NHAI fund management is poor, a/cs don't conform to rules: CAG

The Comptroller and Auditor General of India (CAG) has taken exception to the fund management of National Highways Authority of India (NHAI).

NHAI raised Rs 10,000 crore through tax-free bonds in 2012-2013. This was despite a surplus of funds, with Rs 9,928 crore parked in fixed deposits (FDs) with banks as on end-March 2012 and Rs 5,934 crore as on end-March 2013.

"There is need for a critical review of fund management by NHAI, by objectively linking the raising of funds with the progress of work and implementation of projects," said a CAG audit report on public-private partnership projects, presented in Parliament on Tuesday.

CAG sees the issuance of tax-free bonds to NHAI despite its surplus funds as an opportunity wasted to earn higher tax revenue through an alternative avenue. Speaking through the opportunity cost lens, CAG estimated the government lost the chance to earn tax revenue of Rs 135.9 crore, considering a corporate tax rate of 32.45 per cent on surplus money invested in FDs at 9.85 per cent per annum out of funds borrowed through tax-free bonds. Opportunity cost is the loss from choosing one alternative over another.

NHAI’s road construction and the proportional financial requirement are mandated by the B K Chaturvedi committee plan. During 2011-2012, according to the committee’s projections, it was to complete 9,192 km of roads and Rs 9,155 crore was apportioned. Actual construction was less by 18.7 per cent from the revised estimate of the ministry of road transport and highways, 6,502 km against the plan for 7,994 km.

However, its borrowing exceeded the approved amount by 36 per cent, at Rs 12,512 crore. The non-achievement of targets were due to delays in land acquisition, clearances, approvals, etc.

CAG also said NHAI's accounts were neither fully on a cash basis nor on an accrual basis. Hence, its financial statements did not fully adhere to the Generally Accepted Accounting Principles and to the standards issued by the Institute of Chartered Accountants of India.