Based on the audited accounts of the Government of Maharashtra for the year ending 31 March 2017, this Report of the Comptroller and Auditor General provides an analytical review of the Annual Accounts of the State Government.  The financial performance of the State has been assessed based on the Fiscal Responsibility and Budgetary Management Act and Fiscal Correction Path of the Government, Budget Documents, Economic Survey of Maharashtra 2016-17, Thirteenth Finance Commission Report, Fourteenth Finance Commission Report and other financial data obtained from various Government Departments and organisations.

The Report is structured in three Chapters:

Chapter I is based on the audit of Finance Accounts and makes an assessment of the Maharashtra Government’s fiscal position as on 31 March 2017. It provides an insight into trends of committed expenditure and the borrowingsmade by the State Government.

Chapter II is based on audit of Appropriation Accounts and gives a grant-wise description of Appropriations and the manner in which the allocated resources were managed by the service delivery Departments of the State Government.

Chapter IIIgives a selected insight into the Maharashtra Government’s compliance with various reporting requirements and Financial Rules.  The Report also compiles the data collated from various Government Departments/Organisations in support of the audit findings.

The important audit findings are briefly highlighted in the following paragraphs:

Finances of the State Government

Fiscal correction: During 2016-17, the State achieved two of the three major parameters specified by the Fourteenth Finance Commission viz. (i) the ratio of debt to Gross State Domestic Product at 17.5per cent was lower than the norm of 22.64 per cent, and (ii) the fiscal deficit at 1.5 per cent of Gross State Domestic Product was lower than the norm of 3.25per cent. However, the third parameter of Interest Payment/Revenue Receipt at 13.94per cent was higher than the norm prescribed by Fourteenth Finance Commission at 12.17per cent and to the norm prescribed by State’s Medium Term Fiscal Policy Statement (12.78per cent) during 2016-17. As against the revenue deficit of ` 5,338 crore during 2015-16, the deficit during 2016-17 was ` 8,536 crore due to higher growth rate of the revenue expenditure (12 per cent) than the revenue receipts (11per cent) over the previous year.

Capital Expenditure:The percentage of capital expenditure to totalexpenditure remained constant at 11 per cent during 2012-13 and 2013-14,but the same declined to 10 per cent and remained at that level during 2014-15 to2016-17. Greater fiscal priority needs to be given to this area since increasedpriority to physical capital formation is expected to increase the growthprospects of the State.

Review of Government investments:The average return on the State Government’s investment in Government Companies, Joint Stock Companies and Partnerships and Statutory Corporations etc. was 0.04 per cent during 2012-17 while the Government paid average interest at the rate of 7.6 per cent on its borrowings during the same period.

The Government may take steps to ensure better value for money ininvestments. Otherwise, high-cost borrowed funds will continue to be investedin projects with low financial returns.

Revenue Receipts: The State could not maintain the growthmomentum ofrevenue receipts during 2012-13 to 2014-15. The rate of growth of revenuereceipts which had increased to 11.9 per cent in 2015-16 from 10.4 per cent in the previous year 2014-15, decreased to 10.6 per cent in 2016-17.

Central Tax transfers: Tax devolutions from the Central Government increasedfrom ` 28,106 crore in 2015-16 (15 per cent of revenue receipts) to` 33,715 crore in 2016-17 (16 per cent of revenue receipts). The devolution ofthe State’s share of Union Taxes assigned to the State also increased by 20 per cent duringthesecond year(2016-17) of awardperiod of Fourteenth Finance Commission ascompared to the first year of award. Grants-in-aidfrom GoI which constituted nine per cent of revenue receipt in 2015-16however, increased to 11 per cent in 2016-17.

Non-plan Revenue Expenditure:The revenue expenditure (` 2,13,229 crore)constituted 87 per cent of the total expenditure (`  2,45,055 crore) of which,80 per cent (`  1,71,140 crore) was incurred on the non-plan component.  During 2016-17, the non-plan revenueexpenditure (` 1,71,140 crore) remained lower than the normative assessment made in the budget estimates, Medium Term Fiscal Policy Statement(` 1,75,193 crore) and Fiscal Correction Path (`  1,73,668 crore).

Debt servicing:The average expenditure on debt servicing during 2012-17was ` 30,652 crore which accounted for 89.1 per cent of average publicdebt receipts during the same period, implying that a larger percentage ofdebt was being used for debt servicing. This also indicated that a veryinsignificant portion of the debt was available for meeting developmentalexpenditure to promote growth. Further, the State has to mobilise theresources for repayment of ` 43,952.10 crore (an increase ` 30,235.04 crorecompared to the period 2016-18) during the period 2018-20. Unless there isa definite plan to meet this liability the resources available for developmentmay shrink.

Interest payments: Interest payments (`28,532 crore), which increased by 11 per cent during the year over 2015-16, were more than the projections made in the Medium Term Fiscal Policy Statement (`28,220 crore) but less than the projections made in the Fiscal Correction Path (` 29,361 crore) and assessment made by the Fourteenth Finance Commission (`29,697 crore).

Financial Management and Budgetary Control

The programmeimplementation of various social and developmental programmes in the State left an overall saving of ` 49,240.15 crore, set-off by an excess of ` 167.69 crore.  There were instances of inadequate provision of funds. Rush of expenditure at the end of the financial year was another chronic feature noticed in the State. In many cases, the anticipated savings were either not surrendered or surrendered on the last two days of March 2017, leaving no scope for utilisation of these funds for other developmental purposes.

Financial Reporting

The Government’s compliance with various rules, procedures and directives was found wanting in various Departments which was evident from delays in furnishing of UtilisationCertificates by various Grantee Institutions against the loans and Grants-in-aidreceived by them from the State Government. Delays were also seen in submission of Annual Accounts by Autonomous Bodies and Departmentally managed Commercial Undertakings. There were instances of large outstanding cases of losses and misappropriations for which Departmental action was pending since long. Detailed contingency bills were not submitted on time or not furnished at all in violation of prescribed Rules and Regulations, indicating lack of internal controls besides raising apprehensions about proper end-use of funds.Omnibus Minor Head across Major Heads continued to be operated during the year for recording receipts and expenditure,thereby affecting transparency in financial reporting of Government transactions.         

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