CAG Finds ‘Cash Diversion’ by Govt to Unknown Repositories, Understated External Debt

New Delhi: In a damning report, the Comptroller and Auditor General (CAG) has found big holes in the Central government’s book-keeping that includes diversion of public funds to unknown repositories, undervaluation of the country’s external debt, among others. 

Citing CAG’s report number 21, released last month, titled ‘Quality of Accounts and Financial Reporting Practices, related to the Central government’s accounts for 2021-22, The Telegraph, newspaper said the Centre’s “accounting shenanigans” regarding the use of public funds would “leave any private conglomerate and its auditors aghast.”

CAG report unveils a shocking web of financial deceit in the Modi govt's accounts. Secret repositories, hidden liabilities, and undervalued debts. This is wholesale loot of public money. Modi govt must be held accountable.https://t.co/LW2mFGy8MD

— Sitaram Yechury (@SitaramYechury) September 18, 2023

According to some ‘glaring holes’ raised by CAG, the Centre allegedly grossly undervalued the country’s external debt by Rs 2.19 lakh crore, placing it at Rs 4.39 lakh crore in 2021-22, by using the old exchange rate. At the current rate, it would have “ballooned” to Rs 6.58 lakh crore, says the report. 

Also, the liabilities for small savings and provident fund have been undervalued at Rs 21,560 crore, as the government has not disclosed how much it has invested in the equity of state-owned companies and collected by way of dividends. 

As per The Telegraph report, citing CAG figures, investment of National Small Savings Funds (NSSF) in state government securities, accumulated NSSF deficit, post office insurance fund and investments in government undertakings stood at Rs 6,23,006 crore in 2021-22, but the figure reported by the government in the summary statement has given the total amount as Rs 6,01,445 crore, showing a mismatch of Rs 21, 560 crore. Where is this money? 

The CAG report has also slammed the government for not giving an “appropriate picture” of its public accounts liabilities. Noting that public funds cannot be parked in entities outside government accounts other than three funds from where funds are disbursed -- the Consolidated Fund of India, a small contingency fund that deals with unforeseen with the current corpus limited to Rs 30,000 crore, and the public account where the government holds money in trust, it said “these are funds that do not actually belong to the government like these cannot be parked provident funds and small savings collections.” Hence these funds cannot be parked elsewhere other than these three entities. 

It cited the example of the Department of Space that parked Rs 154.94 crore in 16 current accounts in banks.  The CAG said when it raised the issue with the department, it said it would close the accounts immediately. 

The CAG found that “these accounts were being used by ISRO to make customs duty payments and credit receipts from the sale of scrap. In November 2021, the department said it would close these accounts when it was able to make customs payments through NEFT/RTGS — the inter-bank settlement systems that enable instantaneous transfer of money. But these accounts were not closed despite these promises,” say the report. 

Citing another example of “irregularities” in accounts, the CAG found that the government had collected Rs 10,376 crore from telecom levy under the Universal Service Obligation Fund (USOF), but only Rs 8,300 crore was transferred to the fund. When asked where was the rest of the collected levy, the government did not answer, says the report.

More such examples of ‘financial discrepancies’ were cited by the CAG report.  For example, Rs 52,732 crore was collected in 2021-22 as education and health cess from individual and corporate taxpayers. Of this, 60% (Rs 31,788 crore) was transferred to the Prarambhik Shiksha Kosh. The rest was to go the Madhyamik and Ucchattar Shiksha Kosh and the Pradhan Mantri Swasthya Surakhsha Nidhi – but both these were found to be not in operation at the end of March 2022. 

When asked by the CAG, the Finance Ministry said in May this year that these funds would be operationalised in 2022-23. “It is still not clear whether they are up and running,” said the report.
 
The CAG report found 15 cases of “mismatch” between the government’s statement on equity holdings in public sector undertakings and the information provided in the respective annual reports of PSUs. 

For instance, as per the government’s statement, it held 30,40,00,000 equity shares in New India Assurance, while the company’s annual accounts puts this figure at 140,80,00,000. In NTPC, the government statement puts the number of its equity shares at 399, 67,26, 967, but the power PSU’s annual report puts this figure at 495,53,46,251.