Off-Budget borrowings have yet again drawn the criticism of the Comptroller and Auditor General (CAG) of India whose latest audit report was tabled in the Kerala Legislative Assembly on February 15 (Thursday).
Apart from borrowings made by the Kerala Infrastructure Investment Fund Board (KIIFB) and the Kerala Social Security Pension Ltd (KSSPL), the borrowings under a bill discounting system also have drawn flak this time.
The report on State finances for the year ended March 31, 2022 observed that the Kerala government had resorted to short-term borrowings for settling pending bills of contractors through the bill discounting system. The promissory notes issued during the year (2021-22) amounting to ₹1,601.72 crore remained unsettled, but the accounts did not reflect this.
“This has consequently resulted in deferment of clear-cut liabilities to the next financial year with an avoidable interest liability,” the report noted.
‘Debt trap’
The latest CAG report has repeated the warning sounded in past reports that unchecked off-Budget borrowings could lead the State into a “debt trap.”
According to the report, “off-Budget borrowings have increased the overall liabilities of the State from ₹3,57,392.76 crore to ₹3,83,267.15 crore as on March 31, 2022.” During 2021-22, the KIIFB raised off-Budget loans amounting to ₹7,762.78 crore and the KSSPL, ₹6,550 crore.
Kerala Finance Minister K.N. Balagopal’s observations on the matter were also tabled in the Assembly along with the CAG report. It noted that the audit report reiterates observations “that were rejected by the Public Accounts Committee and the State Assembly.”
The Minister defended KIIFB and KSSPL borrowings, while asserting that the CAG report “loses sight of the fact that it is because of the State’s wide security net through the KSSPL that it has been able to keep poverty below 1%, which is the lowest in the country.”
On the bill discounting system, Finance department sources said the practice was started in 2014 under the United Democratic Front (UDF) government as a short-term financial adjustment measure.
