CAG raps Andhra Pradesh government over off-budget borrowings

In reply, the government said that the economy of the State suffered structural deficit on account of unjust, unfair and unscientific state bifurcation.

Published: 25th March 2023 09:51 AM  |   Last Updated: 25th March 2023 09:51 AM   |  A+A-

A photo of Andhra Pradesh Chief Minister YS Jagan Mohan Reddy used for representative purposes only. (File Photo)

By Express News Service

VIJAYAWADA: The Comptroller and Auditor General (CAG) found fault with the State government for not disclosing off-budget borrowings and committed liability of pending payments in the Budget documents, which has the impact of diluting public financial management and placing major sources of funding of government’s crucial infra projects beyond the control of Legislature.

The CAG report for 2021-2022 was tabled in State Assembly on Friday, which said that the total outstanding liabilities of the State to GSDP was within the target of 35.60 per cent. However, after considering the off-budget borrowings, the liabilities of the State will be 40.85 per cent of GSDP, which is more than the target under the APFRBM Act.

“The government has a liability for off-budget borrowings of Rs 1,18,394 cr and committed liability on account of pending payments of Rs 17,804.20 cr to DISCOMs, pending payments towards irrigation projects and water supply schemes to the end of 2021-22. The same was not disclosed.” 
When clarification was sought, the State government replied to the CAG saying that it has been following the cash accounting system, as per the prescribed rules on par with the other State governments and the Centre due to which the payable and receivable bills are not considered.

“The government stated that the pending liabilities such as subsidies payable to DISCOMs, contractor/suppliers’ bills payable and others are not included as liabilities in Finance Accounts and the same system is followed for the financial year 2022-23 and earlier as well. The reply of the government is not acceptable due to the fact that as per the APFRBM Rules, the State government should disclose liability in respect of major works and contracts, committed liabilities in respect of land acquisition charges and claims on the State Government in respect of unpaid bills on works and supplies,’’ it observed.

The CAG pointed out that borrowed funds should ideally be used to fund capital creation and developmental activities. “Using borrowed funds for meeting current expenditure and repayment of interest on outstanding debt is not sustainable. Along with the borrowings raised, the State Government has been establishing Corporations/PSUs/SPVs to raise the funds as off-budgetary borrowings from the market outside the ambit of the FRBM Act to implement the State policies/works. This further increases the interest burden of the State government,’’ it observed.

In reply, the government said that the economy of the State suffered a structural deficit on account of unjust, unfair and unscientific state bifurcation. “AP lost assets to Telangana on a geographical basis but inherited liabilities on a population basis. The state also did not have the resources to meet the servicing of liabilities. The State government has been pursuing with the Government of India regarding the fulfilment of assurances given at the time of bifurcation such as an award of Special Category Status, Revenue Deficit Grant for 2014-15, etc. In this scenario, it would be inevitable that a part of borrowed funds would be used for meeting the debt servicing obligations,’’ the government said. AP’s outstanding public debt has hiked by 6.97 per cent amounting to Rs 24,257 crore at the end of the 2021-22 financial year over the previous year, CAG in its State Finance Audit Report said.

The public debt (internal debt and loans and advances from the Government of India) of the composite State of AP was Rs 1,66,522 crore as of June 1, 2014. Post bifurcation, with effect from June 2, 2014, the residual State of AP was allocated a debt of Rs 97,124 crore on a population basis. The public debt stood at Rs 3,04,040 crore as of the end of March 2022 (an increase of 213 per cent over that of 2014-15), the report said. When it comes to finances, the CAG maintained that the State witnessed an increase of 28.53 per cent in revenue receipts during the year 2021-22 as compared to the previous year mainly due to an increase in transfers from the Government of India by 22.90 per cent.

“State Government receipts were overstated to an extent of  Rs 319.02 crore. The State received compensation of Rs 6,389 crore towards revenue loss due to GST implementation, partly as grants (Rs 3,117 crore) and partly as back-to-back loans (Rs 3,272 crore) from the Centre. The debt servicing of this loan would be done from the State Finances Audit Report for the year ended 31 March 2022.’’  

“During 2021-22 as against total expenditure of Rs 1,77,674 crore, the capital expenditure of the State was Rs 16,373 crore, which constituted 9.21 per cent. However, when compared to 2020-21, the capital expenditure decreased by 14 per cent i.e. Rs 2,602 crore during 2021-22. Thus, increasing levels of revenue expenditure coupled with a low level of capital formation will have an impact on infrastructure development, industrial development, aggregate demand, employment generation, revenue generation etc, of the State in the long run.’’

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