Southern States - Kerala

CAG report paints a bleak picture of State
By Our Special Correspondent

THIRUVANANTHAPURAM, MARCH 15. The Comptroller and Auditor General of India (CAG) has painted a bleak picture of the Kerala Government's finances and warned it of continued misery if it does not improve budgeting, control revenue expenditure and tone up the tax collection mechanism.

The CAG pointed out that the deceleration in the growth of revenue deficit and fiscal deficit during 2000-01 as compared to 1999-2000 was achieved by curtailing or postponing revenue expenditure and reminded the Government that in the absence of sufficient capital expenditure, the disparity between the assets and liabilities was widening at an alarming rate.

The critical observations about the State Government's financial management are contained in the CAG's report relating to the year ended March 31, 2001. According to the CAG, while the State Government's assets grew by seven per cent during 2000-01, its liabilities climbed up by 18 per cent.

Referring to the deceleration in revenue deficit during 2000-01, the CAG pointed out that revenue deficit had fallen from 3,624.21 crores in 1999-2000 to Rs. 3,147.06 crores, mainly on account of the curtailment of expenditure under various Government programmes. According to the report, the State Government's revenue expenditure grew by three per cent during 2000-01. The annual rate of growth in revenue receipts was flat at Rs. 10 per cent during the year as was the case the previous year.

The CAG noted a fall in fiscal deficit during 2000-01 from Rs. 4,534 crores in 1999-2000 to Rs. 3,878 crores. The ratio of revenue deficit to fiscal deficit increased from 0.42 in 1996- 97 to 0.81 in 2000-01.

The local bodies suffered on account of the strained financial situation with the assistance to local bodies falling from 29 per cent of the revenue expenditure during 1999-2000 to 27 per cent of the revenue expenditure during 2000-01. The share of capital expenditure in the total expenditure of the Government also declined sharply from 8 per cent in 1996-97 to 5 per cent in 2000-01. There was, in fact, negative growth in capital expenditure during the last three years.

The report noted that public sector undertakings, joint stock companies and cooperative banks and societies in which the Government had invested Rs. 1,883 crores as of March, 2001, had given only an insignificant return of less than one per cent during the last five years. The period had also seen the outstanding debt of the Government almost doubling from Rs. 7,853.39 crores as of March, 1997, to Rs. 13,729.23 crores as of March, 2001, a growth of 81 per cent. Internal debt of the Government increased by a whopping 157 per cent during the period.

Other liabilities like small savings, provident fund, reserve funds and deposits also increased significantly by 151 per cent during the period. The net inflow of funds from these sources after repayments and other disbursements was not significant, but the State continued to be saddled with huge unpaid liabilities and a significant contingent liability in the shape of outstanding guarantees of Rs. 9,553 crores.

The Government had to repeatedly avail of ways and means advances, including overdrafts and State undertakings and other institutions lodged their moneys with the treasuries and kept loans raised from the market in Government accounts to bolster the ways and means position of the Government. Despite these measures, 81 per cent of the borrowings was consumed by revenue expenditure.

In a bid to shore up its finances, the Government also had to choke the outflow of funds through treasuries.

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