‘If OBB is considered then outstanding liabilities will exceed XV FC limit’
‘If OBB is considered then outstanding liabilities will exceed XV FC limit’
The Comptroller and Auditor General of India has expressed concern over off-budget borrowings (OBBs) of the state government, claiming that the percentage of outstanding liabilities would exceed the limit if considered.
In its State Finance Audit Report for the year ended March 31, 2021, the CAG noted that although the percentage of total outstanding liabilities to GSDP at 28.11 per cent was within the limit of 29.5 per cent prescribed by the XV Finance Commission for 202-21 , if the OBB of ₹ 97,940.45 crore is considered, it will exceed the limit of 38.1 per cent. The non-disclosure of the OBB had the dual effect of undermining public financial management and legislative oversight and was in contravention of the XV Finance Commission’s recommendations.
The CAG noted that the government resorted to long maturity borrowings as 58.98 per cent of its market borrowings during the year were with maturity of 20 to 30 years. However, there was no evidence on record to show that the government has conducted any financial impact study for longer maturity borrowings with similar interest rates. The CAG observed that the state government was not fully disclosing all the guarantees given to various institutions.
The Government also did not ensure the financial performance and accountability of the institutions before providing the guarantees. Since the state recorded a revenue deficit, market borrowing was to be used to finance the revenue deficit and fiscal deficit. There has been a significant increase in the utilization of tools and advances in the year 2020-21 due to the COVID-19 pandemic.
On the impact of the COVID-19 pandemic, the CAG said that the economic slowdown coupled with the pandemic had a dual effect of reduction in revenue receipts and increase in revenue expenditure, especially in the initial months of the financial year as compared to the previous year. The state had to depend significantly on resources and advances.
The state has registered the lowest growth rate in the last five years during 2020-21 in view of the COVID-19 pandemic. As a result, the state was not able to achieve any of the three major fiscal targets for the year – maintenance of revenue surplus, fiscal deficit target to GSDP and total outstanding liabilities to GSDP.
However, it is heartening to note that Telangana may register a positive growth rate of 2.42 per cent during the year as against the negative growth rate of 2.97 per cent at the national level.
The CAG also pointed out the persistent tendency to spend without budget provision (₹1,247 crore) as well as expenditure in excess of the above provision (₹81,154.54 crore) in contravention of constitutional provisions. “Such additional expenditure of ₹1.32 lakh crore from 2014-15 to 2019-20 was yet to be regularised,” the CAG said.