New Delhi: The Comptroller and Auditor General (CAG) accused Prime Minister Narendra Modi of papering over budget deficits by borrowing funds ‘outside the budgetary control’ to finance capital and revenue spending in 2016-17 and reduce budget deficit target for the current fiscal year.
“Government has adopted off-budget means of financing the subsidy arrears, thereby deferring the payment in the relevant financial year and in the process also incurring additional cost by way of interest payments,” the CAG observed.
The report added that such financing for capital expenditure, especially for financing railway projects, is also rampant but is not part of the fiscal indicators in spite of fiscal implications.
“In terms of capital expenditure, off-budget financing of railway projects through borrowings of the IRFC (Indian Railway Finance Corp.) and financing of power projects through PFC (Power Finance Corp.) are outside the budgetary control. Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications.”
The auditor, however, advised the government to establish a policy framework for off-budget finances, which must comprise a disclosure about its rationale and objective to parliament.
However, the ministry of finance contested the charge made by the CAG, claiming it is wrong to point that there is no direct legislative control over off-budget borrowings as amendments to the FRBM Act in 2018 include a debt target.