CAG calls on Goa government to work on realistic budgets

Panaji: The Comptroller and Auditor General (CAG) called the surplus state revenue budgets unrealistic and said he had to work for more realistic budgets.

The CAG also warned the state about the debt profile, as it is expected to pay heavy IMEs over the next few years.
“The state government needs to develop more realistic estimates of revenue and expenditure when preparing the state budget. Thus, a greater drop in revenue (16.42%) and a relatively less important control of expenditure (12.26%) than the RE were at the origin of the revenue deficit in 2019-2020 ”, explains the CAG.

On debts, he said, the government’s debt maturity profile indicated that the government’s responsibility to repay debt in the periods 2020-21, 2021-23 and 2023-25 ​​would be ₹ 694 crore, ₹ 2,182 crore and ₹ 2,475 crore respectively.

During the period 2019-2020, the state failed to meet two key budget parameters. First, the state recorded a revenue deficit of 325,325 crore in 2019-2020 compared to a revenue surplus of ₹ 355 crore the previous year. Second, due to an increase in the budget deficit of 11.27% and interest payments of 9%, the primary deficit increased to 529 crore in 2019-2020, from ₹ 448 crore in 2018-19.

However, the state government managed to keep its budget deficit against the GSDP (2.47 percent) within the three percent limit set by the Goa FRBM law and the projection made by the Fourteenth Finance Committee ( FC XIV). The outstanding debt to MSRP ratio fell from 26.71% in 2016-2017 to 28.03% in 2019-2020. Thus, the state was unable to meet the target of 25 percent set by Goa FRBM law and 24.92 percent set by FC XIV.

The state government transferred in the short term 138.49 crore of employees and the government contribution to the NSDL under the defined contribution pension scheme in 2019-2020, thus underestimating the revenue shortfall and the budget deficit to this extent.

The off-budget budget operations amounting to 919 crore during the 2019-2020 fiscal year resulted in an underestimation of the overall debt of 1.14% of the MSRP. In addition, taking into account off-budget borrowing from the state, the total outstanding debt at the end of March 2020 stood at 23,473 crore compared to 22,554 crore shown in the financial accounts.

In accordance with the provision of Section 5 (a) of the Goa FRBM (First Amendment) Act 2014, the state government was to eliminate the fiscal year 2014-15 revenue deficit and maintain it at that crores or generate a surplus of revenue thereafter. The state government met this target in 2014-2015 and maintained a revenue surplus until 2018-2019. However, the state had a revenue deficit of 325,325 crore in 2019-2020.

It was found that the state revenue surplus amounted to ₹ 511 crore and ₹ 355 crore during the period 2017-18 and 2018-19. This was higher than the projections made in BE and RE. However, in 2019-2020 there was a revenue shortfall of 325 crore as actual revenue (11,297 crore) decreased by 2,219 crore compared to 13,516 crore (16.42%) in RE.

Actual revenue expenditure (₹ 11,622 crore) decreased by 1,624 crore compared to ₹ 13,246 crore (12.26%) in RE. Thus, a larger drop in revenue (16.42%) and relatively less expenditure control (12.26%) than RE were at the origin of the revenue deficit in 2019-2020. The state government should develop more realistic estimates of revenue and expenditure when preparing the state budget. Section 5 (b) of the Goa FRBM Act 2014 (First Amendment) foresaw to achieve a budget deficit of 3% of the MSRP by 2013-2014 and thereafter, in order to maintain the ratio or reduce it. The ratio of budget deficit to GDPD was first reduced to less than 3% in 2014-2015 and has remained so thereafter.

The budget deficit ratio to GSDP in 2019-2020 stood at 2.47 percent, which was within the three percent target prescribed by Goa’s FRBM law and FC XIV recommendations. The budget deficit in 2019-2020 was 1,994 crore, which was lower than projections made in BE (4,470 crore) and RE (4,027 crore). The provisions of Section 5 (d) of the Goa FRBM Act 2014 (First Amendment) required that the total outstanding debt5 owed to the GSDP be reduced to 27% by March 31, 2015 and, thereafter, keep it below 25%. However, the ratio of outstanding debt to MSRP has increased over the past three years, from 26.75% in 2017-18 to 27.90% in 2018-19 and finally to 28.03% in 2019-20.

In 2019-2020, revenue decreased by 141,141 crore (1.23%). The state’s own tax revenue decreased by 171 crore (3.51%), non-tax revenue by 137 crore (4.77%) and the state’s share of Union taxes by 398 crore ( 13.83%), offset by the increase in subsidies from GoI by ₹ 565 crore (69.33%). About 66% of the state’s revenue in 2019-2020 came from its own resources. The Indian government paid compensation of 819 crore to the state government to compensate for the loss of revenue after the implementation of the GST, against the fee of 1,246 crore per year.

Over the five-year period (2015-20), central tax transfers increased by 29%, from 1,924 crore in 2015-16 to ₹ 2,480 crore in 2019-20. The state government’s share of Union taxes and duties in 2019-2020 decreased by 398 crore yen from the previous year and represented 22% of revenue. GoI grants increased by ₹ 565 crore (69%) in the year compared to the previous year. Aid grants represented 12% of revenue in 2019-2020.

In the period 2019-2020, revenue expenditure increased 4.86% (₹ 539 crore) from the previous year and represented 87.42% of total expenditure. Revenue expenditure was 14.45% of MSRP in 2019-2020.
In 2019-2020, capital expenditure decreased by 23% (₹ 489 crore) compared to the previous year. The share of capital expenditure in total expenditure increased from 16.53% in 2017-2018 to 12.49% in 2019-2020. During the period 2019-2020, capital expenditure (₹ 1,660 crore) was 1,040 crore lower than total government debt revenue (₹ 2,700 crore).
The State Government’s aggregate debt (₹ 22,554 crore) at the end of fiscal year 2019-2020 included an internal debt of ₹ 15,746 crore (70%), a public account liability of ₹ 5,660 crore ( 25%) and GoI loans and advances of ₹ 1,148 crore (five percent). Internal debt included market loans (₹ 13,010 crore), special securities issued to NSSF (2,138 crore), NABARD (₹ 546 crore) and loans from financial institutions (₹ 52 crore).

The government debt maturity profile indicates that the government obligation to repay debt in the periods 2020-21, 2021-23 and 2023-25 ​​would be ₹ 694 crore, ₹ 2 respectively. 182 crore and ₹ 2,475 crore which can put a strain on the state budget during this period. In addition, 8,667 crore, or 51% of total public debt, would be repayable over the next seven years. Therefore, the state government should develop a well thought out loan-repayment strategy to avoid falling into the debt trap.


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