KSIDC incurs loss of Rs 40 crore due to unauthorised loan to pharma firm: CAG

Thiruvananthapuram: In a damning report, the Comptroller and Auditor General (CAG) has revealed that the Kerala State Industrial Development Corporation Limited (KSIDC) incurred a loss of Rs 40 crore due to an unauthorised loan granted to a private pharmaceutical company during the first term of the Pinarayi Vijayan government.

The CAG report stated that in August 2019, the then Industries Minister intervened illegally, to grant Rs 3 crore as loan to a pharmaceutical company when the firm already owed an outstanding due of Rs 72 crore to the KSIDC. The preliminary report was prepared by the auditing group in the office of the Principal Accountant General (Audit 2 Kerala) on October 9. The present LDF Convenor EP Jayarajan was the Industries Minister at the time. The CAG has not named Jayarajan in its report.

The loan was granted to Kochi-based Vysali Pharmaceutical Ltd owned by Dr AD Krishnan.

Key findings from the CAG report

*  The intervention by Industries Minister influenced decisions at every stage of the loan approval process.

* The pharmaceutical company had outstanding dues of Rs 72 crore as of June 30, 2019, while the value of the pledged land that was offered as security was only Rs 30 crore.

* Due to a lack of effort in recovering the loan, the KSIDC incurred a loss of Rs 40 crore.

* Attempts to attach the pledged land were halted after intervention from the office of the Industries Minister.

* Despite the pharmaceutical company accumulating substantial dues, an interest-free loan of Rs 3 crore was sanctioned.

* The loan was approved on the directive of the Industries Minister, even though the outstanding dues exceeded the value of the land provided as security.

The report was prepared after a special audit conducted by the CAG, which is scrutinising the KSIDC's functioning over the past five years. Although the report was handed over to the KSIDC in October, no response was received. The CAG will prepare a detailed report once a response is received, and the government's view on the issue will be sought.

Meanwhile, EP Jayarajan has claimed that there was no irregularity in the process. “Dr. Krishnan had come to meet me. I heard his grievances. But I adopted only appropriate steps. I have not done anything out of the way. I can comment on the issue only after going through the file concerned. I need to examine what the CAG has said,” he said.

“KSIDC made losses and brought the company to the present situation. The then Industries Minister EP Jayarajan tried to help us, but he has not done anything in an irregular manner. I cannot comment on the issue without seeing the CAG report,” Dr AD Krishnan,Chairman and Managing director of Vysali Pharmaceuticals said.