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CAG finds deterioration in Bihar`s fiscal position

There was deterioration in Bihar`s fiscal position in terms of trends in 2009-10 compared to the last two years, Controller and Auditor General report said.



Patna: There was deterioration in Bihar`s
fiscal position in terms of trends in 2009-10 compared to
the last two years, Controller and Auditor General report
said.

Although the state maintained a revenue surplus during
these years and had already achieved the 12th Finance
Commission recommendation of eliminating revenue deficit,
there was a decrease in the revenue surplus during the period
under review, said the CAG report on the state`s finances for
the year ended March 31, 2010.

The report was tabled by Deputy Chief Minister SK Modi
in the state Assembly.

The report, however, said the fiscal deficit which was
well within 3 per cent of the gross state domestic product
(GSDP) increased to 3.4 per cent during the year, which too
was within the revised recommendation of 3.5 per cent.

It suggested the need to reduce non-plan expenditure as
the revenue expenditure was 80 per cent of the total
expenditure, of which 74 per cent was under the non-plan head
which included expenditure on salaries, pension payments,
interest liabilities and subsidies, which constituted 77 per
cent of non-plan revenue expenditure.

A CAG review showed that the average return on
government`s investments in statutory corporations, government
companies, cooperative banks and societies varied between 0.24
to 0.38 per cent during the last three years.

The government paid average interest on borrowings at
rates ranging from 6.48 per cent to 7.93 per cent and this was
obviously an unsustainable proposition.

The report suggested that the state government should,
therefore, initiate steps to seek better value for money in
its investments.

Otherwise the high cost of borrowed funds invested in
projects with low financial returns, would continue to strain
the economy.

Increasing fiscal liabilities accompanied by negligible
rates of return on government investment and inadequate
interest cost recovery on loans and advances might result in a
situation of unsustainable debt in the medium to long term
unless suitable measures are initiated to reduce the Non-Plan
revenue expenditure and to mobilise additional resources,
through tax and non-tax sources.

The report said that during 2009-10, there was an
overall savings of Rs 10,546 crore, which was a result of the
total savings of Rs 10,644 crore, being offset by excess
expenditure of Rs 98 crore.

This excess expenditure required regularisation under
Article 205 of Constitution, it said.

PTI

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