FRONT PAGE | Tuesday, February 24, 2009 | Email | Print | 
Tricky UPA Govt dumping huge liabilities on GenNext
Pioneer News Service | New Delhi
CAG says Centre manipulating fiscal deficit figures
Not appropriately reflecting them in Union Budget
It is official now. The UPA Government is manipulating fiscal deficit figures and will leave behind huge burden on future regimes by its fiscal mismanagement. The Comptroller and Auditor General (CAG) has criticised the Centre for transferring significant liabilities to future generation without appropriately reflecting them in the Union Budget. The CAG report, placed in Parliament on Friday, has exposed the Government’s mismanagement that has led to fiscal imbalances by not figuring massive amount of petroleum, fertilisers and FCI bonds.
Blaming the Government for deviating from the norms of the budget, the CAG has pointed out that budget documents on issuance of bonds/securities by the Union Government is not taken as part of budgetary expenditure/receipts.
“As a result, not only the deficits in the budget are understated, it also raises the issues of transparency in fiscal operations and inter-generational equity in fiscal management of the Government,” observes the Auditor General.
Pinpointing the Government for this escapism, the CAG has observed that such practices were rampant in issuing bonds. “For instance, the Government’s outstanding liabilities on account of Petroleum Bonds alone has consistently increased and stood at Rs 71,288 crore as on 31 March, 2008, thereby transferring significant liabilities to future generations without appropriately reflecting them in the Union Budget,” said the report.
Stating that the Government’s attitude went against ensuring effective parliamentary financial control, the CAG’s report has described as unfair practice avoidance of the figures relating to high value bonds from the budgets. Advocating for transparency in the financial management, the CAG said the Government avoided the figures of crores worth of bonds from the ‘Budget at a Glance’ and put on ‘the off-budge items as below the line items’ of the ‘Budget at a Glance’.
Observing the frequent issue of bonds, even for public sector banks operations, the CAG said: “The issuance of bonds has been resorted to frequently for financing not only fuel, food and fertiliser subsidies, but also deferred liabilities with regard to bank loan waivers and contribution to capital of public sector banks.”
The CAG has observed that the significant quasi-fiscal transactions to finance recurrent revenue expenditures through ‘de facto borrowings’ not only created apprehensions about the quality of the fiscal consolidation process that is underway, but also raised the issue of transparency in fiscal operations and inter-generational equity in fiscal management and long-term macro-economic stability’.
Detailing the status on the issue of all bonds for the past five years, the CAG observes that it was evident from the trends that the Union Government has been issuing securities as an integral component of restructuring plan of nationalised banks and other domestic financial institutions such as UTI, IDFC, IDBI as well as to IMF thereby ‘creating extra budgetary liabilities.’
“The extra-budgetary items have, however, become a significant component of liabilities in the recent past. The Central Government, besides providing explicit subsidies on petroleum, food and fertilisers, has also been periodically issuing special bonds to the oil marketing companies (since 1997-98) and FCI (in 2006-07) and fertiliser companies (2007-08) as compensation towards under-recoveries of their products,” said CAG.
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