OPINION: How deep in red?
NEW DELHI (The Statesman/ANN) - This newspaper has for long been complaining about the Union budget having lost its sanctity with governments routinely engaging in off-budget sanctions and financial manoeuverings.
When the Comptroller and Auditor General of India (CAG) states that the government has engaged in such peccadillos to mask fiscal and revenue deficits, the country has to sit up and take notice. Indeed, the CAG’s critical audit report on Compliance of FRBM Act, 2003, for fiscal 2016-17 ~ submitted to Parliament, pointing out that the government underestimated its total liability by five per cent and its revenue deficit by Rs 50,999 crore ~ is an unhappy denouement in what was supposed to be an exercise in exemplary governance, promised to the country nearly five years ago.
It is, therefore, important that the government take serious note of the CAG’s suggestion that it have “in place a policy framework for off-budget financing, which, among others, should include disclosure to Parliament”. This, the government seems to have tried to avoid through under-the-radar actions. Breaking up an expenditure incurred in a particular year in two parts and shifting one to the next year’s account is nothing short of malfeasance but the government had no qualms about it.
It has accounted for a part of the food subsidy in 2016-17, carrying over Rs 81,303 crore to the next year, thereby understating expenses. It has repeated this ploy for the fertilizer subsidy, showing Rs 70,100 crore for 2016-17 and deferring Rs 39,057 crore to 2017-18. That the CAG should ask the government for the rationale for doing so is to be expected but the finance ministry’s disingenuous rebuttal ~ that it has not really evaded legislative supervision because under the amended FRBM Act (in 2018) a debt target is disclosed and thus Parliament would be aware of the off-budget borrowings ~ is typical of any institution that is uncomfortable with making a clear articulation of its finances.
The government has, however, done worse, courtesy off-budget financing of railway projects through borrowings of the Indian Railway Finance Corporation. Other tricks in terms of capital expenditure include financing power projects through the Power Finance Corporation that, the CAG points out “are outside the budgetary control” and “not part of calculation of the fiscal indicators despite fiscal implications”. Clearly the government is under pressure to stick to the plan of limiting its fiscal deficit to no more than three per cent of its gross domestic product by the end of 2020-21, but surely good governance demands that the reality around the financial bottomline be disclosed.
In its last budget before the elections, even though an interim one, the government would do well not only to explain the rationale and objective but also disclose the total off-budget financing and the strategy to service such debt along with a full disclosure of off-budget financing by all the bodies substantially owned by it. Only then would the country have an idea of the red ink that the government’s finances are steeped in.