FEBRUARY 7, 2019

Close examination of the Modi Government’s budgetary figures reveals disturbing discrepancies

ByUJJAWAL KRISHNAM

When Indian Union Finance Minister Piyush Goyal presented an Interim Budget for 2019, it was filled with lucid schemes calculated to woo the voters. Now, with the fully-fledged budget to be presented only when the House reassembles following the general election later this year, this has triggered intense debate over the breaking of the long-standing convention of working with “interim” budgets. It also neglects and undermines the recommendations of the Comptroller and Auditor General of India (CAG).

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was passed by parliament in August 2003. Its objective was to institutionalize fiscal discipline and reduce fiscal deficits as well as improving macro-economic management and the overall management of public funds by moving towards a balanced budget. Section 7A of the FRBM, as amended in May 2012, provides that the central government may entrust the CAG to periodically review compliance to the act, with the results of such reviews to be presented before both houses of parliament.

In truth, there are ‘buried’ audits [ Report 32 of 2017 and Report 20 of 2018] on compliance to the FRBM, which point to serious discrepancies in the Modi Government’s budget management.

Lack of transparency

The CAG asserts that the government’s accounts are not transparent in respect to information about tax revenue collections. In the 2015-16 and 2016-17 financial years, the amount of refunds declared included 68.86 billion rupees and 103.12 billion rupees as expenditure on interest on refunds. Despite the substantial sums involved, no further information about the refunds was disclosed in either the Annual Financial Statement or in the Union Government Finance Accounts.

The Finance Ministry replied to the CAG, in June 2017 and July 2018, saying that estimation of refunds was operationally difficult at the time of budgeting. Not satisfied, the CAG repeatedly insisted that the ministry should not address audit concerns relating to transparency in accounts of gross tax collection and refunds against the transparency requirement as envisaged in the FRBM Act.

Expenditure variations

The CAG, while comparing the actual figures for expenditure on grants for creation of capital assets for the financial years 2015-16 and 2016-17, noticed discrepancies between the budget documents and documents compiled by Controller General of Accounts (CGA). The variation for 2015-16 was 7.99 billion rupees and it escalated to 8.27 billion rupees in 2016-17.

The gross liabilities on account of National Small Savings, Provident Funds and Other Accounts in Public Account in the UGFA for 2015-16 and 2016-17 are reported at 12.315 trillion rupees and 13.11628 trillion rupees, respectively. However, in the Receipt Budget, the liabilities show variations of 431.39 billion rupees and 536.34 billion rupees for 2015-16 and 2016-17, respectively. This is due to the non-inclusion of the amount of investment in the Post Office Insurance Fund through private fund managers.

Coal levy arrears

The CAG has also examined the information with respect to coal. It has come to its knowledge that Ministry of Coal had furnished incorrect information relating to Arrears of Non-Tax Revenue for financial year 2016-17 for inclusion in the consolidated statement of the same presented along with the budget for 2018-19. Closer examination revealed that, for the reporting year 2015-16, the outstanding amount of coal levy furnished to the Ministry of Finance in Form D-2 by the Ministry of Coal was incorrect when compared to information made available to the auditor.

Foreign loans inconsistencies

Examination of disclosure statement Form D-4 revealed that a sum of 122.48 billion rupees was shown as loans outstanding from Foreign Governments at the end of 2015-16. Similar information contained in the Union Government Finance Account 2015-16 revealed that a sum of 120.34 billion rupees was outstanding as loans from foreign governments. This means that loans outstanding from foreign governments were overstated by 2.14 billion rupees.

Non-submissions

According to Rule 6 of the FRBM Rule 2004, in order to ensure greater transparency in its fiscal operation, the central government shall, at the time of presenting the Annual Financial Statement and Demand for Grants, make disclosures of arrears of tax revenue and non-tax revenue, guarantees, assets, liabilities on annuity projects and grants for the creation of capital assets. The consolidated statements of disclosures in the relevant documents, presented along with budget, are compiled on the basis of reports of ministries/departments furnished to the Ministry of Finance.

But during checks of disclosure statements furnished by the individual ministries or departments to the Ministry of Finance, it was found that some ministries/departments did not furnish information when the figure involved was deemed to be “nil”, or when the respondents felt the information did not apply to them. Since the reports from departments/ministries in the relevant forms D1 to D6 are the basis of Ministry of Finance presentations to parliament for budgetary purposes, the possibility of the budget being based upon incorrect information cannot  be ruled out, the CAG says.

The Modi government is not ensuring the required disclosure of all transactions that have fiscal implications, despite the CAG’s regular interventions. Audits repeatedly encounter insufficient transparency and irregularities in the disclosure of deficit figures relating to the budget. Whether this is due to incompetence or fraud, it is a situation calling out for action.

https://www.asiatimes.com/2019/02/article/is-the-modi-government-fudging-the-accounts/