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India Today
5 days ago
- Business
- India Today
Why CAG is alarmed by Maharashtra's off-Budget borrowings
The Comptroller and Auditor General (CAG) has sounded an alert on the off-Budget borrowings by the Maharashtra government affecting its fiscal transparency. The statutory auditor has also pointed to the growing stress on the state's public finances.'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,' said the CAG's report on Maharashtra State Finances for report, which was submitted to the state legislature during its recent monsoon session, explained that off-Budget borrowing (OBB) allows the government to meet its expenditure requirements without recording these debts in the Budget, thereby bypassing legislative 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. 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 However, audit has observed that despite the requirement for transparency, off-Budget borrowings were not disclosed in the Budget documents,' the CAG report said. The CAG's audit noticed instances wherein the state government had resorted to off-Budget borrowing through the Maharashtra State Road Development Corporation (MSRDC) and MSRDC Tunnels Ltd. These entities had entered into an agreement with financial institutions, guaranteeing repayment through state budgetary allocations to cover the principal and interest payments.'The 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,' the CAG report said, adding: 'The continuous mismatch between receipts and expenditure indicates rising fiscal stress.'State governments are increasingly turning to populism in their politics. For instance, in Maharashtra, after a drubbing in the Lok Sabha election last year, the erstwhile Eknath Shinde-led regime rolled out a gravy train of welfare schemes. The flagship scheme was the Mukhyamantri Majhi Ladki Bahin Yojana, under which over 25 million women from indigent families were given doles of Rs 1,500 per month in a replica of a similar cash benefit scheme for women in neighbouring Madhya schemes, such as stipends for apprentices, free visits to pilgrimage centres for senior citizens, and even a waiver on the toll on passenger cars levied at the five entry points to Mumbai, served as force-multipliers in the state assembly poll held later that year, which was swept by the from the ruling coalition say the Ladki Bahin scheme led to this 'silent' voter segment of women, whose financial and social autonomy is otherwise constrained, voting for them with their feet. By June this year, a scrutiny by the state government has detected that around 885,000 women had claimed more cash doles under the Ladki Bahin Yojana than they were eligible for. The state government also struck off over 2,000 government employees from the list of CAG report said that the state has different sources of revenue receipts, such as its own tax revenue, non-tax revenue, devolution of state's share in taxes, grants in-aid from the Union government and non-debt capital receipts. From 2019-20 to 2023-24, the revenue receipts increased by 52.05 per cent, from Rs 2,83,189.58 crore in 2019-20 to Rs 4,30,596.46 crore in 2023-24, at a CAGR (compound annual growth rate) of 11.04 per compared to 2022-23, during 2023-24, its own tax revenue increased by Rs 24,857.06 crore (8.96 per cent), the non-tax revenues rose by Rs 4,081.53 crore (24.33 per cent) and the state's share of Union taxes and duties increased by Rs 11,348.78 crore (18.91 per cent). However, the grants-in-aid from the Union government decreased by Rs 15,368.84 crore (29.89 per cent).The CAG noted that debt as a percentage of the Gross State Domesdatic Product (GSDP) has increased to 18.11 in 2023-24 from 17.42 in 2022-23. Additionally, there were off-Budget borrowings during 2022-23 and 2023-24. 'If the current trend is followed, the ratio of debt/GSDP would eventually rise, leading to reduced fiscal flexibility,' it to India Today Magazine- EndsTune InMust Watch
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.
