Criticising the off-budget borrowings made through the Kerala Infrastructure Investment Fund Board (KIIFB) yet again, the Comptroller and Auditor General of India (CAG) has asked the State Government to include them in its annual budget statement.
In its latest State Finances Audit Report tabled in the Assembly on Thursday, the CAG asked the Government to disclose details of off-budget borrowings made through the KIIFB and Kerala Social Security Pension Ltd (KSSPL) in the budget and accounts.
Borrowings of these concerns ultimately constitute liabilities of the State Government, the CAG noted. “'These off-budget borrowings are not taken into the disclosure statement in the budget documents or in the accounts, nor have legislative approval.”
Further, such borrowings have the effect of bypassing the Net Borrowing Ceiling of the State by routing loans outside the budget through government-owned or controlled entities despite being responsible for the repayments. Financing expenditures through off-budget borrowings raised public debt and went against the letter and spirit of the Kerala Fiscal Responsibility Act, the CAG observed.
“If the State Government increasingly resorts to these off-budget routes to finance both its capital as well as revenue spending, the liabilities of the State may increase substantially over a period of time leading to a debt trap, without the legislature even knowing that such liabilities are being created,” the report observed.
During 2019-20, the Government had resorted to off-budget borrowings to the tune of ₹1,930.04 crore through the KIIFB and ₹6,843.65 crore via KSSPL for financing its capital as well as revenue spending, the CAG report said.
The CAG did not accept the State Government's contention that the KIIFB borrowings are not off-budget borrowings. It also rejected the argument that the records and statements of the KIIFB are laid before the legislature and, therefore, the borrowings have legislative approval. The KIIFB borrowings and expenditures are not included in the budget documents for the vote of legislature as exercised under Article 203(2) of the Constitution, the CAG said.
In the KSSP's case also, the CAG did not accept the Government's contention that KSSPL is a separate entity incorporated under the Companies Act and that its liabilities were not the State's. This is not the first time that the CAG has raised this issue.
In the previous State Finances Audit Report for the year ended 2019 tabled in January this year, the CAG had observed that the off-budget borrowings of the KIIFB were “not in accordance with the Constitution'' and that ultimately it would turn out to be a direct liability of the State Government.
