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Now CAG red flags Gujarat’s model of fiscal chaos, skewed priorities

| Updated: September 29, 2021 20:55

Gandhinagar: Much has been claimed about the Gujarat Government’s prudent financial management over the past two decades, but even a  small scratch at the surface separates facts from fiction.

This is what the latest report of the Comptroller and Auditor-General of India tabled in the two-day session of the State Assembly that concluded on Tuesday reveals.

Among a host of countless other things, the country’s top auditor highlighted the “sub-optimal usage” of budget funds by the state government between 2015 and 2020. Strikingly, the report says 123 projects in the State are lying incomplete for more than six years now, while some may not have taken off at all.

Also, the State Domestic Product (SDP) for 2019-20 is the lowest in the last five years, while 35 of 88 state-owned companies registered a loss and 11 of them are facing closure or liquidation.  

Sub-optimal use of allocated budget

The budgeted amount for the renewable energy project of converting Modhera temple and nearby village as the country’s first solar-powered region along with two other renewable energy projects remained 100 percent unutilised.

The CAG in the report stated that “Utilisation of budget by the state government has been sub-optimal every year, during the last five years,”. The auditor pointed out that the Gujarat government used 88.08 percent of its budget for 2015-16, which fell to 87.87 percent in 2019-’20.

The CAG observed that the state government could utilise 89.98 percent of its budget provisions during the past five years. A large amount of unutilized allocated funds points to both inaccurate assessments of requirements, as well as inadequate capacity to utilise funds for planned purposes.

“Budget provisions sought and obtained by some departments far more than actual requirement, and their inability to utilise the same, deprives allocation of resources to other priority sectors and also leads to poor legislative control over public finances,” the auditor stated while pointing the surrendering of Rs 25,838 crore at end of March 2020.

The CAG said that the budget of Rs 12.03 crore provided for converting Modhera Sun temple and the town in a solar-powered region was surrendered during 2018-’19 due to the lack of response from the Government of India to the revised proposal sent by the state government. A year later in 2019-’20, it was again surrendered citing the pending land acquisition and high tender prices quoted by the state-run Gujarat Power Corporation Limited as the reason for non-utilisation of funds.

Stuck funds in incomplete projects

As many as 123 projects in Gujarat – on which Rs 5,810 crore has already been spent are still sprawling incomplete for more than six years now, stated the CAG report. Out of these projects, 19 projects belonged to Narmada, Water Supply, Water Resources, Water Supply and Kalpsar departments. While 104 belonged to the Roads and Buildings Department.

The CAG pointed out that the stuck funds in incomplete projects will hamper the quality of expenditure and the potential benefits for prolonged periods.  

Negative net worth of government companies

Out of 88 government units, 35 have registered accumulated losses of Rs 28,291 crore as on March 31, 2020. As many as 20 companies out of these 35 state’s Public Sector Units reported negative net worth as on March 31, 2020. The capital of these companies was consumed completely and had an outstanding loan from Gujarat government amounting to Rs 4,281 crore.

Also, the report stated that a total of 11 out of 35 SPSUs were filing for closure or liquidation.

 SDP for the year 2019-20 lowest in last five years

The Gross State Domestic Product (GSDP) of Gujarat showed 10.75 percent growth for the financial year 2019-20 which is the lowest percentage of growth in the last five years. According to the report, there was a notable decrease in the share of the agriculture, industrial and services sector in the state’s GDP during 2015-20.

GSDP is the value of all the goods and services produced within the boundaries of the state in a given period and at current prices, Gujarat GSDP grew the highest (13.79 percent) during 2017-18.

There has been a notable decrease in the relative share of the industrial sector in GSDP that fell from 39.72 percent in 2015-16 to 38.19 percent in 2019-20. Also, the share of the agriculture sector fell from 17.57 percent in 2015-16 to 16.60 percent in 2019-20. And the share of the services sector fell from 31.66 percent in 2015-16 to 30.97 percent in 2019-20.

On the contrary, the relative share on the taxes on products (deducting subsidies) in GSDP increased from 11.05 percent in 2015-16 to 14.25 percent in 2019-20.

The tax revenue of the state increased from Rs 62,649 crore in 2015-16 to Rs 79,008 crore in 2019-20 at a compounded annual growth rate (CAGR) of 5.97 percent.

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