As of March 31, 2025, the total investment in companies, corporations, and other bodies stood at Rs 4,444.43 crore. This includes Rs 4,215.15 crore in government companies, Rs 107.37 crore in statutory corporations, and Rs 121.91 crore in cooperative banks and societies. However, the dividend and interest received from this portfolio in 2024-25 was only Rs 0.20 crore, further underscoring the lack of adequate economic returns on the capital committed. The stark contrast between the substantial investments made and the meager returns highlights the urgent need for a reevaluation of investment strategies in the public sector.

No Dividend Policy in Place

The CAG's report also points out the absence of a dividend policy, which would typically mandate a minimum share of profits that profitable state enterprises must return to the government. Such a policy would ensure a return on equity and incentivize management to enhance performance. Unfortunately, the state has neither established nor enforced such a policy. The lack of a structured approach to profit distribution not only hampers the state's revenue generation but also discourages accountability among the management of these enterprises.

In the fiscal year 2023-24, three state PSUs reported profits, yet none declared a dividend. The CAG found no state rule requiring a minimum payout, resulting in public equity remaining stagnant without any systematic return to the treasury. This lack of a dividend policy has created an environment where there is little incentive for state enterprises to maximize profitability or efficiency, leading to a cycle of underperformance.

This issue is not isolated; out of the 22 SPSEs in the state, two are non-operational, and the investments made in them remain unrecovered. Among the 20 active enterprises, none paid dividends during the review period, indicating a structural weakness across the board. The fact that a significant portion of the state's investments is tied up in non-operational or poorly performing enterprises raises concerns about the strategic planning and oversight of public sector investments.

Borrowed Funds, Minimal Returns

The CAG emphasizes that capital tied up in these enterprises could have been allocated more effectively elsewhere. When funds are raised through borrowing, the state incurs interest costs even if the enterprises yield little or no returns. This situation not only strains the state's financial resources but also limits its ability to invest in more productive areas such as infrastructure, education, and healthcare.

The State Warehousing Corporation serves as a stark example; despite a significant government stake, it generated only Rs 6 lakh in returns for 2024-25, while the state's average cost of funds was several percentage points higher. This disparity is why the CAG describes the current arrangement as an inefficient use of public funds, contributing to fiscal stress. The failure of such enterprises to deliver adequate returns poses a serious challenge for the state's budgetary planning and overall economic strategy.

Despite these concerns, investments in companies, corporations, and other bodies continue to rise. The CAG's audit calls for a comprehensive review of non-performing units and for regulations that compel profitable enterprises to declare dividends. Without such measures, the state risks perpetuating a cycle of inefficiency and financial strain, which could ultimately hinder its economic growth and development.

In conclusion, the CAG's findings present a critical examination of the state's public sector investments, urging the state to reassess its strategies to ensure better returns on public funds. The implications of these findings extend beyond mere financial metrics; they touch upon the broader issues of governance, accountability, and the effective use of taxpayer money. Addressing these issues will require a concerted effort from the state government to implement reforms that enhance the performance of public sector enterprises and ensure that public investments contribute positively to the state's economic landscape.