Right ahead of GST, Gujarat's revenue growth in slow lane

CAG's audited report also finds GSPC's Rs 478.98 cr cost on KG-21 well remaining idle

Right ahead of moving to GST, the Comptroller and Auditor General of India (CAG) report tabled in the Gujarat Assembly today showed that the state's revenue surplus has shrunk significantly. Add to that, the growth in revenue receipts in Gujarat during FY16 over FY15 was 5.99%, much below the average of 18 General Category States (GCS) at 15%. 

The CAG report showed that the revenue surplus of Rs 3,215 crore in 2011-12 reduced to a revenue surplus of Rs 1,704 crore in 2015-16. However, the decrease in revenue surplus during the current year was on account of increase of only Rs 5,505 crore (6%) in revenue receipts against an increase of Rs 9,217 crore (10.53%) in revenue expenditure over the previous year. 

The fiscal deficit increased from Rs 11,027 crore in 2011-12 to Rs 23,015 crore in 2015-16. During 2015-16, the fiscal deficit was mainly met from net market borrowings of Rs 14,565 crore. 

At the end of 2015-16, the fiscal deficit as a percentage of GSDP was 2.34%, which was within the limit of 3%. The state's total outstanding debt as percentage of GSDP was 22.45% in FY16, which was within the target of 25.91% fixed by the Fourteenth Finance Commission (FFC). 

CAG recommended that the state government may explore mobilising additional resources through tax and non-tax sources by ensuring better tax compliance and rationalising the user charges etc respectively. 

Revenue expenditure continuously increased from Rs 59,744 crore in 2011-12 to Rs 95,779 crore in 2015-16. CAG said that the revenue expenditure grew at higher rate than that of revenue receipts from 2013-14 to 2015-16. 

During 2015-16, the state government invested Rs 387 crore in statutory corporations, Rs 7400 crore in government companies and Rs 14 crore in co-operative institutions. The average return on investment was 0.25% in the last five years, while the government paid an average 7.67% as interest on its borrowings during 2011-12 to 2015-16. 

CAG also pulled up the public sector undertakings (PSU), especially the discoms as well as Gujarat State Petroleum Corporation (GSPC) for various reasons. 

In case of Gujarat's discoms, CAG observed deficiencies by them in planning and implementation of the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) which was launched in July 2008 by the Government of India (GoI)'s Ministry of Power (MoP).  

"There was a delay in awarding tender of SCADA projects resulting in works remaining in progress till date. In the 60 Part B projects which had been completed, the discoms were able to achieve the target of reduction of aggregate technical and commercial (AT&C) losses to 15% in 39 towns. In the 21 towns, where the targeted reduction of AT&C losses could not be achieved, the losses ranged from 15.31% to 46.17% in 2015-16," the CAG report stated.

Resultantly, Gujarat's state discoms could have saved Rs 60.71 crore in 2015-16 by containing AT&C losses in these 21 towns, the CAG observed.  Discoms were also pulled up for additional expenditure of Rs 3.39 crore and favouring ineligible bidders with contracts valued at Rs 61.41 crore by non-adherence to certain provisions of purchase policies and tender conditions.

After its debt accumulation that came to fore last year after the CAG report, GSPC was yet again pulled up this year for expenditure of Rs 478.98 crore on KG-21 well drilled outside the template remaining idle. As per the CAG report, GSPC also incurred an additional expenditure of Rs 34.37 crore to remove the unaligned KG-21 conductor. The state auditor was of the view that while GSPC maintained zero visibility and diver error contributing to the well being drilled outside the template, CAG did not find the reply convincing as exploration objectives were fully met only when the gas discovered in a well at the exploration stage was developed for commercial extraction.

"The company found gas reserves in the KG-21 well in exploration stage but may not be able to develop the same for commercial purpose. This was due to the well being drilled outside the template and re-entry being difficult. As the KG-21 well could not be developed at present due to operational errors as conceded by the management, the exploration cost of Rs 478.98 crore incurred on the same remained idle," the CAG observed.