Off-budget financing costs more, says CAG

Comptroller and Auditor General (CAG) has raised flag over the off-budget financing route of the finance ministry in its report on fiscal responsibility management, saying that deferred subsidy arrears could cost more.

According to CAG, carry-over liabilities of subsidy financing of the different ministries have increased in the recent years. 

In the report, which covered fiscal 2016-17, CAG said, “The government resorts to off-budget methods of financing to meet revenue and capital requirements. The quantum of such borrowings is huge and the current policy framework lacks transparent disclosures and management strategy for comprehensively managing such borrowings.”

However, the finance ministry told CAG that off-budget borrowings are not beyond the scope of Union Budget as provisioning of repayment of principal and interest of off-budget borrowings is made through the Budget. 

CAG has used three cases to demonstrate the fallout of off-budgeting policy. For instance, the budget allocation made to Union chemicals and fertilisers, like foodgrain bill, in a financial year is not sufficient to clear all the dues of fertiliser subsidies with the dues being carried over to next financial year.

Deferring the payment are incurring additional cost by way of interest payments. However, CAG in the report has advised that the government should be a clear rationale and objective of off-budget financing along with sources of funds.