CAG nails Telangana State poor fiscal management

Hyderabad: The Comptroller and Auditor General (CAG) has nailed the Telangana Government on the poor fiscal management.

The State Finances Audit Report for the year ended March 31, 2021, said that the Telangana State had failed in achieving any of the three key fiscal targets -- maintenance of revenue surplus, targets of fiscal deficit to GSDP and the total outstanding liabilities of GSDP for 2021.

The report said that the state had registered a revenue deficit of Rs 22,298 crore and the fiscal deficit was Rs 49,038 crore. The revenue deficit was understated to an extent of Rs 545 crore and the fiscal deficit was understated to an extent of Rs 214 crore due to non-discharge of interest liabilities and certain misclassifications between revenue and capital expenditure.

During 2020-2021, the state registered the lowest growth rate in the last five years due to the corona pandemic.

The CAG said that "although the percentage of total outstanding liabilities to GSDP was within the limit of 29.50 per cent of GSDP, this would be away above the limits at 38.10 per cent if the liabilities regarding its Off Budget Borrowings (OBB) of Rs 97,940 crore are considered". The report observed non-disclosure of OBB has a dual impact of diluting public financial management.

The CAG explained that Telangana also failed to achieve a revenue surplus for a second consecutive year since its formation in June 2014. The higher revenue deficit in 2021 was on account of higher revenue expenditure and lower revenue receipts when compared to 2019-2020.

The CAG was also not happy with the government reply on raising funds from banks for development expenditure and repayments are made from their accounts and hence these cannot be considered as OBB always for calculation of total outstanding liabilities of the state.

Considering that the OBB and other liabilities are to be serviced out of the budget, the report said that the ratio of the debt to GSDP would be 38.10 per cent which is 13.10 per cent higher than the target of 25 per cent as the Telangana State FRMB Act. "This is also 8.60 per cent higher than the norm of 29.50 per cent prescribed by the 15th Finance Commission," the report added.