CAG warns Rajasthan against borrowings for investments, says delayed projects lead to cost overruns
The Comptroller and Auditor General of India (CAG) has warned the Rajasthan government against investments using borrowed funds, saying the practice will lead to an unsustainable financial position.
The Comptroller and Auditor General of India (CAG) has warned the Rajasthan government against investments using borrowed funds, saying the practice will lead to an unsustainable financial position.
“Continued use of borrowed fund for investments which do not yield sufficient financial returns would lead to unsustainable financial position,” said the CAG report tabled in the assembly.
As on March 31, 2017, the government invested Rs about Rs 41,733 crore in 49 public sector companies, seven statutory corporations, two rural banks, 25 joint stock companies, and cooperative banks and societies. The maximum investment of Rs 40,246 crore was made in the government companies.
The CAG report on state finances states that the average return on these investments was 0.1% to 0.3% during 2012-17, while the government paid an average interest of 6.7% to 7.6% on its borrowings. “Therefore, return on investment of the state government is very low.”
The net investment in government companies, rural banks, and cooperative banks and societies was Rs 4,316 crore during 2016-17. The total investment in two statutory companies, 18 government companies, and six joint stock companies amounted to about Rs 1,04,158 crore, out of which accumulated losses of five power companies was Rs 98,935 crore, the report states.
“In view of the huge losses of some of the state-owned public sector undertakings, the government may consider reviewing their working so as to reduce losses and take adequate steps to strengthen the undertakings.”
CAG has also pointed out that when it comes to loans and advances to institutions and organisations, the state has been borrowing at a higher rate while earning interest at much lower rate on its lending.
The top auditor has also criticised the government over incomplete projects leading to cost overruns.
“As per the information furnished by the state government, there were 197 incomplete projects (more than Rs 10 crore each) as on March 31, 2017, on which an amount of Rs 17,668 crore was spent. Of these, 42 projects (Rs 4,830 crore) were incomplete for the past five to 23 years, out of which cost of 28 incomplete projects increased by 150%,” states the report.
“Due to non-completion of projects within the stipulated time, the expected benefits to society were delayed and the cost also increased over the years.”