Chhattisgarh eyes state entities’ excess funds to shore up finances

IN WHAT IS being seen as a sign of the state’s stretched finances, the Chhattisgarh government has asked for excess funds from the state’s corporations to be deposited in the government’s civil deposit account, the K-deposit.

A January 20 order released by the Finance Department, and signed by Special Secretary (Finance) Sharda Verma, asks CEOs and MDs of 20 different boards, authorities and corporations to deposit the surplus amount in their respective bank accounts into the government’s K-deposit. These 20 corporations include the State Police Housing Corporation, the Khadi and Gramodyog Board, State Marketing Corporation, Beverages Corporation, the State Industrial Development Corporation, State Mineral Development Corporation, and the Chhattisgarh Madhyamik Shiksha Mandal, among others. While some of these boards are completely dependent on state government funds, others receive funding under various schemes of the Central government too. The state could be looking at a deposit to the tune of Rs 100 crore from these corporations, the sources said.

A K-deposit is a civil account maintained by state governments to keep funds without incurring any interest cost. Fund balance in the K-deposit helps states present a picture of solvency and creditworthiness.

Explained

Utilising unspent funds

It’s not usual for states to get corporations to park their funds in the K-deposit. While it does help the state tide over a cash crunch in the last quarter, it gives the finance department (the CM holds the finance portfolio here) full control over funds allocated to the entities.

Acknowledging the order, officials of the state government said the decision was taken for better regulation of funds. Maintaining that the state’s financial condition “is very good otherwise”, the Finance department said that “the board/corporation/authority can withdraw the money from K-deposit with the Finance department’s approval as and when they need to make a payment”. This move, officials believe, will ensure an additional check by the CM office on the corporations’ utilisation of funds since CM Bhupesh Baghel also holds the Finance portfolio.

Responding to queries, the state Finance department told The Indian Express, “(The) Accountant General Chhattisgarh has pointed out to State Government that some of the public sector entities (board/corporation/authority) of State Government have drawn the funds from budget and have parked the money into bank accounts. This is violation of provisions of the Finance code, which clearly states that no money should be drawn from the Consolidated Fund in anticipation of expenditure and it should be drawn only when the payment has to be made in lieu of service, work, procurement etc. Drawal of money in advance adversely affects the finances of the State and should be avoided to maintain fiscal discipline. So the instruction has been issued only to ensure better compliance of rules and regulations.”

Despite the Finance department stating otherwise, Chhattisgarh has been facing a financial crunch since 2020. In the pandemic year, the department levied strict restrictions on expenditure.

In a letter to Union Finance Minister Nirmala Sitharaman in November last year, Baghel had sought financial resources for Chhattisgarh.

According to an annual study of state finances by the Reserve Bank of India, Chhattisgarh’s deficit saw a spike in 2019.

While the revenue deficit of the state was a negative 0.2% of the Gross Domestic State Product in 2018-2019, it rose to 2.8% of the GDSP in 2019-2020. Similarly, the gross fiscal deficit in the state rose from 2.7% of GDSP in 2018 to 5.2% in 2019. The state’s problem is compounded by the continuously growing acreage of rice farming and an additional weight of Rs 700 per metric tonne that is being given as MSP to farmers under the Nyaya scheme. Officials say excessive costs towards various Cabinet-rank positions to accommodate factions in the ruling Congress party have also been a drain on the exchequer.

Meanwhile, the order has left officials of Boards, which are dependent on government grants, perplexed. “We anyway have not had much input due to the pandemic, and now this order means we will have to give up our fallback money… This money is not to keep the government solvent, but to give back to the public in terms of infrastructure and services,” a member of one of the 20 Boards said on condition of anonymity.

To help states’ in their finances, the Centre had shared two advance installments of their monthly devolution. On January 20, the Centre released Rs 3,239.54 crore, comprising one advance installment of tax devolution to the state government. In November, a similar amount was released against the monthly installment of Rs 1,619.77 crore. —With inputs from Sunny Verma, New Delhi

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