The Comptroller and Auditor General of India (CAG) has criticised the Punjab government on state's debt sustainability, saying most of the borrowed funds were used for redemption of past debts while little funds were deployed on capital expenditure.
In its latest report on state finances, the auditor found major portion of borrowings was used for repayment of earlier debts.
In the report, CAG discovered that the percentage of utilisation of borrowings for repayment of earlier borrowings was increasing every year.
The percentage of utilisation of borrowings for repayment of past debts went up from 35.58 per cent in 2008-09 to 68.19 per cent in 2012-13, it said.
Punjab's total borrowings went up from Rs 6,432.25 crore in 2008-09 to a whopping Rs 22,166.50 crore in 2012-13.
In 2012-13, out of Rs 22,166.50 crore of borrowings, a sum of Rs 15,115.79 crore was found to be used on repayment of past debts (principal portion), according to the report.
Significantly, the spending on capital expenditure, which helps boosting assets creation in the state, as percentage of borrowings went down from 44.42 per cent in 2008-09 to 8.64 per cent in 2012-13.
Notably, Punjab finance minister, Parminder Singh Dhindsa during the budget session, which concluded yesterday, had blamed inflationary pressures and high interest rates on borrowings during the previous UPA government for state's mounting debts.
Punjab's outstanding debt has been projected at Rs 1,13,052.95 crore including reserve funds during 2014-15 as against revised estimates of Rs 1,01,969.92 crore for 2013-14.
Growing borrowings have been a major issue in Punjab as the SAD-BJP led state government has earned wrath from several quarters for ballooning debts.
CAG also found that the state government did not make any contribution in sinking fund during 2012-13, and as a result of that it had no option but to raise new debts every year to repay the past ones.
A sum not exceeding 1.5 per cent of total loans could be set apart from revenue each year to a Sinking Fund(Depreciation) for purchasing securities to be redeemed for payment of loans.
CAG during scrutiny of records of the Punjab finance department revealed the state government raised market borrowings of Rs 64,511.84 crore during 2008-09 to 2012-13.
However, the state government did not include any clause as to prepayment in terms and conditions of borrowings, thus the government in improved budgetary conditions would not be able to mitigate its market loan liabilities.