Andhra Pradesh outstanding debt rose 73% between 2016 and 2021: CAG report

Finance Minister Buggana Rajendranath on Wednesday, 21 September, tabled the FY2021 audit report in the state assembly.

As on 31 March, 2021, market borrowings stood at Rs 2,29,318 crore, which formed a major portion of the outstanding debt, with interest rates ranging from 5 percent to 13.99 percent.

“The total outstanding liabilities of the state to GSDP during the year 2020-21 was more than the target of 35 percent, which includes the additional borrowing limit of 2 percent of the GSDP provided by the government of India for the year 2020-21. If we factor in the off-budget liabilities of the government, the outstanding debt will constitute 44.04 percent of the GSDP,” said the CAG report.

It also mentioned the response from the state government about the outstanding liabilities. According to the CAG, the Telangana government stated that its liabilities should be viewed in the context of the 2014 bifurcation and the Covid-19 pandemic, “which resulted in the reduction of revenues and increased expenditure to tackle the pandemic in the state”.

Special Bills against Treasury code galore

The CAG noted that for the year 2020-21, 54,092 accounting entries were processed at the Andhra Pradesh Centre for Financial Systems and Services (APCFSS) through the back end of the Comprehensive Financial Management System (CFMS).

They were processed through “Special Bills” in the CFMS, which is not an authorised type of bill in the Andhra Pradesh Treasury Code.

The gross amount transacted through the Special Bills was ₹48,284.31 crore, including adjustments between the Consolidated Fund of the State (CFS) and the public account.

The issue of Special Bills was detected during a treasury inspection conducted by the Office of the Principal Accountant General (Accounts & Entitlements) of Andhra Pradesh in March 2021 in respect of certain accounting entries effected centrally at the Andhra Pradesh Centre for Financial Systems and Services (APCFSS) through the back end of Comprehensive Financial Management System (CFMS), thus bypassing the controls in the ordinary workflow of financial accounting entries.

The Finance Department sorted the accounting entries made in the special bills into 14 categories.

“In respect of five categories totalling ₹26,839.60 crore, the Finance Department informed us that the entries were a consequence of government orders on schemes and on local bodies. While the relevant government orders were provided to us, no valid reason was forthcoming as to why these entries could not be carried out in consonance with the Treasury code, through the CFMS and the Treasury system. In respect of 16,688 accounting entries totalling ₹9,124.57 crore, the Finance Department had no explanation as to why they were even necessitated in the first place, much less being carried out through the backend,” said the CAG.

The report also said there were 1,006 accounting entries with a debit of  ₹8,891.33 crore to the Consolidated Fund of the state, made without requisite sanction orders or Budget Release Orders.

Another 25,734 entries, totalling ₹3,428.81 crore, were only supported by internal documents of the APCFSS, which were not valid as per the Treasury code.

Off-budget borrowings

Off-budget borrowings by the current government had always come under criticism by the Opposition TDP.

Also called off-budget financing, this 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.

These are financed through government-owned or controlled public-sector enterprises or departmental commercial undertakings, which raise the resources through market borrowings on behalf of the government.

However, the government must repay the debt and/or service the debt from its budget. Therefore, off-budget borrowings or financing involves the payment of interest on a recurrent basis and repayment of the borrowings from the budget as and when it is due.

The Andhra Pradesh government resorted to such off-budgetary borrowings to the tune of ₹86,259.82 crore by the end of 31 March, 2021 said the CAG report.

“Borrowings of these concerns ultimately are the liabilities of the state government. These off-budget borrowings are not taken into the disclosure statement in the budget documents, nor do they have legislative approval,” observed the CAG.

Interest payments at ₹20,018 crore in 2020-21

During 2020-21, the interest payments made by Andhra Pradesh were to the tune of ₹20,018 crore, said the CAG report.

The interest on market borrowings of ₹16,911 crore and Special Securities issued to the National Small Savings Fund (NSSF) of the Central government — ₹1,090 crore — continued to be a major component of interest payments.

The state government budgeted and spent ₹2,288 crore during 2020- 21 towards interest payments on off-budget borrowings.

Interest payments constituted 19.04 percent of revenue receipts of the state.