A report by the Comptroller and Auditor General of India (CAG) on the state of finances in Andhra Pradesh has revealed that the outstanding liability of Andhra Pradesh on account of Off Budget Borrowings (OBBs) stood at ₹1,18,393.81 crore on 31 March, 2022.
The overall liability of the state, including these outstanding OBBs as on 31 March, 2022, stood at ₹4,90,897 crore and this constituted 40.85 percent of the Gross State Domestic Product (GSDP).
The GSDP is considered, in monetary terms, the sum total volume of all finished goods and services produced during a given period of time, usually a year, within the geographical boundaries of the state, accounted without duplication.
Details from the report
The Andhra Pradesh government on Friday, 24 March, tabled the FY2022 audit report in the state Assembly.
OBBs by the current YSRCP government had always come under criticism from the Opposition — especially the TDP.
The state government did not disclose the OBBs in the budget documents.
The CAG report said the state’s overall liability, including the outstanding OBBs, was ₹4,90,897 crore. This, it said, constituted 40.85 percent of the GSDP.
The OBBs of the state government for the financial years 2019-20 and 2020-21 were ₹26,097 crore and ₹86,260 crore, respectively, said the CAG report.
The report also said that during the year 2021-22, an amount of ₹11,331.83 crore was spent on servicing the debt from these OBBs.
Of the total OBBs, the majority were raised by the AP State Development Corporation or the APSDC (₹22,504 crore) and the AP Power Finance Corporation (₹18,115.07 crore).
The CAG report also said two public-sector undertakings (PSUs) raised loans through banks, for which repayments were made by way of escrowing future revenues of the consolidated fund of the state.
These PSUs are the AP Road Development Corporation and the APSDC.
The state government established the AP State Development Corporation (APSDC) with a mandate of planning, funding, and financing social and economic development projects and activities in Andhra Pradesh.
The CAG report also found that the corporation was operating a Personal Deposit (PD) Account wherein the loans it raised were being credited and the loan funds utilised for financing the welfare programmes of the state.
Thus, the borrowed funds were being used for financing current expenditures.
What are OBBs?
Also called off-budget financing, OBBs generally refers to the use of those financial resources by the government — for meeting expenditure requirements in a particular year or years — that are not reflected in the budget for that year or those years, for seeking grant or appropriation, hence remaining outside legislative control.
The Andhra Pradesh government resorted to borrowing through the state PSUs — government-owned or controlled public sector enterprises or departmental commercial undertakings.
These PSUs raise loans from banks and other financial institutions, such as HUDCO, for which the state government provides unconditional and irrevocable guarantees for the servicing of the debt. Thus, these liabilities constitute the liabilities of the state government.
The servicing of these OBBs is being done through payment of interest on a recurrent basis through the budget and the repayment of the borrowings by releasing funds to the PSU concerned either in the form of assistance/grants-in-aid or loan by the state government.
