New Delhi, December 19, 2017

Says targets should be deferred after amending the FRBM Act

The Comptroller and Auditor General of India has pulled up the Finance Ministry for deferring its fiscal deficit targets and opaqueness in Budget classifications.

The issues have been raised in two audit reports on the Provisions of the Fiscal Responsibility and Budget Management (FRBM) Act 2003 and Accounts of the Union Government for 2016-17, which were tabled in Parliament on Tuesday.

“Deferment of fiscal targets needs to be carried out through appropriate amendment in the Act,” said the CAG in its audit on the provisions of the FRBM Act, while noting that the expert committee led by former Revenue Secretary NK Singh, in its report submitted in January 2017, recommended repealing of the existing FRBM Act.

New roadmap

It had proposed adopting the new ‘Debt and Fiscal Responsibility Act’ and had suggested a new roadmap for fiscal indicators.

In Budget 2016-17, the target date of elimination of effective revenue deficit was deferred from March 2018 to March 2019 without corresponding amendment in the Act.

Further, in Budget 2017-18, the target date of effective revenue deficit was deferred beyond financial year 2019-20, and that of fiscal deficit to 2018-19 by the government, without amending the Act.

The CAG in its report also noted the wide gap in projections and actuals for 2015-16 included in Medium Term Fiscal Policy Statement for gross tax revenue, outstanding liabilities and disinvestment varied significantly.

“This indicates deficiencies in the process of making assumptions while preparing fiscal policy statements,” said the CAG, adding that the government needs to put in place an appropriate mechanism to avoid instances of inconsistencies in estimation and correct reporting of components of expenditure having a bearing on deficit indicators.”

For instance, in 2015-16, the Budgeted annual reduction of revenue and fiscal deficit was only 0.1 per cent and 0.2 per cent of the GDP, respectively, as against the required reduction of 0.4 per cent for each.

The CAG also called for full disclosure on liabilities relating to annuity projects and said that the Centre must transfer specific-purpose levies and cess collected to the designated funds.

About Rs.20,911 crore was collected under levies and cess forming part of tax amd non-tax revenue, but was not transferred to earmarked funds, leading to understatement of revenue and fiscal deficit by an equal amount in 2015-16.

Government accounts

In its audit of government accounts, the CAG fund that 14 regulatory bodies and autonomous agencies had at the end of March 2017 retained funds to the tune of Rs.6,064 crore outside the government account, contrary to the instructions of the Finance Ministry.

Further, the Central Board of Direct Taxes (CBDT) incurred Rs.2,598 crore expenditure as interest on refunds in 2016-17 without Parliamentary approval. In total, it spent Rs.58,537 crore on interest payments over the last nine years without obtaining the approval of Parliament, said the CAG.

[The Hindu Business Line]