Incomplete projects: CAG points out 30% cost escalation

LUCKNOW: The Comptroller and Auditor General (CAG) has pointed towards a large number of projects lying incomplete in the state with cost revision in such instances leading to nearly 30% escalation.

“Blocking of funds on incomplete works impinge negativity on the quality of expenditure” in Uttar Pradesh, CAG observed in its report on the state’s finances for the year ending on March 31, 2019. The report was tabled in the state assembly during the monsoon session here on Saturday.

CAG recommended that the cost of all the incomplete projects be re-evaluated and a mechanism be evolved to ensure their timely completion.

“Out of total 592 incomplete projects, the estimated cost was revised for only 18 projects. (Overall increase in estimated cost by 30 per cent),” CAG said in its audit report.

A table in the CAG report showed that the initial cost of these 592 incomplete projects was estimated to be Rs 12,216 crore. The cost of 18 of these projects was revised. The total cost of these projects went up from Rs 410 crore to Rs 532 crore, an increase of about 30%, the report said.

“Since the state government has not evaluated the cost of the remaining incomplete projects, the funds required to complete these projects could not be ascertained,” it said.

CAG also pointed out a ‘notional’ loss of Rs 29,896 crore during 2014-19 to the state government in view of the difference between the borrowing cost and the return on investment in the share capital and debentures of different concerns.

About the state government’s fiscal deficit, CAG observed it was financed predominantly by market borrowings. “However, there was scope for reducing market borrowings for financing fiscal deficit keeping in view the increase in investments held under cash balance investment amount during 2015-16 (Rs 601 crore) to 2018-2019 (Rs 15,525 crore). Further, the share of Reserve Fund in financing fiscal deficit consistently increased during 2015-16 (Rs 2,561 crore) to 2018-19 (Rs 13,545 crore) mainly due to significant appropriation from revenue account to sinking fund without actual investment of balances under the sinking fund,” CAG said.

CAG further observed, “During 2018-19, the ratio of fiscal deficit to GSDP (Gross State Domestic Product) was within the targets as set in the budget estimates, mid-term fiscal restructuring policy, Uttar Pradesh Fiscal Responsibility and Budget Management Act and 14th Finance Commission. However, the fiscal deficit (Rs 35,203 crore) of the state increased by 26.58% as compared to 2017-18. The ratio of total outstanding debt to GSDP is above the targets in the budget estimates MTFRP, UPFRBM Act and 14th Finance Commission.”

About the quality of deficit/ surplus, CAG noted, “During 2018-19, non-debt receipts were not sufficient to meet primary expenditure resulting in primary deficit of Rs 3,161 crore. Primary deficit had a fluctuating trend. However, it declined from (-) 1.35 per cent of GSDP in 2014-15 to (-) 0.20 per cent of GSDP in 2018-19. The improvement in primary deficit during the years 2014-15 to 2018-19 was mainly due to increase in revenue receipts, however, there was concomitant reduction in capital expenditure.”