Case Study on SAIL

Case Study on SAIL (Window Dressing)

 

The annual report for 1997-98 reveals, the Rs 16,403-crore Steel Authority of India Ltd’s (SAIL) bottomline is not worth its weight in steel. By resorting to complex accounting changes, and despite 11 qualifications from 5 statutory auditors–as well as the venerable Comptroller & Auditor-General of India (CAG) SAIL, transfigured net losses of Rs 354.08 crore into net profits of Rs 132.99 crore in 1997-98.

The performance of SAIL the country’s largest steel producer was not good in the previous year. Despite the recession, and even as it was buffeted by cheap imports, SAIL’s sales went up marginally: from Rs 14,114.01 crore in 1996-97 to Rs 14,624.07 crore in 1997-98. But its net profits plummeted from Rs 515.17 crore to Rs 132.99 crore on account of a Rs 374- crore increase in interest costs and a Rs 104-crore increase in depreciation.

Even these meagre profits–which account for only 0.81 per cent of its sales–came from window-dressing the accounts through write-backs and non-provisions. But a SAIL spokesperson defended by saying that “Changes in accounts are for valid and justifiable reasons.” We now look at the five contentious accounting changes made by SAIL:

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