The curious case of under-spending by UP

Tushar Chakrabarty | Updated on: Jun 29, 2022
In sectors such as water supply and sanitation, the actual expenditure was 60 per cent lower than the amount budgeted

In sectors such as water supply and sanitation, the actual expenditure was 60 per cent lower than the amount budgeted | Photo Credit: Kesavan A N@Chennai

A CAG report reveals that the State’s spending across sectors has been below the budgeted amount in the last few years

On May 26, the government of Uttar Pradesh presented its Budget for financial year 2022-23. Projecting a total expenditure of ₹5,82,956 crore (excluding debt repayment), the size of the Budget was significantly larger (28 per cent) than the Revised Estimates for 2021-22.

A few days after the presentation of the Budget, the Comptroller and Auditor General (CAG) of India released its report on the finances of the State in 2020-21. This was the year when, owing to the national lockdown and Covid-19, Central and State governments saw a decline in revenue collections and the need for increased expenditure to support the economy.

The CAG observed that the State has been under-spending across sectors. This could be due to over-estimation of expenditure and receipts at the Budget stage over the last few years.

In 2020-21, expenditure by the State (excluding any loans and advances given by it and debt repayment) was ₹3,50,780 crore, which is 26 per cent lower than the Budget Estimate.

In sectors such as water supply and sanitation, the actual expenditure was 60 per cent lower than the amount budgeted, while in agriculture and allied activities only 53 per cent of the budgeted amount was spent.

The CAG highlighted that in 12 grants, at least 50 per cent of the expenditure was incurred in March 2021, the last month of the financial year. Further, in 251 schemes across 57 departments, the State government did not incur any expenditure.

These schemes had a budget provision of at least ₹1 crore, and had cumulative allocation of ₹50,617 crore. These included schemes such as Pipe Drinking Water Scheme in Bundelkhand/Vindhyas and apportionment of pension liabilities.

However, under-utilisation of funds has been a trend in the State, not limited to the years impacted by the pandemic. Between 2015-16 and 2019-20, the actual expenditure by the State was on average 11 per cent lower than the amount budgeted to be spent.

During the same time period, the expenditure on capital outlay fell short of Budget Estimates by an average of 13 per cent while this figure was 10 per cent in the case of revenue expenditure. This is due to the fact that salaries, pension, and interest payments form a significant part of revenue expenditure and cannot be cut in a financial year.

According to the Revised Estimates of 2021-22, Uttar Pradesh is expected to spend 11 per cent less than what was budgeted. However, the State has projected a more than 25 per cent increase in its expenditure for 2022-23.

Meeting the targets set out in the Budget would involve overturning the consistent pattern of underspending that the State has witnessed over the previous few years.

One of the reasons for lower actual expenditure could be over-estimation of receipts by the State. Uttar Pradesh’s revenue receipts between 2015-16 and 2019-20 were 8 per cent lower than the budgeted figures. However, the components of the revenue receipts show some variation.

Revenue receipts

The State’s own tax revenue was 8 per cent lower on average while own non-tax revenue collected by Uttar Pradesh was 48 per cent higher than the Budget Estimate stage. Between 2015-16 and 2019-20, grants from the Central government were 39 per cent lower than the budgeted figures. This could be due to over-estimation by the State, or the Central government not releasing the grants that were budgeted.

In 2020-21, Uttar Pradesh saw a revenue deficit of ₹2,367 crore or 0.12 per cent of its GSDP, after reporting revenue surplus for 14 successive years since 2006-07. The government attributed this to the unusual economic situation created by the Covid-19 pandemic. As a measure to mitigate the impact of Covid, an ordinance was promulgated in June 2020 to raise the fiscal deficit limit from 3 per cent of GSDP to 5 per cent of GSDP for the year 2020-21.

However, as a result of the under-spending by the State, it could contain its fiscal deficit in 2020-21 at 3.2 per cent of GSDP against the available limit of 5 per cent of GSDP. The CAG pegged the State’s outstanding debt-GSDP ratio in 2020-21 at 32.8 per cent, which it said was higher than the target that Uttar Pradesh has set for itself at 32 per cent. According to the forecast provided by the State government in the 2022-23 Budget, its outstanding debt-GSDP is projected to remain above 32 per cent till 2024-25.

The CAG also analysed the functioning of 38 public sector undertakings (PSUs) in the State. Of these, 22 earned a profit of ₹700 crore, while 16 posted a loss of ₹7,411 crore in 2020-21. Note that both the number of PSUs incurring losses and the quantum of losses have decreased since 2018-19. In 2018-19, 20 PSUs had reported losses of ₹15,219 crore.

The writer is an analyst at PRS Legislative Research. Views are personal.

Published on June 28, 2022
COMMENTS
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you