Calling for greater fiscal discipline in addressing the states funding needs,the Comptroller and Auditor General of India (CAG),has criticised the state government for raising excess market borrowings than required for financing its deficit.
During 2011-12,the government raised excess market loans than required for financing its fiscal deficit. As a result,the cash balance of the state as on March 31,2012,stood at Rs 18,632 crore,which was 24% higher than previous year, the auditor stated in its latest report tabled in the Gujarat Assembly.
The cost of holding surplus cash balances is high. Since,maintaining huge idle cash balance is not prudent cash management,appropriate steps should be taken for spending on capital projects for creation of assets, it added.
The report also pointed out that governments expenditure for 2011-12 stood over Rs 80,200 crore against the approval of Rs 85,700 crore,resulting in non-utilisation of funds of about Rs 5,500 crore.
CAG also criticised the lack of sufficient returns from borrowed funds. Continued use of borrowed funds to fund investments which do not have sufficient returns will lead to unsustainable financial position. The government may ensure proper justification for investment in high cost funds, CAG stated after it found that the state governments average return on investment made between 2007-12 was just 0.27%,while the government paid an average interest of 7.75% on its borrowings during the same period.
During this five-year period,the state governments investments increased by Rs 18,000 crore. Out of the Rs 4,600 crore invested during 2011-12,Rs 3,160 crore was invested only in the state-owned company,Sardar Sarovar Narmada Nigam Limited,which is executing the multi-purpose Narmada project.
Non-submission of utilisation certificates of Rs 9,000 crore indicated lack of proper monitoring by the departments in utilisation of grants given for specific purposes, CAG also stated.