Guj govt gave 7.56% interest, got back 0.33% in 2010-11

The state government got measly returns of 0.33% on its investments, but paid an average of 7.56% on its borrowings in 2010-11, the CAG said in its report. The state government had invested Rs34,495.92 crore in statutory corporations, government companies, rural banks, joint stock companies and co-operatives. The government has equity participation of Rs34,369 crore in 61 government companies/corporations.

"The return on these investments was Rs114.43 crore, i.e. just 0.33%. As against this, the state government paid average interest of 7.56% during the year," CAG noted.

It said that continued use of borrowed money to fund investments which do not have sufficient returns would lead to an unsustainable financial position. The state government invested Rs3,445 crore in 2010-11, out of which Rs2,192 crore was invested in Sardar Sarovar Narmada Nigam Limited, which is executing the multi-purpose Narmada project.

"The government should hasten to seek better value for money in its investments. Otherwise, high cost borrowed funds invested in projects with low financial returns will continue to strain the state's economy," CAG recommended.

However, the returns earned by the government have shown a slight increase, while the average interest paid has shown a downward trend.

According to CAG, the government's returns on its investments rose from 0.19% in 2008-09 to 0.25% in 2009-10, while average interest paid on borrowings fell marginally from 7.80% and 7.64% to 7.56%. The difference between interest rate and rate of return has also come down marginally.