CAG report on the Fiscal Responsibility and Budget Management

The government should frame a policy on off-budget financing and sources of such funding in view of its fiscal implication, CAG report on the Fiscal Responsibility and Budget Management (FRBM). The reports tabled in Parliament covering fiscal 2016-17, the Comptroller and Auditor General of India (CAG) said off-budget financing was being used to defer fertilizer arrears, food subsidy bills and outstanding dues of Food Corporation of India (FCI) through borrowings.

Key Highlights 

  • The CAG recommends the government to frame a policy on off-budget financing and sources of such funding in view of its fiscal implication.
  • The off-budget financial arrangements defer committed liability (subsidy arrears/bills) or create future liability and increase the cost of subsidy due to interest payment.
  • The report states that since the off-budget financing is outside the parliamentary control, it has implications for fiscal indicators as they “understate” the government’s expenditure in the year by keeping them off the budget.
  •  The CAG recommends the government to put in place a policy framework for off-budget financing which would specify the rationale and objective of off-budget financing, quantum of off-budget financing, sources of the fund among others.
  • The CAG also recommends the government to consider disclosing the details of off-budget borrowings through disclosure statements in Budget as well as in accounts.