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The Comptroller & Auditor General (CAG) has castigated the Maharashtra government for the overall fiscal liabilities of the state increased at an average annual rate of 15.44% during 2007-12. The liabilities consist of internal borrowings, loans and advances from the Government of India, receipts from the Public Accounts & Reserve Funds. The fiscal liabilities increased to Rs 2,55,756 crore in 2011-12 from Rs 1,58,114 crore in 2007-08. During 2011-12, the debt to gross state domestic product (GSDP) ratio at 20.5% was higher than the projections of 19.17% made in the Meditum Term Fiscal Policy & Strategy (MTFPS). However, it was lower than the 13th Finance Commission and Maharashtra Fiscal Responsibility & Budget Management Rules 2011 (26.10%). The revenue deficit indicates that some portion of the high cost borrowings is being used by the state government for meeting its current expenditure.
CAG in its report for the yer ended March 2012 however, observed that these liabilities were around twice the revenue receipts and thrice the state's own resources. The buoyancy of these liabilities with respect to GSDP during 2011-12 was 0.677, indicating that for each one per cent increase in GSDP, fiscal liabilities grew by 0.677%.
Of the total fiscal liabilities, the share of public debt was maximum at 72% followed by deposits (13%), reserve funds (8%) and small savings and provident fund (7%). "Fiscal liabilities increased by Rs 26,187 crore to Rs 2,55,756 crore in 2011-12 from Rs 2,29,569 crore in 2010-11 mainly due to increase in public debt of Rs 17,994 crore, reserve fund of Rs 1,399 crore, deposits of Rs 4,533 crore and small savings and provident funds of Rs 2,261 crore," CAG said in its report.
According to CAG, the emergence of a positive sum of quantum spread and primary deficit since 2009-10 indicates the tendency towards debt stabilization, however the negative resource gap in the state during 2011-12 was a matter of concern. This was a result of insufficiency of the incremental non debt receipts to meet the incremental primary expenditure and incremental interest payments.
Further, CAG suggested that borrowed funds be, as far as possible, be utilised only for infrastructure development, whereas revenue expenditure should be met fully from the revenue receipts. CAG has asked the state government to take steps to achieve zero revenue deficit as soon as possible.
CAG has also rapped the state government for investment made in statutory corporations, rural banks, joint stock companies and cooperatives and the average return on these investments. The investments increased to Rs 83,016 crore in 2011-12 from Rs 44,256.26 crore in 2007-08 while the return on these investments actuall fell to 0.04% from 0.28% during the same period. On the other hand, the government paid average interest rate of 7.21 to 7.38% on these investments.
CAG has emphasised a need to ensure better value for money in investments. "Otherwise, high cost borrowed funds will continue to be invested in projects with low financial returns. Projects which are justified on account of low financial but high socio economic returns may be identified and prioritised with full justification for channeling high cost borrowings there.The government must prepare itself better to face future liabilities/commitments by taking steps like proper investment of the amounts relating to contributory pension scheme and specific purpose reserve funds," CAG said.
