CAG raises concern over Maharashtra's off-budget borrowings for large-scale capital expenditure

New Delhi: The Comptroller and Auditor General (CAG) of India has raised concerns over Maharashtra's growing reliance on off-budget borrowings (OBBs), warning that such practices affect the state's fiscal transparency and must be brought under legislative control for sustainable financial management.

The CAG report on Maharashtra State Finances for 2023-24 was tabled in the legislature on Friday.

PSU Watch is now on Whatsapp Channels. Click here to join

"Financing expenditures through off-budget borrowings increases the public liabilities of the state substantially over a period of time leading to a debt trap, without the legislature even knowing that such liabilities are being created," it pointed out.

According to the CAG, the increasing use of OBBs by the Maharashtra government not only undermines fiscal transparency but also risks bypassing established budgetary controls and legislative oversight.

"The state government needs to improve its fiscal accountability by ensuring that all liabilities are comprehensively reported in the annual financial statements," the report said while stressing that such borrowings must be subject to legislative scrutiny.

The CAG findings gain significance as the Maharashtra government continues to fund capital expenditure through OBBs.

All government borrowings and expenditure should legitimately be covered within the respective budgets, the CAG said.

The state must disclose details of off-budget borrowings carried out through various government agencies in both the Budget and Accounts, it added.

"Such borrowings are often raised through state-owned or state-controlled entities, with repayments ultimately covered by the state government's budget. These borrowings, which are serviced through the state's budget, are effectively considered as the state's own liabilities under Article 293(3) of the Constitution," the CAG said.

The report also referred to provisions of the Maharashtra Fiscal Responsibility and Budget Management (MFRBM) Act and Rules, which require full disclosure of liabilities, including OBBs, in Form B-6 of the Medium-Term Fiscal Policy Statement (MTFPS).

"However, Audit has observed that despite the requirement for transparency, off-budget borrowings were not disclosed in the budget documents," the CAG said.

The report noted that the MTFPS 2023-24 mentioned only Rs 19.40 crore as outstanding OBBs (from before 2004-05), while actual outstanding OBBs had increased from Rs 51 crore in 2019-20 to Rs 10,135 crore by the end of 2023-24.

"This sharp rise signals the growing dependence of the state on off-budget funding for large-scale capital expenditure," the CAG pointed out.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)