The Comptroller and Auditor General of India has expressed concern over the off budget borrowings (OBBs) of the State government yet again.
The constitutional audit institution said that the State was liable to pay principal and interest on account of OBBs to an extent of ₹1.18 lakh crore in addition to its total liabilities of ₹3.14 lakh crore at the end of financial year 2021-22. Taking into consideration the OBBs and other liabilities that are being serviced out of the State budget, the ratio of debt to GSDP would be 37.77 % which was 12.77 % higher than the 25 % target set in the TSFRBM Act.
This was also 8.47 % above the norms of 29.3 % prescribed by the XV Finance Commission. The CAG, in its audit report of State finances 2021-22, said though the State government was disclosing the quantum of guarantees given to institutions in the budget documents to a certain extent, it did not disclose its OBBs of ₹1.18 lakh crore to be serviced from out of its resources. This would impact the debt to GSDP ratio.
Major portion of the OBBs (₹66,854 crore) belonged to the Kaleshwaram Irrigation Project Corporation Limited (KIPCL). The maximum repayment spread period of OBBs was 14 years and future liability on Kaleshwaram project towards debt servicing worked out to ₹1.41 lakh crore over the next 10 years.
In view of the confirmation of KIPCL that it had borrowed on behalf of the State government and as the detailed project report did not envisage any revenue streams, it was likely that the onus of servicing these huge liabilities would have to be borne by the State government. “This will constitute a huge burden on State finances constraining them severely and the capacity of the State to have any developmental plans in near future,” the CAG said.
State to finance Revenue Deficit through market borrowings
The CAG said as the State had a revenue deficit, it had to finance it from the market borrowings. The State government would have to repay ₹2.52 lakh crore as principal and interest on the market borrowings by 2032-33 and this would put significant pressure on the Government finances. The CAG took exceptions to the non-tax revenue and the grants-in-aid components claiming that they were projected abnormally. “Consequently, budget estimates for expenditure were also overstated resulting in unspent provisions across several grants.”
The State Legislature approved budget estimates of ₹2.3 lakh crore originally and supplemented by ₹24,144 crore. The expenditure was ₹2.63 lakh crore resulting in net excess expenditure of ₹8,076 crore. Excluding the amount of ways and means advances which were taken for temporarily bridging the gap in finances, the expenditure was ₹1.95 lakh crore, only 77% of the budget estimates.
