State of absolute unaccountability

The CAG report made key observations on Goa’s declining condition of financial affairs writes Ramrai Naik

Key Highlights of CAG Report

Fiscal Deficit increased from Rs 948 Crore in 2014-15 to Rs 1,483 Crore in 2015-16

The CAG audit team found 38 mining cases where environment clearance were not observed by the lessee during the 2009-16 period

14 working Public Sector Undertaking registered a turnover of Rs 939 Crore as on September 2016, turnover equal to 1.54% of GSDP, earned aggregate profit of Rs 52 Crore

1519 shops in 7 Urban Local Bodies leased out without proper renewing agreements, rent recovered at low rates, loss of revenue amounting to Rs 9.89 Crore

The report by CAG (Comptroller Auditor General) for the year that ended 2016 was tabled in the State Legislative Assembly, recently. It shows astonishing figures about the fiscal conditions and other expenditures incurred by Goa. Despite there being political stability in the previous regime, the government couldn’t control wasteful spending.

Important observations were made in the CAG Report of which most alarming was the state’s fiscal position declining in the FY ending 2016. The erstwhile state leadership of Laxmikant Parsekar, who was also the Finance Minister faced major heat. CAG highlighted several key parameters where Goa fared unsatisfactorily, thus indicating the previous regime’s inability in managing the state’s finances.

“The fiscal position of the state had declined in terms of key parameters as compared to the previous year. The parameters like revenue, fiscal and primary deficits indicate the extent of overall fiscal imbalance in the finances of the state government during the specified period,” observes the CAG report. The report adds, “During 2015–16, revenue surplus was Rs 132 crore less than the previous year’s surplus of Rs 279 crore due to reduced growth of receipts as compared to the expenditure.”

CAG data showed a steep increase of Fiscal Deficit during 2015-16. From Rs 948 crore in 2014-15 it had increased to Rs 1,483 crore the following FY. Due to increase in the fiscal deficit by 56.43 per cent and interest payment by 6.64 per cent, the primary deficit increased to Rs 408 crore in 2015-16 from a primary surplus of Rs 60 crore in 2014-15.

On a fairly neutral front, the state managed to keep fiscal deficit relative to GSDP to 2.44 per cent which was within the limit of three per cent fixed by the Goa Fiscal Responsibility and Budget Management Act (First Amendment) Act, 2014. Similarly the ratio of interest payments to revenue receipts has been maintained at 12.58 per cent as against the level of 12.86 per cent prescribed by the 14th Finance Commission.

 

Illegal Extraction of Iron Ore

Apart from fiscal expenditure, The Comptroller and Auditor General has been rather more critical of the state Government’s role in regulating the mining operations. The CAG report observed extreme violations of the mining plan and environment clearances during 2009-16 which led to illegal extraction of iron ore amounting to Rs 1900 crore.

“The performance audit on systems and controls in collection of minerals receipts has revealed a number of system and compliance deficiencies. We observed violation of the provision of the Acts and Rules made for regulation of mining operation in the State. Violating the provisions of the MCD (Mineral Conservation and Development) rules and MC (Mineral Concession) rules the lessees had extracted minerals valued at Rs 1,529.64 crore in excess of the mining plan,” said the CAG report.

“The lessee had also extracted minerals valued  Rs 374.99 crore in excess of quantity allowed under environment clearances,” added the report. All in all the CAG audit team found 38 cases where environment clearance was not observed by the lessee during the 2009-16 period.

It comes at a time when Goa observed a long mining ban which lasted nearly 2 years however iron ore extraction began only after three years in November 2015. Hence it’s safe to say that much of the illegal mining data finds its relevance to pre-2012 September when the Apex Court had ordered to halt mining operations in the state.

The CAG has reprimanded the State Directorate of Mines and Geology (DMG) for not taking action to recover the penalties under excess extraction over the limits.

“There was lack of internal control within the department to ascertain the lawful dispatch of minerals, independent assessment of grades of ore, internal audit of department and timely assessment of royalty dues. These results in short recovery of royalty to the tune of Rs 19.78 crore,” the CAG report stated. CAG also pointed out the lack of coordination between DMG and the central body, Indian Bureau of Mines; and the Ministry of Environment and Forest, in regulating the mining operations in the state.

 

Development Expenditure

On a positive note, CAG confirmed a 20.76 percent hike in state spending on developmental fronts during the year 2015-16, compared to the previous year. “While the State’s total expenditure showed a growth rate of 16.17 percent, the growth rate of development expenditure was 20.76 percent over the previous year. The development expenditure increased by 49 percent (Rs 2,369 crore) from Rs 4,838 crore in 2011-12 to Rs 7,207 crore in 2015-16. During the FY 2015-16, 81 percent of the development expenditure was incurred on development revenue expenditure,” the CAG report said.

It is easily derived that the Parsekar Government’s key focus was also to strengthen the social infrastructure of the state. As the hike was primarily found to be contributing to social ser-vices amounting Rs 368 crore. Similarly, in economic services, spending were to the tune to Rs 448 crore.

In social services, the increase was mainly under the heads of education, sports, arts and culture (Rs 111 crore), health and family welfare (Rs 53 crore), water supply, sanitation, housing and urban development (Rs 69 crore). In economic services, the increase was in agriculture and allied activities (Rs 46crore), rural development (Rs 57 crore) and energy (Rs 170 crore).

Although development expenditure was more in the 2015-16 period than its previous year. It was in fact, Rs 599 crore lesser than what was projected in the respective budget the same year.

 

Misuse of Tax Exemption

The Comptroller Auditor General made another important observation, where it found the social institutions misusing the tax exemption given to them by Transport Authorities. CAG highlighted that, social institutions that were exempted from paying road tax on their vehicles, purchased high-end luxury cars causing a loss to the State exchequer. “We observed that Director of Transport in exercise of powers conferred by Rule 22 of Motor Vehicle Rules issued notification to two institutions. The total road tax exempted to these institutions for purchase of new luxury motor cars was Rs 9.87 lakh,” CAG wrote in the report.

“Tax relief to luxury cars of social institutes serves no purpose. The exemption granted by transport department to the trusts/societies which could afford to purchase luxury vehicles and pay for choice registration numbers, defeated the intention of the Rules,” the CAG report added.

Similarly, CAG revealed that the Revenue Department incorrectly allowed tax exemptions of VAT amounting Rs 12.29 crore to cement manufacturing unit. The same unit was later declared high polluting by the Central Government.

The report stressed and recommended the current government to take corrective measures in the state’s finances in order to strengthen the fiscal position and in other key areas of finance.

 

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