Mumbai, July 18 (IANS) The Comptroller and Auditor General (CAG) of India in its report on Maharashtra State Finances for the year 2023-24 has said that ‘off-budget borrowings’ (OBBs) affect state’s fiscal transparency.

It issued a strong warning to the state government that off-budget borrowings increases the public liabilities of the State substantially over a period of time leading to a debt-trap, and asked the Maharashtra government to bring them within the ambit of legislative control to ensure sustainable financial management.

“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,” the report said.

The CAG report was tabled by the Deputy Chief Minister Ajit Pawar in the state assembly on Friday.

“Government of Maharashtra’s increasing use of off-budget borrowings not only affects fiscal transparency but also risks circumventing 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. Furthermore, these off-budget borrowings should be brought within the ambit of legislative control to ensure sustainable financial management,” said the report.

Off-budget items are government borrowings and expenditures that do not get reflected in the government budget. CAG’s observations come when the Maharashtra government has been heavily depending on raising OBB.

According to the report, all Government borrowings and expenditure should legitimately be covered within the respective budgets and the Government must include the disclosure of the details of the off-budget borrowings done through various agencies of the State Government in the Budget and Accounts.

The CAG report said that the Off-budget borrowing allows the government to meet its expenditure requirements without recording these debts in the budget, thereby bypassing legislative scrutiny. “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,” it said.

The CAG in its report pointed out that as outlined in the Maharashtra Fiscal Responsibility and Budget Management (MFRBM) Act and the Rules (2006, amended in 2008), the State Government must provide full disclosure of its liabilities including off-budget in Form B-6 of the Medium-Term Fiscal Policy Statement (MTFPS) of that particular year.

“However, the CAG in its report has observed that despite the requirement for transparency, off-budget borrowings were not disclosed in the budget documents. As per the MTFPS 2023-24, the State Government has disclosed an outstanding off-budget borrowing of Rs 19.40 crore only (outstanding prior to 2004-05),” it said.

The outstanding off-budget borrowing increased significantly from Rs 51 crore in 2019-20 to Rs 10,135 crore by the end of 2023-24, indicating the increase in the state’s reliance on off-budget borrowing for large-scale capital expenditures.

–IANS

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