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Indian Express
18-07-2025
- Business
- Indian Express
CAG warns Maharashtra of ‘Debt Trap' citing off-budget borrowings
The report of the Comptroller and Auditor General (CAG) of India on Maharashtra State Finances for the year 2023-24 has said that 'off-budget borrowings' affect state's fiscal transparency. Issuing a warning that off-budget borrowings increases the public liabilities of the state substantially over a period of time, leading to a debt-trap, it directed 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. '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. The observations of the CAG hold importance at a time when the Maharashtra government has been relying on raising OBB. In an exclusive interview with The Indian Express in April 2025, Maharashtra Chief Minister Devendra Fadnavis' Chief Economic Advisor (CEA) Praveen Pardeshi had said that the state government has decided to fund capital expenditure through off-budget source of funding and has planned to raise and spend around Rs 30,000 crore on several key projects. The report maintained that '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 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, Audit 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 State's reliance on off-budget borrowing for large-scale capital expenditures.
Time of India
24-04-2025
- Business
- Time of India
Maharashtra must monetise assets to boost capex, says chief eco advisor
Mumbai: Retired bureaucrat Praveen Pardeshi has been appointed chief economic advisor to chief minister Devendra Fadnavis at a challenging juncture - the state faces its highest ever debt of Rs 9.3 lakh crore amid a host of populist welfare schemes. Speaking to TOI, Pardeshi said there is enough fiscal space for borrowing and that his recommendation is to increase long term institutional borrowings for capital expenditure and to monetise the government's assets. This includes leasing irrigation land for tourism and a portion of reservoir surface for solar power generation, besides charging municipal bodies a premium for the use of irrigation water for commercial use. You Can Also Check: Mumbai AQI | Weather in Mumbai | Bank Holidays in Mumbai | Public Holidays in Mumbai "Our fiscal deficit ranges from 2.8 to 3% of GDP which is below the fiscal limit and gives us huge space for more borrowing. In fact, Maharashtra is an underutilised borrowing state compared to others. Borrowing for consumption is bad but borrowing for capital investment is good," said Pardeshi."As discussed with the chief minister, our focus needs to be on long-term loans from institutions and development banks like the WB," said Pardeshi, who is also chief executive officer of the think-tank, Maharashtra Institute for Transformation (MITRA). by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Intel Laptops + 1:1 Support for Your Team Lenovo Pro Benefits Learn More Undo The average repayment period on such loans is 15-20 years with a five-year moratorium. "This time span allows for the completion of the project and the impact on the economy and incomes. The state is then in a good position to repay the loan and does not face a debt trap. We are targeting loans worth Rs 30,000 crores from development banks," he said. Pardeshi is also advising the government on the monetisation of its assets especially in the irrigation sector. "The water resources dept is one of the largest spenders in the state but is not even able to recover its maintenance cost for dams. The idea is to monetise irrigation projects without burdening the tax-payer," he said. Idle resources like the reservoir surface have a huge potential for solar power, he said. "Solar power has 15% more efficiency in water because of lower temperatures. We have suggested the department take a PPP advisor, undertake competitive bidding and allocate a certain amount of the reservoir surface for solar power," he said. The reservoir surface should be leased, even to private players who can pay the lease rent and win the bid, he said. Water-front tourism on irrigation lands that are not used is another suggestion. "We have done GIS mapping of irrigation project lands which are not used and are not under submergence. These can be leased for water-front tourism. But this should be done with large-scale tourism companies who maintain environmental standards with waste water and effluent recycling." Pardeshi said the irrigation department should also consider charging a higher rate to municipalities when they supply water for commercial use."When I was municipal commissioner, the BMC made a profit of around Rs 1,000 crore a year on water. This was because of the supply for commercial use to malls, theatres and industry. But the irrigation department did not make such profits because it gives bulk water to municipalities for both domestic and commercial use," said Pardeshi."We are formulating a policy under which municipalities receiving will have to pay a certain amount to the irrigation department for the water supplied for commercial use," he added.
