OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA
New Delhi, 24th March, 2021
J&K STATE AUDIT REPORT NO. 1 PRESENTED IN PARLIAMENT
The Report No. 1 of the Comptroller and Auditor General of India, on Social, General, Economic and Revenue Sectors for the year ended 31 March 2019, Government of Jammu and Kashmir was presented to the Parliament on here today, on 24.03.2021 in accordance with Article 151 of the Constitution of India and the decision (22 June 1994) of the Government of India, Ministry of Finance, Department of Economic Affairs.
This Report is in three parts.
Part-I comprising of Chapters-1 and 2, covers audit findings of eight Government departments and contains nine paragraphs involving Rs. 192.47 crore relating to Management of Bank accounts, unfruitful expenditure, unauthorised payment of idle salary etc.
Part-II comprising of Chapters-3 and 4 covers audit findings of Revenue sector and includes five paragraphs on short demand due to concealment of purchases, irregular grant of tax remission, irregular allowance of input tax credit and misappropriation of Government money, involving Rs. 2.03 crore.
Part-III comprising of Chapters-5, 6 and 7 covers audit findings of Public Sector Undertakings and includes one Performance Audit on ‘Working of Jammu and Kashmir State Road Transport Corporation’, and four paragraphs relating to expenditure incurred in excess of sanctioned cost, non-recovery of excess expenditure, short realisation of administrative overheads and execution of works in excess of approved costs involving Rs. 754.53 crore.
Part-I: Social, General and Economic (Non-PSUs) Sectors (Chapters-1 and 2)
Total expenditure of the State including Revenue expenditure, Capital expenditure and disbursement of loans and advances increased from Rs. 34,550 crore to Rs. 64,572 crore during 2014 to 2019. The revenue expenditure increased by 91 per cent from Rs. 29,329 crore in 2014-15 to Rs. 56,090 crore in 2018-19. However, capital expenditure during the same period increased by 64 per cent from Rs. 5,134 crore to Rs. 8,413 crore.
Compliance Audit (Non- PSUs)
Non-establishment of Model Schools
Failure of the Education Department to take timely action for utilisation of amounts received from the Government of India (GoI) for establishment of Model Schools at block level resulted in depriving quality education to the intended beneficiaries and non-utilisation of total available funds of Rs. 44.13 crore. The State Government contribution of Rs. 5.74 crore and interest accrued included in the available fund of Rs. 44.13 crore was also blocked, for ten years.
Management of Bank Accounts in Government Departments
Government instructions issued from time to time on consolidation and streamlining of utilisation of funds retained in bank accounts of Drawing and Disbursing Officers (DDOs) were not strictly adhered to. Only a meagre amount of Rs. 64.10 crore was transferred from the redundant bank accounts of DDOs during the period December 2016 to February 2017. The accumulated balance in 1,138 bank accounts of 131 DDOs of three selected Government Departments increased from Rs.116.41 crore to Rs.399.94 crore during the period from 2014 to 2019. Increase in the accumulated balances was due to undisbursed funds of relief/ compensation to the victims of militancy, natural disasters, improper planning and non-completion of schemes, overstatement of expenditure in the Utilisation Certificates, retention of funds, retention of statutory deductions and land compensation outside the Government Account.
Non collection/ short remittance of dues
Non-distribution of 1,30,121 ration cards printed during the period 2015 to 2018 to the consumers in 11 test-checked units of Food Civil Supplies and Consumer Affairs Department led to non collection of Rs.1.07 crore as well as short remittance of Rs. 1.69 crore into Government Account.
Unfruitful expenditure due to non-functional Solar Power Plants
Non-settlement of payment of Works Contract Tax (WCT) with the State Taxes Department rendered 128 Solar Power Plants installed at police establishments nonfunctional since September 2014 despite incurring expenditure of Rs. 9.70 crore between May 2014 to January 2015 and availability of maintenance free warranty.
Wasteful expenditure on water storage tanks
Irrigation and Flood Control Department took up the execution of work on water storage tanks, without acquiring the private land and seeking prior clearance from Forest Department/ Defence Authority, resulting in wasteful expenditure of Rs. 3.67 crore.
Unfruitful expenditure on Lift irrigation Scheme
Non-selection of suitable site for construction of pumping station before taking up execution of the works for lift irrigation scheme, by Executive Engineer, Irrigation and Flood Control Division, Sumbal led to revision of cost of the scheme and inability to arrange additional funds over a period of eight years for completion of scheme, rendered expenditure of Rs. 2.23 crore on the scheme unfruitful.
Under-utilisation of mobile cranes fitted with weigh bridge testing kits
The Legal Metrology Department failed to engage driver/ trained staff for operating mobile cranes fitted with weigh bridge testing kits provided by GoI for an amount of Rs.1.18 crore, resulting in their under-utilisation and defeating the intended purpose to modernise and transform the manual practice of calibration/ verification of weigh bridges.
Unauthorised Payment of idle salary
Failure of the Power Development Department to either transfer Drivers/ Chauffeurs deployed in excess of sanctioned strength or utilise their services effectively resulted in unauthorised drawal and payment of idle salary of Rs. 79.46 lakh to Drivers/ Chauffeurs during the period from March 2015 to January 2019.
Unfruitful expenditure and blocking of funds
Failure of Public Health Engineering Department to make the augmentation of water supply scheme functional over a period of seven years, resulted in unfruitful expenditure of Rs.78.28 lakh and blocking of Rs.39 lakh.
Part-II: Revenue Sector (Chapters-3 and 4)
During the year 2018-19, the overall receipts of the State increased by 5.6 per cent over the previous year. The revenue raised by the State Government (Rs.14,175.70 crore) was 28 per cent of the total revenue receipts against 29 per cent in the preceding year. The balance 72 per cent of the receipts during 2018-19 was from the Government of India (GoI) of which 62.25 per cent came in the form of Grants-in-aid. The Grants-in-aid from GoI constituted 45.02 per cent of the total receipts of the State.
Test-check of the records of 54 units out of 398 auditable units of State Taxes, State Excise and Transport Department conducted during the year 2018-19 showed under assessment/ short levy/ loss of revenue aggregating Rs. 900.11 crore in 502 cases. Departmental replies were received only from 8 units regarding acceptance of under assessment and other deficiencies of Rs. 2.46 crore. The Departments recovered Rs.1.55 crore during 2018-19 in respect of 51 cases pertaining to audit findings of period prior to 2018-19.
Compliance Audit (Revenue Sector)
Short levy of tax due to concealment of purchases
Failure of the Assessing Authority, Commercial Taxes Circle ‘H’ to detect the concealment of turnover while assessing the dealer resulted in short levy of tax, interest and penalty of Rs.17.67 lakh.
Short demand of tax and interest due to irregular grant of tax remission
Irregular grant of tax remission by the Assessing Authorities, Commercial Taxes Circles-I and II, Udhampur, to two industrial units which had concealed purchases of Rs.12.32 lakh during the years 2010-11 and 2013-14, resulted in short demand of Rs.26.22 lakh.
Short demand due to irregular allowance of input tax credit
Failure of the Assessing Authorities Commercial Taxes Circle-II, Udhampur and Circle ‘L’ Jammu to disallow the input tax credit claimed by the dealers on purchases made during the period of suspension of their registration certificate, resulted in short demand of Rs.1.26 crore.
Short demand due to irregular availing of input tax credit
Failure of the State Taxes Anantnag-I circle to correctly verify the return filed by the dealer and disallow the irregular input tax credit claimed on expired/ returned goods, resulted in short demand of Rs.16.04 lakh.
Misappropriation of Government money
Tehsildar, Kathua failed to adhere to the rules prescribed for handling of revenues of the Government and also furnished incorrect information to audit which facilitated the misappropriation of revenue receipts of Rs.16.81 lakh.
Part-III: Public Sector Undertakings (Chapters-5, 6 and 7)
As on 31 March 2019, there were 42 PSUs, including 39 Government Companies (of which nine were non-working) and three Statutory Corporations under the audit jurisdiction of the Comptroller and Auditor General of India (C&AG). Of these, one PSU i.e. Jammu and Kashmir Bank Limited is listed (July 1998) on the stock exchange. Of the total paid-up equity of the Bank, 59.23 per cent is held by the State Government and remaining 40.77 per cent is held by Foreign Institutional Investors, Individuals and others. During the year 2018-19, six PSUs were incorporated and no PSU was closed down. The 33 working PSUs registered an annual turnover of Rs.9,784.90 crore and earned aggregate profit of ` 448.02 crore as of September 2019 as per their latest finalised accounts. The turnover was equal to 6.33 per cent of Gross State Domestic Product (GSDP) of Rs.1,54,441 crore for 2018-19.
Performance Audit (PSUs)
Working of Jammu and Kashmir State Road Transport Corporation
The Jammu and Kashmir State Road Transport Corporation (the Corporation) a transport undertaking wholly owned by the Government, with the aim to cater to the transport needs, both of passengers and goods for the public in the State was setup in September 1976. A Performance Audit of the Corporation for the period from 2014-15 to 2018-19 brought out instances of certain deficiencies in planning, operational performance, internal controls etc. While total financial implication of this Performance Audit is Rs.737.57 crore, the important audit findings are as follows:
Compliance Audit (PSUs)
Expenditure incurred on construction of a bridge in excess of sanctioned cost
Jammu and Kashmir Projects Construction Corporation Limited did not restrict the work of construction of a bridge and allied works within the sanctioned cost, resulting in non-recovery of expenditure of Rs.1.88 crore incurred on the work.
Non-recovery of excess expenditure incurred on construction of a bridge
Jammu and Kashmir Projects Construction Corporation Limited constructed a bridge over Darhali Nallah, Ujjhan (Rajouri) without ensuring the approval of revised cost offers and release of funds, which resulted in expenditure of Rs. 6.85 crore not being reimbursed.
Short realisation of administrative overheads
Despite clear instructions of the Project Authority to restrict the value of work to Rs.20.50 crore for construction of Niki Tawi bridge, the Jammu and Kashmir Projects Construction Corporation Limited exceeded the sanctioned cost, resulting in short realisation of administrative overheads of Rs.1.64 crore.
Execution of work in excess of approved cost
Failure of the Jammu and Kashmir State Power Development Corporation Limited to execute work under Rajiv Gandhi Grameen Vidyutikaran Yojana as per the approved cost, led to financial loss of Rs.1.92 crore, besides, non-receipt of Rs.4.67 crore from the Rural Electrification Corporation since 2014-15.
Press Brief (State Finances Audit Report of Government of Jammu & Kashmir for the year ended March 2019)
State Finances Audit Report No. 2
The State Finances Audit Report of the Comptroller and Auditor General of India for the Government of Jammu and Kashmir for the year ended 31 March 2019 contains audit observations on the Finance and Appropriation accounts of the State Government for the year 2018-19 and provides an overview of the status of the State Government’s compliance with various financial rules, procedures and directives relating to financial reporting. The Report has been presented to the Parliament on 24.3.2021 .
Following are some of the important comments/audit observations contained in the State Finances Audit Report:
Chapter I: Finances of the State Government
The Buoyancy of Revenue Receipts (RR), State Own Tax Revenue (SOTR) with reference to GSDP was lower during 2018-19 in comparison to 2017-18 as the growth rate of RR and SOTR was lower during 2018-19 as compared to the previous year.
The Revenue Receipts increased by 22,719 crore (5.60 per cent) during 2018-19 over the previous year mainly due to increase in the State’s share in the Union Taxes and Duties by 22,078 crore (17.44 per cent), Grants-in-Aid from Government of India by 2364 crore and State’s Own Tax Revenue by 2290 crore. Transfers from the Union Government of State’s share in Union Taxes and Duties and Grants-in-Aid together constituted 72.33 per cent of the State’s Revenue Receipts during 2018-19.
As on March 2019, loan amounting to 245.93 crore and 2376.72 crore were outstanding against Agro Industries and J&K State Road Transport Corporation which had an accumulated losses of 242.10 crore and 21,148.12 crore respectively as per their latest finalized accounts. Despite poor performance of recovery, State Government disbursed new loan to these entities during the current year.
Revenue Expenditure increased by 215,174 crore over the previous year. Revenue Expenditure during the year constituted 87 per cent of the Total Expenditure. Committed Expenditure on account of salary & wages, pension, interest payment and subsidies constituted 68 per cent of Revenue Expenditure during 2018-19.
The share of Development Capital Expenditure in Total Expenditure decreased from 18.62 per cent in 2017-18 to 11.76 per cent in 2018-19, while the share of Development Revenue Expenditure in Total Expenditure increased from 46.84 per cent to 51.48 per cent during the same period.
As on 31 March 2019, the State Government had cumulative investment of 2689.42 crore in Companies/Statutory Corporations/Co-operative Institutions and Local Bodies. The rate of dividend/interest was 23.99 per cent during the year 2014-15 and it continuously decreased during the subsequent years and there was no return in 2017-18 and 2018-19, while the investment at the end of each year during the said period increased from 2537.17 crore to 2689.42 crore. The return on investment is on historical cost and not on the net present value basis.
The cash balance for the year 2018-19 was not even equal to the earmarked reserve funds amounting to 22,486 crore which means that reserve funds were used for other than the intended purpose.
Overall Fiscal Liabilities of the State were 279,105 crore as on 31 March 2019.The accumulated fiscal liabilities were 1.54 times of the Government’s Revenue Receipts and 5.58 times of the Government’s Own Resources as on 31 March 2019. The buoyancy ratio of these liabilities with respect to GSDP during 2018-19 was 1.39, indicating that for each one per cent increase in GSDP, fiscal liabilities grew by 1.39 times.
Revenue Surplus of 27,595 crore of 2017-18 turned to Revenue Deficit of 24,859 crore during 2018-19 mainly due to implementation of 7th Pay Commission recommendation for J&K Government employees. Fiscal Deficit (FD) increased from 22,778 crore in 2017-18 to 213,337 crore in 2018-19. The State had a Primary Deficit of 28,128 crore in 2018-19 as compared to Primary Surplus of Z1,885 crore during 2017-18.
Chapter II: Financial Management and Budgetary Control:
During 2018-19, expenditure of 285,241.37 crore was incurred against total grants and appropriation of 21,09,479.22 crore. Overall savings of 224,237.85 crore was the result of saving of n8,869.38 crore in various grants and appropriations offset by excess of 24,631.53 crore in five grants and an appropriation, which required regularization under Section 82 of the erstwhile Constitution of Jammu and Kashmir in addition to Z1,14,061.35 crore for the years 1980-2018.
There were persistent savings in six grants during 2014-19. In 16 cases, supplementary provision proved to be unnecessary as the expenditure was less than the original provision, while in four grants supplementary provision proved to be insufficient resulting in excess expenditure.
During 2018-19, a sum of 21,874.17 crore of Grants-in-Aid, Subsidy of 299.18 crore, 20.19 crore of Stipend and Scholarship, 22.24 crore as Salary and 2286.21 crore under operating cost of procurement/Sale of Essential Commodities through PDS were disbursed under the Capital Major Heads of expenditure, as against the requirement of their accounting in revenue heads.
Chapter III: Financial Reporting:
1,774 Utilization Certificates in respect of loans and grants involving 28,219.90 crore against various departments were outstanding as on 31 March 2019. State Government may review whether they should continue to give more grants to departments with high pendency of UC’s. Abnormal delays were noticed in submission of annual accounts by some of the departmental commercial undertakings and Autonomous Bodies.
During 2018-19, 24,220.87 crore (8.24 per cent of the total Revenue Receipts) was classified under the Minor Head 800-`Other Receipts’ and expenditure of 23,662.17 crore (5.68 per cent of Total Expenditure) was booked under Minor Head 800-`Other Expenditure’ instead of depicting distinctly in the Finance Accounts which affects transparency in financial reporting.