CAG flags lack of transparency in food subsidy for FY17 and FY18

The Comptroller and Auditor General of India (CAG) has flagged the use of extra budgetary resources for payment of food subsidy in a report tabled in Parliament on Monday for the financial year 2017-18 (FY18) and FY19.

Experts said making the books of the Food Corporation of India (FCI) public in the Budget for FY22 would go a long way in plugging this loophole. The CAG report said the government undertook funding of revenue and capital expenditure using extra budgetary resources in both the years.

Referring to food subsidy, it said there was a carryover liability of Rs 81,303 crore of unpaid food subsidy during FY18 and then there was fresh subsidy claim of Rs 1.16 trillion, resulting in a total pending liability for food subsidy of Rs 1.97 trillion. Against this, the government released only Rs 61,982 crore to the FCI, leaving a pending liability of Rs 1.35 trillion at the end of FY18.

It was noted that the budgeted provision of Rs 1.45 trillion for FY18 for meeting food subsidy expenses was not fully utilised and there were savings of Rs 48,228 crore at the year-end. These savings were due to a provision of a Rs 42,919 crore loan from the National Small Saving Fund (NSSF) to FCI instead of payment of food subsidy using the budgeted funds.

In the next year, FY19, along with a carry forward liability of Rs 1.35 trillion from the previous years, there was additional liability towards food subsidy of Rs 1.2 trillion for FY19. However, despite a budgetary provision of Rs 1.69 trillion for food subsidy in the BE of FY19, only Rs 70,098 crore was released from the Budget to partly clear carryover liability of previous years.

Payment amounting to Rs 70,000 crore already released to FCI towards food subsidy was found to have been reversed and replaced by a loan from NSSF, leaving the existing Budget provision unutilised to this extent.

This was done primarily as a measure of compressing revenue expenditure to contain the revenue deficit. As a result, the total carried forward liability on account of subsidy arrears rose to Rs 1.85 trillion at the end of FY19.

“Thus, by not discharging liabilities in full from budgetary sources towards food subsidy on account of PDS operations, revenue expenditure, RD (revenue deficit) and FD (fiscal deficit) at the end of FY18 and FY19 were understated,” it said. Aditi Nayar, chief economist of ICRA, said greater disclosures related to the NSSF will boost transparency and aid the analysis of the government’s fiscal position.

The CAG said despite NSSF loan to the FCI, there was variance between Budget Estimates of fiscal deficit, revenue deficit and effective revenue deficit and actual numbers. The same happened in the following year, it said.