Fayaz Bukhari
Srinagar July 4: The fiscal liabilities of State Government are accumulating alarmingly and have gone up to Rs 48, 314 crore, an increase by Rs 17, 042 crores in last 5 years, despite the 13th Finance Commission calling for its reduction and at the same time the State’s revenue collection is decreasing putting the State at the risk of falling into a debt trap.
The Comptroller and Audit General (CAG) report tabled in both Houses of State Legislature last week depicts grim picture of State’s financial health as the State’s debt is increasing every year due to financial mismanagement.
The CAG has found that on one hand there is increasing trends of the State liabilities and on the other there is decreasing trend of State’s revenues (Tax Revenues and Non-Tax Revenues). This has put a question mark on the fiscal sustainability of the State and could lead to State falling into a debt trap, a position where the State is forced to borrow more to meet its debt repayment and interest payment obligations.
The report revealed that the fiscal liability of the State was Rs 31, 272 crore in 2010-11, Rs 36, 267 crore in 2011-12, Rs 40, 265 crore in 2012-13, Rs 44, 673 crore in 2013-14 and it is Rs 48, 314 crore in 2014-15.
The CAG has found that the tax and non-tax revenues of the State have declined from Rs 9,143 crore in 2013-14 to Rs 8,312 in 2014-15, a decrease of about 10 per cent.
The report has found alarming increase in the trend of the liabilities and public debt, including the interest payment on them, which has increased over the years. “Out of the total liabilities which increased from Rs 31,272 crore in 2010-11 to Rs 48,314 crore in 2014-15, public debt increased from Rs 19,867 crore in 2010-11 to Rs 28,200 crore in 2014-15, an increase of 42 per cent. The market loans increased from Rs 11,298 crore in 2010-11 to Rs 18,321 crore in 2014-15, an increase of about 62 per cent over the years”, reads the report.
The 13th Finance Commission (2010-2015) had provided a road map for the State Government to reduce the liabilities but due to financial mismanagement it has not been followed and the liabilities have instead gone up.
Based on the roadmap recommended by the Commission, the State incorporated the target of liabilities/debt management in the State’s FRBM Act through an amendment (Act No. XVIII of 2011), which stipulated to reduce outstanding debt as a percentage of Gross State Domestic Product (GSDP ) to 56.1 per cent, 55.1 per cent, 53.6 per cent and 51.6 per cent for 2010-11, 2011-12, 2012-13 and 2013-14 respectively to reach the target of 49.3 per cent in 2014-15.
Against the Finance Commission set target of 49.3 per cent liability of the GSDP, the total debt/liability of the State in 2014-15 has gone upto 54.95 per cent of the GSDP with total liability of the Government in 2014-15 at Rs 48,314 crore against the GSDP of Rs 87,921 crore in 2014-15.
“Of these liabilities, the borrowings from the open market and loan from the financial institutions like NABARD, LIC, REC was Rs 26,525 crore, which is 55 per cent of the total liability. The public account liability on account of employee’s provident fund, insurance, other committed funds liabilities of the State, was Rs 20,114 crore which is 42 per cent of the total liability and the loans and advances from the Government of India was Rs 1,675 crore, 3 per cent of the total liabilities”, the report said.
It added that in 2014-15, the Government paid Rs 8,323 crore on payment of public debt and Rs 226 crore on Ways and Means Advances (WMA) and Overdraft (OD) of the RBI and Rs 3,533 crore on interest payment, including Rs 1,574 crore on market loans alone.
“Since the market loans are not administered and not controlled and may go up if the market perceives that the debt of the State is unsustainable, the Government needs to pay special attention to manage the market loans”, the CAG recommended.
The report said that the increasing trend of liabilities and debts of the Government has its increasing impact on loan repayment and payment of interests. It has recommended that the Government must work to restrict its debt/liabilities, repayment of debts and interest payment on it to a sustainable /manageable level for its fiscal sustainability.
The report said that the alarming trends of increase in liabilities, debt and interest payment should be viewed in the overall context of the fiscal sustainability of the State, as it is largely dependent upon the central resources in the form of share in the tax pool and special grants of the Finance Commissions, the central devolution for the Centrally Sponsored Schemes, and the loan and advances of the Centre (10 per cent loan and 90 per cent grants) as per its Special Category status.
The CAG recommended that the Government may consider to prepare a time bound action plan to achieve the goal of recovery of at least 50 per cent of service charges from users as recommended by the 13th Finance Commission and to analyze the reasons for delays in completion of projects and take adequate steps for their completion to achieve the intended benefits.
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