Financial Daily from THE HINDU group of publications
Monday, Apr 01, 2002
Industry & Economy
CAG raps Govt for poor fiscal management
HYDERABAD, March 31
THE Comptroller and Auditor-General of India has found several lapses in the Andhra Pradesh Government's fiscal management approach.
In its review for 2000-2001 and over a five-year time frame, the CAG faulted the State for its financial condition which had significantly declined during 2000-2001 due to extraordinary increase in revenue deficit despite increase in revenue receipts including the State's share of Union taxes and duties.
Due to poor ways and means position, the State Government had to resort to frequent and high volume of ways and means advances and overdraft almost throughout the year.
The debt-GSDP (gross State domestic product) ratio had also increased substantially over the years leading to increased pressure on the State's finances due to repayment and interest liability. As borrowed funds had to be sent largely for meeting revenue expenditure, the scope for capital expenditure was reduced and its share in total expenditure amounted to only eight per cent during the year, the CAG noted.
In its report for the year ended March 31 2001, CAG observed there was serious distortion in accounts due to misclassification of the grants in aid to local bodies and part of the subsidiaries to the energy sector.
Further, the sustainability, flexibility and vulnerability of the Government with regard to its financial health as assessed with reference to certain ratios during the five-year period 1996-97 to 2000-2001 indicated that the financial condition declined despite higher allocation to the State. It was clear that the Government needed to control its mounting revenue deficit and its dependence on borrowings to improve its financial condition, the CAG opined and noted that there was extraordinary increase in revenue deficit during the year which shot up by 236 per cent, from Rs 1,233 crore in 1999-2000 to Rs 4,149 crore in 2000-2001.
The fiscal deficit too increased significantly from Rs 4,976 crore in 1999-2000 to Rs 7,306 crore in 2000-2001. This was despite increase in Government of India transfers by Rs 826 crore during the year.
There was significant increase in the total liabilities of the Government during the last five years. The CAG noted that these had grown by 101 per cent on account of 161 per cent growth in internal debt, 57 per cent growth in loans and advances from the Centre and 134 per cent growth in other liabilities.
While the Government was raising high cost borrowings at 11 to 14 per cent from the market, its investments in Government companies fetched insignificant returns of less than one per cent during 1996-2001.
The accounts of 45 out of 50 companies and corporations in which the Government invested Rs 3,501 crore, were in arrears up to 17 years in some cases.
The revenue expenditure of Rs 23,624 crore during the year 2000-2001 exceeded the revenue receipts of Rs 19,475 crore resulting in a revenue deficit of Rs 4,149 crore. This was more than three times of the deficit in the previous year.
The net effect of the transactions in the Consolidated Fund and Public Account was a decrease of Rs 194 crore in the cash balance at the end of the year. The poor allocation to capital expenditure has been brought out in the CAG analysis. While the main sources of funds included revenue receipts of Rs 19,475 crore, recoveries of loans and advances of Rs 402 crore, public debt was Rs 4,324 crore, the net receipts in the public account was Rs 2,780 crore.
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