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CAG trashes State’s claim of sound financial position

The tall claims of Chief Minister Edappadi K Palaniswami and his cabinet colleagues about the robust nature of the state’s finances, mainly revenue and fiscal receipts, have been busted by the CAG.

CAG trashes State’s claim of sound financial position
Chief Minister Edappadi K Palaniswami


In his annual report of the state finances for the fiscal ending in March 2016, the CAG had concluded that from maintaining revenue surplus in 2011-12 and the subsequent fiscal, the state registered a revenue deficit from the 2013-14 fiscal onwards. 

In a glaring indictment of the state’s financial mismanagement, the auditors have summed up that the state not only failed to achieve the revenue surplus as projected in medium term fiscal plan, but also failed to contain its revenue deficit within the target proposed in the budget. 

Attributing the increase in fiscal deficit to revenue shortfall, the report said the revenue deficit of Rs 11,985 crore and fiscal deficit of Rs 32,627 crore were understated by Rs 1,318.48 crore. 

Pointing out that growth rate of revenue receipts, which showed a decreasing trend from 21.39 per cent during 2011-12 to 9.32 per cent during 2013-14 although increased to 13.31 per cent during 2014-15 fiscal, had dropped to a five-year low of 5.38 per cent during 201516 due to poor growth rate of own tax revenues and grants in aid. 

As if that were not enough, the CAG has observed that the state’s own tax revenue increased by Rs 1,820 crore over the previous year and the growth rate, which was 24.56 per cent in 2011-12, declined to a five year low of 2.31 per cent in 2015-16. 

The state’s revenue receipts, as a percentage of GSDP (Gross state domestic product) decreased from 11.2 per cent in 2014-15 to 10.64 per cent in 2015-16. Even investments made by the state in government companies and corporations had not been very fruitful.

‘Exchequer suffered loss as highways dept flouted norms’ 

The State Highways department has been castigated by the CAG for causing additional burden on state exchequer by its non-adherence to norms in preparing estimates for road works resulting in non-utilisation of Central grant of nearly Rs 1.40 crore. 

The report reveals that two works under Pradhan Mantri Gram Sadak Yojana (PMGSY) were awarded to a single bidder without assessing his capacity. “The TN government accorded administrative sanction for taking up 1,591 rural road works at a cost of Rs 858.99 crore in 2009, which included 75 works in 33 packages to be executed by the Highways Department for 49.21 crore,” it said.  However, the contract was cancelled in 2011 by the Superintending Engineer due to slow progress and ordered for recovery of security deposit. Similarly, the upgradation of Elambakkam-Koovam Road sanctioned at Rs 12.81 lakh under P M G S Y was awarded in 2010. “During the inspection, it was observed by the Quality Monitor of the scheme that the existing provision in the estimate was inadequate in view of clay soil of the site, the work was deleted from PMGSY,” the report noted. The report also pointed out that contractors for such road works failed to ensure timely completion. 

Diversion costs dear for Civil Supplies dept

The CAG has pulled up the Civil Supplies Corporation for wrongfully claiming a Central subsidy of Rs 14.55 crore despite knowing that such a claim went against an MoU between the state and Centre.

The MoU, signed in Nov 2010, stated that rice given for PDS could not be diverted for other schemes. When Amudham, on the orders of the state government, contacted FCI in April 2015 as to whether PDS paddy could be diverted for state schemes, FCI informed them categorically that this was impossible due to the MoU. Hence Amudham was now liable to refund the subsidy amount. Amudham ended up losing another Rs 3.19 crore by using PDS rice which cost Rs 35 per kg after processing, whereas direct rice purchase would have cost only Rs 31.65 a kg.

TANGEDCO hauled for excess payment 

The Comptroller and Auditor General (CAG) has hauled the state’s power major TANGEDCO for irregular payment of Rs 11.45 crore to two private players, who supplied power in excess of the contracted amount.

TANGEDCO signed Power Purchase Agreements (PPAs) with Arkay Energy and Sai Regency respectively in June 2013 to supply 110 MW and 5 MW between June 1, 2013 and May 2014. In the PPAs it had mentioned that supply between 100 per cent and 110 per cent would be accepted and paid for only if it had the approval of the corporation’s Load Despatch Centers. A 2015 audit revealed that Arkay supplied 701.15 MU (million units) which was 102.76 per cent of the contracted amount of 682.32 MU, while Sai supplied 22.54 MU, which was 112.16 per cent of the contracted amount of 19.80 MU. Though the corporation restricted drawing power from Sai, it still resulted in payment of Rs 10.36 crore to Arkay and another Rs 1.09 crore to Sai for excess power supplied. It was also revealed that both firms failed to get the mandatory clearances from the LDCs and were paid for it which was against the terms and conditions specified by the PPAs.  The TANGEDCO’s double standards were revealed when the corporation refused to sanction Rs 12.86 lakh for 10 per cent excess power (30.9 MW) supplied by the Chennai-based Kamachi Sponge and Power Corporation in September 2013. Though the state supporting its power major claimed that excess power supply option was included in the PPAs, the CAG stated that the PPAs were clear in this regard. 

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