Rise in fiscal deficit by GSDP ratio affects debt sustainance: CAG

Hyderabad, Mar 27 (UNI) The Comptroller and Auditor General of India, in its report tabled in the State Assembly, has observed that fiscal liabilities and its ratio to Gross State Domestic Product had been steadily rising, thus ''endangering the debt sustainability.'' While noting improvement in mobilisation of State's resources, the CAG said the Government succeeded in reducing revenue deficit despite decrease in grants-in-aid from the Union Government, because of considerable improvement in mobilisation of own resources.

However, fiscal deficit (Rs 8192 crore) recorded an increase of Rs 742 crore over the previous year, mainly due to increased expenditure on irrigation and flood control.

In Andhra Pradesh, weighted interest rate was more than the Gross State Domestic product(GSDP) growth rate resulting in negative interest spread in four out five years between 2000-01 to 2004-05, the CAG noted, adding that ''this negative spread of interest may affect debt sustainability.''

While liabilities increased by 16 per cent, the assets increased by 18 per cent over the previous year. Noting that after many years, the state government did not have to resort to overdraft facility for the first time during the current year, the CAG said this showed ''better management of cash balances. Nevertheless, subsidies, borrowing and interest payments were on increase.'' ''The higher buoyancy to debt with regard to revenue receipt, indicates decreased sustainability. Despite, improvement in the ratio of assets to liabilities, 32 per cent of liabilities has no asset back-up,'' the CAG said.

Overall fiscal liabilities of the state increased from Rs 40,602 crore at the end of 2000-01 to Rs 74,288 crore at the end of 2004-05 and also increase in the ratio fiscal liabilities to GSDP from 29 per cent in 2000-01 to 37 per cent in 2004-05. These liabilities stood at 2.6 times the revenue receipt and 3.7 times of state's own resources at the end of 2004-05, the report said, adding that the fiscal liabilities had grown faster than the State's GSDP, revenue receipts and own resources. The buyoyancy of these liabilities with respect to GSDP during the year was 1.495, indicating that for each one per cent increase in GSDP, fiscal liabilities grew by 1.50 per cent.

While Eleventh Finance Commission had recommended that as a medium term objective, states should endeavour to keep interest payment as a ratio to revenue receipts, at 18 per cent, the CAG observed that the interest payments, were between 20 and 26 per cent of revenue receipts. The payments increased steadily by 87 per cent during 2000-05, primarily due to increasing borrowings.

''The interest payment during 2004-05 comrpised payment on internal debt(Rs 4500 crore), loans received from the Centre (Rs 2176 crore) Small savings, provident funds etc (Rs 414 crore and Reserve fund (Rs one crore).

Referring to diversion of Central funds, the CAG said a test check of 12 offices under four departments revealed that Rs 137.12 lakh remained unutilised under the Operation Black Board (old) scheme (closed with effect from March 31, 2001) and were deposited in Bank (Rs 124.62 lakh) and post office (Rs 12.50 lakh), while Rs 517.98 lakh was incorrectly remitted to the State Government account.

A sum of Rs 1577.19 lakh diverted to State schemes between 2001-05 were not recouped to central scheme(s) as of July 2005.

The CAG noted that expenditure on salaries during 2004-05 was around 32 per cent of revenue receipts and it ranged between 4.6 per cent and 5.6 per cent of GSDP during the period from 2000-01 to 2004-05.

Referring to huge expenditure on pension payments, the report said the sharp increase in the payments during the current year was mainly due to release of withheld dearness relief (five instalments) and revision of pension/family pension to retired employees from July 1996. With the increase in number of pensioners, the pension liabilities were likely to increase further in future.

Though the finances of the State Government were under strain, the Government had been paying subsidies for food and energy sectors.

During the current year, subsidies constituted about seven per cent of the total expenditure and 75 per cent of the subsidy was to the State Transmission Corporation. ''The increase in subsidy is mainly attributable to free power provided to agricultural consumers.'' Pointing to incorrect classification of expenditure, the CAG said the Government booked Rs 493.86 crore being grants-in-aid to local bodies and Rs 335.62 crore being contribution to Central Road fund (Rs 74.70 crore) under captial section, despite misclassification pointed out in earlier audit reports.

''The incorrect classification increased the capital outlay and reduced the revenue expenditure as well as revenue deficit in the finance accounts by Rs 829.48 crore.'' Out of 585 cases of misappropiration amouting to Rs 3546.13 crore reported by the State Government upto March 2005, 100 cases amounting to Rs 167.85 crore were disposed of and 485 cases amounting to Rs 3378.28 crore were outstanding at the end of June 2005. Of these, 454 cases involving Rs 860.78 crore related to 2000-01 period and earlier years, the report added.

UNI