CAG raps Maharashtra govt for unsustainable spending

The auditor also raises alarm over declining trend in capital expenditure

The office of the Union comptroller & auditor general (CAG) has rapped the Maharashtra government for a rising revenue gap and non-productive non-plan spending.

In its report for the year ended March 2015, it observed: "The resource gap in the state during 2013-14 and 2014-15 was negative, indicating decreasing capacity to sustain debt in the medium to long term. This was a result of inefficiency of the incremental non-debt receipts to meet the incremental primary expenditure and incremental interest payments. The state needs to improve its resource mobilisation and prune unproductive expenditure."

The CAG also noted the declining trend in capital expenditure to total expenditure over the past five years. For instance, it fell in 2014-15 over 2013-14 (minus 2.5 per cent), compared to the positive growth rate in general category states (21.9 per cent). As a percentage to to total expenditure, it was 14 per cent in 2010-11 and 10 per cent in 2014-15.  

The report was presented in the state legislature on the concluding day of the budget session on Wednesday. It further rapped the government for the 64 per cent rise during 2014-15 in expenditure under subsidies over the previous year. Spending on salaries and wages was higher than the state’s own Fiscal Correction Path calls for and lower than the projections made in the budget estimate.

CAG asked the government to quickly swing into action to bridge the revenue gap and cut its non productive non-plan revenue expenditure so as to move towards revenue surplus status. Besides, CAG asked the government to consider mobilization of additional resources through tax and non-tax resources.

The non-plan revenue expenditure at Rs 1,46,245 crore remained higher than the normative assessment made by the Thirteenth Finance Commission (Rs 1,01,881 crore) and budget estimates (Rs 1,41,354 crore) but lower than the State Government's projections of (Rs1,54,084 crore). The plan revenue expenditure increased by 21% and non plan revenue expenditure by 13% in 2014-15 over the previous year.

Further, state's outstanding debt rose to Rs 3.19 lakh crore in 2014-15 from Rs 2.20 lakh crore in 2010-11. The per capita debt increased to Rs 21,125.89 in 2014-15 from Rs 17,275.54 in 2010-11.Even though debt to gross state domestic product (GSDP) ratio and debt to revenue receipts were showing a declining trend, the revenue gap sufficiency of non debt receipts was negative during 2011-12, 2013-14 and 2014-15.

According to CAG, the negative resource gap indicates the non sustainability of debt while the positive revenue gap strengthens the capacity to sustain the debt. The positive resource gap during 2012-13 turned negative during 2013-14 and 2014-15 indicating the beginning of risk of non sustainability of debt in the medium to long term.