CAG report sets off alarm bells on state’s finances | mumbai | Hindustan Times
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CAG report sets off alarm bells on state’s finances

mumbai Updated: Apr 22, 2011 01:43 IST
Dharmendra Jore

The Comptroller and Auditor General (CAG) of India expressed grave concerns over the state government’s financial management. It wants the state to work out a revival policy to ensure better value for investments or else suffer the risk of non-sustainability of rising debts.

The observations were made in CAG’s report for 2009-2010 that was tabled on the last day of the budget session of the state legislature on Thursday.

According to the report, the high cost borrowed funds would continue to be invested in projects with low financial returns. It also said that the interest payments increased by 51% since 2005 primarily due to increase in debt liabilities.

Also, the ratio of salary expenditure to revenue expenditure net of interest payments and pensions was 48% during 2009-10, which was much higher than the national norms. The expenditure on pension payments increased at an average annual growth rate of 21% in the past four years.

As projected in the state’s economic survey last month, the state will spend 70% of its income on establishment and repayment of debt leaving a mere 30% for planned development. As per the budget estimates, the state debt is expected to be Rs2,26,926 crore this year (Rs2,09,648 crore as per the economic survey).

According to findings, the negative resource gap (between the income and expenditure) in two consecutive years created a risk of non-sustainability of debt.

To overcome the debt trap, the CAG recommended reduction in unproductive expenditure and to phase implicit subsidies out and contain the growth of revenue receipts. “The government should expand the tax base and rationalise user charges to mobilise additional resources and improve the tax administration in order to reduce revenue arrears.”

The CAG slammed the government for slow pace of programme management because it increased expenditure by Rs2,389 crore. “Rush of expenditure at the end of the year is another chronic feature. The unspent money or anticipated savings were surrendered on the last two days of the year, leaving no scope for utilising these funds for other developmental purposes.”

The report also criticised lack of monitoring and misappropriation of funds.

The report on revenue receipts said the transport department alone caused a loss of about Rs300 crore. It said 13 transport offices did not audit their accounts properly. Avoidable revenue losses of more than Rs40 crore incurred by other departments are mentioned.