CAG Exposes Flaws in Telangana’s Governance

As per a Controller and Auditor General (CAG) Report, tabled in Telangana State Assembly on March 29, the state government failed in the implementation of its flagship programme Mission Kakatiya Scheme. Further revealing shocking details, the report stated that the government had overstated its revenue surplus while understating Fiscal deficit and six Public Sector Undertakings (PSU) had incurred a loss of Rs 21,472 Crores.

Mission Kakatiya was prestigiously launched by the Telangana Rastra Samithi government in 2014. It aimed at restoring the minor irrigation tanks, so that 255 TMC of water, allocated for Minor irrigation sector under Godavari & Krishna River basins, would be effectively utilized. As per official data, the state government had spent up to 3231.2 Crore in three years.

The CAG’s compliance audit found that the government’s target to restore 9,306 tanks, as part of phase-one, within three months, was “unrealistic” as the works were completed in May 2017. This further delayed the phase-two and phase-three of the project, of which only 14 percent and 25 percent works have been completed respectively. So, while the government planned to restore 9,306 tanks every year (20% of total tanks), which would make it 46,531 tanks restored in 5 years, in a phased manner, only 28 percent of the total target has been achieved.

For the financial year 2016-2017, the state government had claimed that it had a revenue surplus of Rs 6,778 Crore. This has been rebutted by the CAG which said that the revenue surplus for that period was only Rs 1,386 Crore and the error of “overstating” occurred on account of “irregular accounting”. This threw the state into a revenue deficit of Rs 5,392 Crore in 2016-2017.

Further, the report stated that the state government is lacking a perfect repayment strategy, wherein the government is utilizing borrowed money in repaying its earlier debts. At the end of March 2017, the state government had utilized 34.74 percent of borrowed funds for repaying existing loans which is an increase of 18 percent as compared to the previous year 2015-2016.

In its report on the PSUs, the CAG expressed “serious concerns” resulting in erosion of “Public Wealth”. Of the total 69 PSUs under CAG’s audit, six of them have incurred a loss of Rs 21,472 Crores. While only 43 PSUs of them are currently working, the investment (capital and long-term loans) in them was Rs 58,746 Crores.

In the recently presented state budget 2018-2019, the government has proposed an expenditure of Rs 1,74,453 Crores and pegged revenue surplus at Rs 5,520 Crores and fiscal deficit at Rs 29,077 Crores. However, the latest CAG observations will impact the state’s government plans in raising funds from financial institutions.