Financial position deteriorates as J&K Govt becomes dependent on borrowings
9 April 2002
The Daily Excelsior
Jammu: The Comptroller and Auditor General of India (CAG) has pointed out an ‘overall deterioration’ in financial position of the Government saying that its liabilities grew by 19 per cent while the assets grew by only seven per cent during the financial year of 2000-2001. ''The liabilities consist mainly of internal borrowings, loans and advances from the Government of India, receipts from public account and reserve funds'', the CAG report said. It attributed the increase in the liabilities as well as the assets mainly to the increase of revenue deficit on Government account from Rs 541.56 crore during 1999-2000 to Rs 960.68 crore during 2000-2001. This led to deterioration in financial position of the Government, it said. The CAG noted that the State of Jammu and Kashmir was increasingly becoming dependent on borrowings. Revenue receipts, according to the report, constitute the most significant source of funds for the State Government. However, its relative share decreased from 80 per cent in 1999-2000 to 75 per cent during 2000-2001. The share of net receipts from public debt (excluding overdraft-temporary loans obtained from Jammu and Kashmir Bank) decreased from 13 per cent in 1999-2000 to 7 per cent in 2000-01. Share of net receipts from public accounts, however, increased from 8 per cent in 1999-2000 to 13 per cent in 2000-01. ''The net receipts on account of overdrafts obtained from Jammu and Kashmir Bank were also to the tune of Rs 159.21 crores during 2000-01 indicating that the State was increasingly becoming dependent on borrowings'', the report said. It observed that the asset formation and the development activities received a very low priority from the Government during the year. The Government applied the available funds mainly for revenue expenditure, share of which in total expenditure was not only 88 per cent in 2000-01 but was also higher than share of the revenue receipts (75 per cent) in total receipts of the State Government. ''This led to the revenue deficit of Rs 960.68 crore'', it pointed out. ''While share of capital expenditure increased from 10 per cent in 1999-2000 to 11 per cent during 2000- 01, lending for the developmental purposes decreased from Rs 90.64 crore during 1999-2000 to Rs 58.58 crore during 2000-01 and comprised only .78 per cent of the total expenditure during the current year against 1.30 per cent in 1999-2000'', the report said, noting ‘evidently, the asset formation and the development activities received low priority during the year’. The CAG pointed out that the main sources of tax revenue of the State Government remained the Excise and Sales Tax while non-tax revenue came mainly from the sale of power. Revenue expenditure (Rs 6620 crore) during the year exceeded the revenue receipts (Rs 5660) crore resulting in a deficit of Rs 960.68 crore. There was a marginal increase of 2.7 per cent in the revenue receipts during 2000-01 over 1999-2000. The main source of tax revenue were excise (40 per cent), Sales Tax (48 per cent) and taxes on vehicles (3 per cent). Non-tax revenue came mainly from sale of power (54 per cent), interest receipts (24 per cent) and forestry & wild life (13 per cent). Indicting the State Government, the CAG observed :''increasing fiscal deficit of the State Government over the years and adverse financial indicators point to improper fiscal management''. While revenue expenditure of the State Government increased from Rs 3129 crore in 1996-97 to Rs 6621 crore in 2000-01, an increase of 112 per cent, the capital expenditure decreased by 13 per cent from Rs 1000 crore to Rs 867 crore during the same period, which revealed a decline in growth inducing planned development expenditure rather than curtailing unnecessary consumption of expenditure, it said. It added that the investments made were unremunerative, as the returns therefrom were negligible. The net outflow of funds under internal debt and increasing liability of interest payments also indicate deterioration in financial position of the Government, restricting its asset creating activities. ''The State Government preferred the easier option of borrowing to that of improving its taxes, revenue, which is the least costly means of financing Government expenditure. There was, therefore, a need for sustained fiscal adjustments including cuts in unproductive expenditure of bring down the deficits'', the CAG said.