The Chhattisgarh Government had raised its market borrowings despite availability of sufficient cash balance during 2009-10 and 2012-13, the Comptroller and Auditor General of India (CAG) has observed in its report on State Finances for the year ended March 31, 2013.
The CAG , in its report remarked that that the 13th Finance Commission had recommended that States with large cash balances should make efforts towards utilising existing cash balance before resorting to fresh borrowings and follow the practice of borrowings on requirement rather than availability.
It was further stated in the report that the scrutiny of notes and files of Chhattisgarh State’s Finance Department revealed that the requirement of market loans were assessed by the State Finance Department considering the anticipated availability of cash balance and receipts and the anticipated expenditure.
The report observed : ‘We (CAG), however, observed that the requirement of market borrowings was not assessed judiciously. During 2009-10, the minimum and maximum amount of investment of cash balance in ‘14 days Treasury Bills’ were Rs 647.54-crore and Rs 2,541.56-crore respectively.’
The report further observed: ‘Similarly during 2012-13, the minimum and maximum amount of investment of cash balance were Rs 779.83 crore and Rs 3,505.27 crore respectively. This indicated that the market borrowings raised was more than the actual requirement leading to increase in cash balance’.
The Chhattisgarh Finance Department during August 2013 stated that there was economic recession in the year 2009-10 and cash balance dipped to alarmingly low of Rs 676-crore as on October 27, 2009 mainly on account of stagnant growth in State’s resources, the report stated.
Further the State Finance Department in its reply stated : Though the cash balance was Rs 2,624-crore on March 31, 2013, on the final adjustment of the year-end on April 2, 2013, the effective cash balance was Rs 920-crore on that date ( cash balance Rs 1,534-crore minus Rs 614-crore towards share in the Central tax for month of April 2013) and had the State not resorted to Open Market Borrowing of Rs 1,500-crore, it would have faced the situation of overdraft,’ the report stated.
CAG observed that the reply of the State Finance Department was not in order since the minimum cash balances during the years 2009-10 (Rs 647.54-crore) and 2012-13 ( Rs 779.83-crore) were much higher than the required minimum balance of Rs 0.72-crore prescribed by the Reserve Bank of India (RBI).
The report further observed: ‘Besides, the minimum amount of cash balance investments one month from the date of receipt of market loans were Rs 1,433.86-crore ( on December 11, 2009) and Rs 1,344.67-crore on April 20, 2013 which indicated that the recommendations of the 13th Finance Commission regarding utilization of existing cash balance before resorting to fresh borrowings was not adhered to.’
