There has been an all-round deterioration in the financial condition of Uttar Pradesh and the state may be heading towards "fiscal stress" in the medium-to-long term, says the Comptroller and Auditor General of India.
In its report for the year ended March 31, 2008, the CAG has said the state’s financial position, viewed in terms of the key fiscal parameters of revenue surplus, fiscal deficit and primary deficit, had deteriorated in comparison to the previous year.
“Not only revenue surplus declined by Rs 1,452 crore (30 per cent) in 2007-08, but fiscal deficit has also increased by Rs 4,179 crore (43.46 per cent) and primary surplus turned into a huge deficit”, the report said.
Moreover, the state’s fiscal performance “in terms of deficit indicators vis-à-vis targets set in Fiscal Correction Path (FCP) as well as Mid Term Fiscal Restructuring Policy (MTFRP) for 2007-08 indicated a dismal picture”, the report noted.
This was despite the fact that central transfers increased by Rs 6,828 crore in 2007-08 and accounted for “85 per cent” of incremental revenue receipts during the year.
The CAG has blamed the decline on revenue surplus on sluggish growth rate of 8.53 per cent (Rs 1,961 crore) in the state’s own tax revenue compared with 22 per cent (Rs 4,140 crore) a year ago.
Besides, “the expenditure pattern of the state reveals that the revenue expenditure as a percentage to the total expenditure varied within a narrow range of 79-88 per cent and stood at 79 per cent in 2007-08 leaving inadequate resources for expansion of services and creation of assets”, the report said.
As a result, “37 per cent of fiscal liabilities of the state were still without the asset backup at the close of the financial year”, the CAG report said.
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"Revenue Expenditure (NPRE) at Rs 53,479 crore in 2007-08 remained significantly higher than the normative assessment of Rs 41,561.50 crore made for the year by the Twelfth Finance Commission”, it said.
In addition, committed expenditure – salary expenditure, pension liabilities and interest payments – constituted about 68 per cent of the NPRE, indicating “the need for changing allocative priorities”, the report added.
The CAG has cautioned that “the increasing fiscal liabilities due to continued prevalence of fiscal deficit accompanied with negligible rate of return on government investments and inadequate interest cost recovery on loans and advances might put a fiscal stress on the state in the medium to long run.”
The report has also stated that things are unlikely to improve “unless suitable measures are initiated to make the investments, including loans and advances commercially viable, to compress the non-plan revenue expenditure and to mobilise additional resources both through tax and non-tax sources in ensuing years."
The CAG has also expressed dissatisfaction over the fiscal liabilities, relative to Gross State Domestic Product (GSDP), standing at 50 per cent, saying it “appears to be on the higher side especially in view of the target set by the Financial Regulation and Budgetary Management Act, enacted by the state government in 2004 to contain it to 25 per cent by the end of the year 2018.”
Also, the report has sought to draw the attention of the state government to the inordinate delays in completion of various projects leading to escalation of costs.
“The delay in completion of 43 major and medium irrigation projects led to a total cost escalation to the tune of Rs 5,710 crore”, the report pointed out.