Rs 23,911 Cr PSU off-budget borrowings bypassed Consolidated Fund: CAG

Jammu, Mar 31: J&K government through Public Sector Undertakings (PSUs) raised Rs 23,911.53 crore as off-budget borrowings, which did not flow into the Consolidated Fund of UT.

“But they are required to be repaid and serviced through the budget,” revealed the Report of the Comptroller and Auditor General of India on the J&K Union Territory finances for the year 2022-23.

The report, providing an overview of the finances, budgetary management and quality of accounts, financial reporting practices and other matters relevant to the UT’s finances, highlighted that the Government of Jammu and Kashmir had not fixed any targets of fiscal indicators in the medium-term fiscal policy statement.

In 2022-23, as per the statistics, the UT had a revenue surplus of Rs 5,976.61 crore which comprised 2.62 percent of GSDP; the fiscal deficit was 2.13 percent of GSDP and the ratio of Public Liability to GSDP was 12.26 percent. Further, if the quantum of off-budget borrowings is included as part of debt, the overall public liability (includes Public Debt and Public Account Liabilities) of the Government was 22.75 percent of the GSDP.

As per the debt stabilisation analysis, the public debt of the Government of Jammu and Kashmir increased by 120 percent from Rs 10,567.85 crore in 2020-21 to Rs 23,240.11 crore in 2022-23.

“Public debt-GSDP ratio of Jammu and Kashmir has increased from 6.30 percent in 2020-21 to 10.20 percent in 2022-23 which cannot be considered as leading to stability. Ratio of interest payments on public debt to revenue receipts showed an increasing trend, from 8.16 percent in 2020-21 to 9.08 percent in 2022-23 which is indicative of decreased debt sustainability,” it was pointed out.

During 2020-21 and 2021-22, J&K, as per the statistics, had a primary deficit, which later turned to primary surplus in 2022-23.

“The Domar gap (g-r) remained negative during 2020-21, which turned positive3 in 2021-22 and 2022-23. Even though both the primary balance and Domar Gap remained positive in 2022-23, the same is not adequate to keep pace with the increase in outstanding debt in tandem with the increase in economic growth,” it was highlighted. This led to an increase in Public Debt to GSDP ratio in 2022-23.

The Comptroller and Auditor General report also flagged misclassification in accounts.

It was noticed that Rs 219.13 crore of Revenue expenditure which included Grants-in-aid of Rs 191.10 crore and subsidy of Rs 28.03 crore was booked under the wrong head of account as capital expenditure.

Pointing towards another grey area of receipt-expenditure mismatch, it was maintained that the continuous incongruity between receipts and expenditure indicated rising fiscal stress.

J&K has different sources of receipts such as Own Tax Revenue, Non-tax Revenue, Grants-in-aid from the Union Government and non-debt capital receipts. The J&K government’s expenditure includes expenditure on revenue account as well as capital expenditure (assets creation, loans and advances, and investments).

From 2020-21 to 2022-23, revenue receipts of J&K grew by 31.39 percent from Rs 52,495.48 crore to Rs 68,975.95 crore. Capital receipts increased from Rs 40,635.06 crore in 2020-21 to Rs 50,200.89 crore during 2021-22, but again decreased to Rs 38,115.80 crore during 2022-23.

The share of Grants-in-aid in revenue receipts rose from 72.07 percent in 2021-22 to 74.65 percent in 2022-23, indicating increased reliance on support from the Government of India. The J&K government received Rs 6,029.68 crore as Central share for the Centrally Sponsored Schemes (CSSs) during 2022-23.

“Other transfers, grants to states and union territories with legislature amounting to Rs 45,463.25 crore were also received by the J&K government during the year from the Government of India. Revenue expenditure is incurred to maintain the current level of services and payment for past obligations. As such, it does not result in any addition to the J&K’s infrastructure and service network,” it was pointed out.

Between 2020-21 and 2022-23, revenue expenditure increased from Rs 52,633.75 crore (31.39 percent of GSDP) to Rs 62,999.34 crore (27.64 percent of GSDP). It consistently made up a significant portion (83 to 85 percent) of the total expenditure during this period.

The gap between revenue receipts and revenue expenditure resulted in a revenue deficit, it was revealed.

As against the revenue deficit of Rs 138.27 crore and Rs 30.83 crore during 2020-21 and 2021-22, there was revenue surplus of Rs 5,976.61 crore during 2022-23.

The J&K government spent Rs 10,773.78 crore only on the capital account. This was 14.59 percent of the total expenditure in the year 2022-23.

“During 2022-23 the J&K government utilised 87.52 percent of its current borrowings for repayment of borrowings (principal). Thus, the borrowed funds were being used mainly for repayment of borrowings instead of capital creation or development activities. The gap between the total expenditure and total non-debt receipts of the UT results in fiscal deficit,” it revealed.

The fiscal deficit of J&K increased from Rs 10,693.36 crire (6.38 percent of GSDP) in 2020-21 to Rs 11,150.60 crore (5.58 percent of GSDP) in 2021-22, but decreased to Rs 4,855.37 crore (2.13 percent of GSDP) in 2022-23.

Under revenue expenditure, the report mentioned that the quantum of committed expenditure constituted the largest share.

“Committed expenditure has the first charge on the resources and consists of interest payments, expenditure on salaries and wages and pensions. Committed expenditure on interest payments, salaries and pensions constituted 75-76 percent of revenue expenditure during 2020-21 (74.67 percent) and 2022-23 (75.36 percent). Committed expenditure increased by 20.80 percent from Rs 39,302.27 crore in 2020-21 to Rs 47,475.27 crore in 2022-23 {an increase of 5.50 percent over 2021-22 (Rs 2474.32 Cr)}. In addition to committed expenditure, inflexible expenditure ranged between 2.94 percent and 4.36 percent of revenue expenditure during 2020-21 to 2022-23,” it was flagged.

Inflexible expenditure increased from Rs 1,741.60 crore in 2021-22 to Rs 2,199.44 crore in 2022-23, registering an increase of 26.29 percent. Taken together, the committed and inflexible expenditure in 2022-23 was Rs 49,674.71 crore; 79 percent of the revenue expenditure.

“Upward trend on committed and inflexible expenditure leaves the government with lesser flexibility for other priority sectors and capital creation,” it reflected.