Overview ix OVERVIEW This Report includes two Chapters containing observations of Finance and Appropriation Accounts of the Government of West Bengal for the year 2002-2003 and three other chapters comprising seven reviews and 41 paragraphs dealing with the result of audit of selected programmes and schemes and of the financial transactions of Government including its commercial and trading activities. A synopsis of the findings contained in the audit reviews and the more important paragraphs are presented in this overview. 1 An overview of the Finances of the State Government The Government showed a lower revenue deficit compared to the previous year. This was achieved by a substantial reduction in plan expenditure. Overall revenue receipts of the State increased from Rs 9387 crore in 1998-1999 to Rs 14525 crore in 2002-2003. Compared to 1998-1999, the contribution of the States own taxes in its total revenue receipts declined from 51 per cent to 49 per cent. Contribution of grants-in-aid decreased from 16 per cent in 1998-1999 to 15 per cent in 2002-2003. The Eleventh Finance Commission recommended, as a medium term objective to keep interest payment ratio i.e. interest payments as percentage of revenue receipts at 18 per cent. It was observed, however, that this ratio reached an all time high at 54 per cent during 2002-2003. Overall revenue expenditure of the State increased from Rs 14243 crore in 1998-1999 to Rs 23161 crore in 2002-2003 at an average trend rate of 16 per cent. Rate of growth of revenue expenditure reached a level of 37 per cent in 1999-2000 and since then it has decelerated and the decline was one per cent in 2002-2003 compared to previous year. The share of capital expenditure in the total expenditure was merely 3 per cent during the year. As a percentage of revenue receipt, revenue expenditure increased from 152 per cent in 1998-1999 to 159 per cent in 2002-2003, indicating a widening gap. Plan expenditure, despite its initial low values in 1998-1999 at 17 per cent further steeply declined to a meagre 11 per cent over the years. In case of developmental expenditure, its ratio to total expenditure declined from 59 per cent in 1998-1999 to 46 per cent in 2002-2003. Fiscal liabilities of the State increased from Rs 31954 crore in 1998-1999 to Rs 77515 crore in 2002-2003 at an average rate of 26 per cent during 1998-2003. Net funds available as a percentage of total gross debt receipts declined from 48 per cent in 1998-1999 to 40 per cent in 2002-2003. The ratio of fiscal liabilities to Gross State Domestic Product (GSDP) had been increasing continuously. Average interest spread had been negative in 2002-2003 with GSDP growth of 7 per cent in 2002-2003. Persistence of this phenomenon may endanger debt sustainability. Against investment of Rs 4203.70 crore in statutory corporations, rural banks, joint stock companies and co-operatives, return on the investment was Audit Report (Civil) for the year ended 31 March 2003 x negligible in each of the last five years. Since Government was investing the interest bearing borrowed funds, the difference between the rate of return on these investments and the average interest rate on its outstanding liabilities represented an implicit subsidy, which amounted to Rs 2094.58 crore during 1998-2003. The amount blocked up in incomplete projects during 1998-2003, continued to rise from Rs 949 crore in 1998-99 to Rs 1159 crore in 2002-2003. States fiscal imbalances were also increasing and a larger part of the fiscal deficit was used for meeting current expenditure. Increasing ratios of fiscal liabilities to its GSDP, revenue receipts and own resources indicated that the debt stock was increasingly becoming unsustainable. Balance from its current revenue (BCR) was not only consistently negative, its magnitude was on the increase. Further, with large revenue deficits (though marginally declined in the current year), a larger part of this liabilities were not having an asset back up. The ratio of its assets to its liabilities had declined to 0.35 indicating that more than half of the States fiscal liabilities had ceased to have an asset back up. All these indicate continuing deterioration of the States fiscal situation. (Paragraphs 1.1 to 1.11) 2 Allocative Priorities and Appropriation Against the total provision of Rs 39729.83 crore including the supplementary budget the expenditure was Rs 44491.99 crore. The overall excess of Rs 4762.16 crore was the result of excess of Rs 11159.99 crore in 4 grants and 5 appropriations offset by the savings of Rs 6397.83 crore in 90 grants and 17 appropriations. The excess expenditure was mainly on account of huge payment of Ways and Means Advances and Overdraft (Rs 15982.21 crore) offset by savings under other heads. The excess expenditure of Rs 11159.99 crore in four grants and five appropriations required regularisation under Article 205 of the Constitution of India. Major savings occurred under eight grants mainly