By Bizodisha Bureau, Bhubaneswar, November 29, 2019: Odisha government on Thursday came for a rap from the Comptroller and Auditor General (CAG) on for what it called ‘mindless borrowing’ despite having cash reserves available with it.

In its latest report on the state’s finances for the 2017-2018 fiscal tabled in the assembly, the CAG pointed out, “Odisha borrowed Rs 12,013 crore at a higher interest rate ranging from 6.94 to 8.24 per cent when cash balance of Rs 13,436.83 crore was available by March 31, 2018.”

CAG cited the recommendations of the 13th Finance Commission saying that the states with large cash balances should use it before resorting to borrowings. The CAG recommended that before fresh borrowings, Odisha should examine whether it is necessary to borrow funds at higher interest rates when there are large cash balances available with it. The CAG also advised the state government to avoid huge cash balances.

State’s closing cash balances in the 2015-16 and 2016-17 financial years were pegged at Rs 12,047.68 crore and Rs 14,601.11 crore, respectively. The government in its reply in March 2019 had stated that the cash balance included tied up balances like Odisha Mineral Bearing Areas Development Corporation (OMBADC) Fund, State Disaster Response Fund, Consolidated Sinking Fund (CSF), Guarantee Redemption Fund (GRF) and others, and cannot be used by the state government for general purpose expenditure.

“If these balances are deducted, the amount of the cash balance is about Rs 10,000 crore, which is the minimum balance required for one month’s day-to-day expenditure,” the government had told the CAG.

However, the CAG observed that “Cash relating to OMBADC fund was only Rs 11,568 crore. Even after deducting the tied up balances like CSF, GRF etc., the state was still left with untied cash balance of more than Rs 13,000 crore. An amount of Rs 12,013 crore was borrowed at a higher interest rate from the market, while untied cash of more than Rs 13,000 crore was available.”

The CAG also pointed out that against the mandated minimum cash balance of Rs 1.28 crore, the state government maintained Rs 557.03 crore with Reserve Bank of India as on March 31, 2018.

“Open market borrowings form a major portion (52.78 per cent) of the internal debt of the state government, with interest rates ranging from 4 to 13.99 per cent,” the report stated.

“In 2017-18, the state government borrowed fresh market loans of Rs 8,438 crore while no amount was repaid. The outstanding market borrowings as of March 31, 2018 were Rs 23,531 crore,” it said.