Taking loan to pay back loan, Punjab headed for debt trap: CAG
Despite the tall claims made by the SAD-BJP government, the principal accountant general presented an abysmal picture of Punjab finances while issuing a loud and clear warning — the state is headed for a major debt trap as half of the financial liability of whopping Rs 1.12-lakh crore has to be paid back in the next seven years.punjab Updated: Mar 15, 2016 17:32 IST
Despite the tall claims made by the SAD-BJP government, the principal accountant general presented an abysmal picture of Punjab finances while issuing a loud and clear warning — the state is headed for a major debt trap as half of the financial liability of whopping Rs 1.12-lakh crore has to be paid back in the next seven years.
Releasing three of the four reports of the comptroller and auditor general (CAG) for 2014-15, principal accountant general Jagbans Singh said Punjab’s revenue expenditure (non-productive) was on the rise while the capital expenditure (productive) had gradually declined. He said a large part of the expenditure was done on repayment and servicing the hefty loans, leaving very little money with the state to spend on development activities.
Other than the state of the finances, the reports released on Monday also pointed out several instances of misappropriation of funds worth crores of rupees, besides highlighting the failing fiscal health of the public sector units.
The revenue receipts grew at an annual average rate of 8.27% during 2010-11 to 2014-15, whereas revenue expenditure grew at an annual average rate of 8.34%. The revenue expenditure (non-productive) continued to constitute a dominant portion (93 to 95%) of the total expenditure during this period. The increase in revenue receipts in 2014-15 (Rs 4,000 crore) was also mainly due to increase in grants from government of India.
The revenue expenditure (non-productive) increased by Rs 5,000 crore, whereas capital expenditure (productive) increased by Rs 900 crore. The capital expenditure, however, was only 33% of the projections made in the fiscal consolidation roadmap.
The revenue deficit rose to Rs 7,600 crore from a deficit of Rs 5,300 crore in 2010-11. The government did not contain the revenue deficit within limit of ‘zero per cent’ prescribed in the fiscal consolidation roadmap.
The public debt increased to Rs 1.12-lakh crore from Rs 75,000 crore in 2010-11. A major portion of borrowings was utilised for repayment of earlier borrowings (47 to 70%) and revenue expenditure (20 to 39%). Only 8 to 19% of the borrowings were utilised for capital expenditure during 2010-15.
“If this practice continues, Punjab would not be able to generate additional revenue to service its debt and it would have no option but to raise new borrowings every year to repay the borrowings of earlier years,” states the report.
Government has to repay 11% of its debt between 1-3 years, 20% between 3-5 years and 19% between 5-7 years. It signifies that state has to repay more than 50% of its debt in the next seven years. “This is an alarming position and the state is heading towards a serious debt repayment position, which is termed as debt trap,” warns the report.
Though the debt-GSDP (gross state domestic product) ratio at 32% was within the target fixed (38.7%) under the Fiscal Responsibility and Budget Management Act, yet the borrowed funds were mostly used for redemption of past debts. As much as 23% of the revenue receipts were used to service the debts during the current year.
Accounts of state power utilities window dressed
The Punjab government has been indulging in some serious bluffing while glossing over the accounts of the power utilities and grain procurement agencies.
The CAG report placed in the assembly on Monday evening has revealed that while accounts of the part of the performance and transaction audit of the Punjab State Power Corporation Limited (PSPCL) and Punjab State Transmission Corporation Limited (PSTCL) were “refurbished” to look better, the state procurement agencies inflated their outstanding arrears by several hundred crores. The CAG also found a major mismatch between the cash credit limit (CCL) sought by the government when compared to the stock of grain held by the state procurement agencies.
While unbundling the Punjab State Electricity Board, Punjab had placed a financial burden of Rs 25,000 crore on the two new corporations–PSPCL and PSTCL--by passing unfunded liabilities on to them. Interestingly, the state government sought to “refurbish their balance sheets” by inflating its equity capital in the two entities by Rs 3,700 crore by reflecting consumer contributions and grants and subsidies as equity capital and including re-valued land assets of Rs 4,900 crore whose ownership was not vested in the two successor entities.
The CAG report said the state procurement agencies (SPAs) showed Rs 16,350 crore as recoverable, of which Rs 11,400 crore had been qualified as doubtful. Moreover, there was a mismatch of Rs 21,000 crore between the outstanding CC limit and stock of foodgrains held by these agencies.
Test check of the records of 281 offices of sales tax/value added tax, state excise, motor vehicles, goods and passengers, forest receipts and other departmental offices conducted by the CAG showed under assessment/short levy/loss of revenue aggregating Rs 2,500 crore in over 35,000 cases. The departments managed to recover only Rs 18.26 crore.