THIRUVANANTHAPURAM: The Comptroller and Auditor General (CAG) has once again criticised the Kerala Infrastructure Investment Fund Board (KIIFB). The CAG report on state finances for 2020 tabled in the assembly on Thursday observed that the off-budget borrowings by the KIIFB and the Kerala Social Security Pension Limited (KSSPL) bypass the net borrowing ceiling (NBC) of the state. Borrowings by both the entities are liabilities of the government and hence be included in the annual budget and accounts.
KSSPL is a wholly government-owned company constituted as an SPV for disbursement of various social security pensions. Besides, funds from the central and state governments, the company collects deposits and loans from PSUs and other institutions for making the payments.
Details of borrowings not reflected in budget accounts, says CAG report
“These off-budget borrowings are not taken into the disclosure statement in the budget documents or in the accounts, nor do they have legislative approval. They are used to finance government expenditure, the details of which are not reflected in the budget or finance accounts,” the report reads. It further said the government should include offbudget borrowings in the budget and accounts.
The report said the borrowings of these concerns were ultimately the liabilities of the state government. The offbudget borrowings bypass the NBC by routing loans outside the state budget through government owned or controlled companies/ statutory bodies despite being responsible for repayment of such loans. “Such borrowings have an impact on the revenue and fiscal deficits and thus, have the effect of surpassing the targets set for fiscal indicators under The Kerala Fiscal Responsibility Act, 2003.
Creating such liabilities without disclosing them in the budget raises questions both of transparency and of inter-generational equity,” the report said. The CAG observed that all government borrowings and expenditure should legitimately be covered within the respective budgets. Expenditure on social security pension schemes and critical infrastructure projects in the state are desirable.
However, financing expenditures through off-budget borrowings raises public debt and detracts from compliance with the letter and spirit of the provisions of the KFR Act. Outstanding extra budgetary liabilities need to be clearly identified with transparent reporting of deficit and debt as provided in the Act, the report said. The report rejected the state government’s argument that the borrowings of KIIFB are not off-budget borrowings.
Every year, the state government sets apart petroleum cess and a share of the motor vehicle tax to KIIFB through regular budget provision under capital account. The CAG observed that KIIFB has no revenue of its own and the state government has to defray KIIFB’s debt obligations by its own revenue resources under the KIIF Act, 1999.
“Merely because these repayment obligations are provided in the Act does not detract from the fact that KIIFB’s liabilities are a direct charge on the government’s revenue resources and are thus direct liability of the government,” said the CAG report. In 2019-20, the borrowings by KIIFB and KSSPL were Rs 1,930 crore and Rs 6,843.65 crore respectively.