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CAG's report on Gujarat: Fact versus fiction
Media has seized upon unfounded comments, needless opinion to pillory Narendra Modi while ignoring praise for his governance model
The Comptroller and Auditor-General’s report that was tabled in the Gujarat Assembly during the recent Budget session has predictably provided fodder to the Opposition to target Chief Minister Narendra Modi, if only to score brownie points.
Ever since last December’s Assembly election in Gujarat when the Congress suffered its third consecutive and crushing defeat at the hands of the BJP, it has been floundering for an issue to take on Modi and his Government. The Congress thought its dry run was over when the CAG report was placed in the Assembly — it was apparently critical of Modi and his Government. But excitement soon gave way to despair when a reading of the full report revealed that the CAG has actually lauded Modi and the Gujarat Government on several counts, including the manner in which the latter had managed the State’s finances and increased its revenue generation.
Here’s what the anti-Modi media won’t tell you: The CAG report notes that Gujarat’s revenue generation has shot up by a whopping 102 per cent in 2011-2012 as compared to 2007-2008. Similarly, its tax revenue has shot up by 22 per cent as compared to the previous year. The targets set for the State by the 13th Finance Commission have also been achieved by the Government. As opposed to the target of keeping fiscal deficit at three per cent of Gross State Domestic Product, Gujarat has maintained it at 1.87 per cent. If this does not reflect fiscal prudence, then what does?
The CAG report also lauds the land allotment policy of the State Government. Sadly, what is happening is that vested interests are at play in maligning the image of Gujarat and thereby seeking to tarnish Modi’s image, which is nothing new anymore.
The Congress and its handmaidens in the media would want you to believe that Gujarat’s PSUs are all loss- making, non-performing, useless units. Guess what the CAG report says? The CAG report records that as of March 31, 2011, as many as 1.12 lakh people were employed by 66 of Gujarat’s PSUs. Of these PSUs, 41 units posted profits in 2011. The total annual turnover of the PSUs was Rs79,642 crore, or 13.47 per cent of that year’s GSDP.
The CAG has noted an improvement in the working of PSUs between 2006 and 2011. Profits which earlier stood at Rs1,826 crore went up to Rs3,929 crore in 2011. Indicating efficient and proper use of funds, the CAG report has noted that 98.93 per cent of the investments in PSUs during 2011 were made in active units. In 2010, the guarantee liability of the State was Rs5,428 crore; this came down to Rs3,376 crore in 2011-2012. From 2007-2008 to 2011-2012 GETCO witnessed a massive 702 per cent increase in its profit.
While it is true that some adverse comments have been made by the CAG in its report on the issue of allotting land to the joint venture of L&T, Mitsubishi and Nuclear Power Corporation of India Limited, they are, to put it mildly, misleading. The joint venture of these companies was given land at Hazira for their critical steam generator and nuclear forging plant. The CAG’s observation that a 30 per cent concession, amounting to Rs128 crore, was given to the joint venture by the State Government, is presumptuous.
It must be remembered that this engineering project involves high technology and is critical for the nation’s nuclear power generation programme. In engineering units, the total capital investment is low as compared to the manufacturing sector, but the employment potential, especially for skilled jobs, is higher compared to others. A nation’s manufacturing strength is measured by its strength in the engineering sector.
Hence it was a conscious decision taken by the Gujarat Government to provide a 30 per cent concession in the land cost to this joint venture. The Government is empowered to take decisions that encourage innovative projects. In any case, what the Government earns after a plant of this nature is commissioned is much more than the notional loss calculated by the CAG.
It would be pertinent to mention that an inquiry was conducted by the Justice MB Shah Commission into the issue of giving land at concessional rate to the L&T joint venture. The inquiry resulted in a clean chit for the Gujarat Government.
The CAG appears to have erred on another count. It says that Reliance Petroleum was given land at Rs120 per sq km for building a housing colony for its industrial workers. The CAG report says that a 30 to 40 per cent premium should have been charged because the land was for industrial purposes; by not doing so a loss of
Rs2 crore was incurred.
The CAG has clearly misinterpreted the purpose for which this land was allotted. It is patently incorrect to equate the cost of land for housing colonies for industrial workers with that of land meant for industrial purposes. From its perspective, the Gujarat Government has done no wrong; indeed, it would be the right thing to do.
Similarly, on some others issues the CAG has opted for a subjective audit instead of an objective audit. Needless to add, the latter is desirable, the former is not.
Having observed the manner in which the Gujarat Government functions over the past many years, I can say that Gujarat is one State where the valuation of Government land is done both systematically and scientifically, and this is due to the State Government playing a pro-active role.
In the initial stages the valuation is done at the district level through the Town Planning Department and is approved by the District Level Committee, which is headed by the Collector. Thereafter, the valuation is put up before the State-level committee headed by the Finance Secretary. The Government also seeks the opinion of the Chief Town Planner.
Once this exercise is over, the valuation is put up for the consideration of and approval by the State Cabinet, which is empowered to take the final decision. The State’s land allotment policy is transparent and to the best of my knowledge, there has been no deviation from this principle except in projects crucial to the State’s growth.
The CAG report’s observations on Gujarat International Finance Tec-City, or GIFT, are erroneous. GIFT is a project that is a first of its kind in India. It is an innovative model for creating an international financial services centre based on the use of state-of-the-art technology in order to propel economic growth for the State and the nation. It is a project where the State Government has, without investing a substantive amount except for the initial share equity and making available largely barren land, expects investment to the tune of Rs78,000 crore. This would never have been possible without the location of the project.
Detailed studies on this project have been carried out by McKinsey that indicate that GIFT will develop over the next decade and generate over a million jobs. The project is expected to generate Rs4,000 crore in revenue for the State and Rs7,000 crore for the Centre every year.
Bearing in mind these projections, the State Government decided to transfer 662 acres of land to the joint venture company at Rs1, which was a relaxation of the Government’s policy. Along with it, the Government also created a foolproof and strong mechanism for ensuring the recovery of the cost of the land from the surplus amount. Hence, the presumptive loss of Rs2,760 crore seems to have been calculated by the CAG on the basis of misplaced assumptions and not facts.
Reading, understanding and analysing the CAG’s reports requires patience and intelligence. It would be rude to suggest that those who are grabbing stray observations from the CAG’s report to pillory Narendra Modi and the Government he heads lack intelligence. But one can surely say that they do lack patience. Such is the haste to use anything to beat Modi and his Government with! Never mind if it leaves you looking utterly silly at the end of the day.
(The writer is a senior journalist based in Delhi)
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