Finance minister reveals tricks of finance

SRINAGAR: State finance minister Haseeb Drabu said in his budget speech on Monday that he had figured out the “institutional and systemic fraud” and “discrepancies” in the financial structure of the government.
“For instance, during one of the austerity drives, the big cut that finance departments enforced was on tea served in offices. The tea never stopped but its financing changed,” Drabu said in the assembly. He mentioned that the tea was paid for by “faking printer cartridge bills.”
Pointing out other instances, Drabu said that hardly any norms and standards were followed for construction of roads, bridges, educational institutions, and courts.
“We have buildings taken up during the 1990s which are still incomplete. Frankly, in our system buildings and constructions have become an end in themselves,” he said.
Drabu said that the finance for seasonal and casually-employed labour had been budgeted under components of capital expenditure. The consequence of this was that wages were not paid on time, the amount the government spent on wages was concealed, and there was no money left for maintenance of capital assets, Drabu said.
The finance minister termed the relations of public sector units with the state government as “incestuous.” Giving an example, he said, “The SRTC, which is on budgetary support, is the exclusive transporting agency for the CAPD. The government, by virtue of an order, has given the SRTC a contract to carry food grains to various parts of the state. The SRTC, in turn, sub-contracts it to private transporters with a commission as high as 56 percent. Whether this is poor contracting or inefficient pricing or plain corruption, I leave to you to decide.”
Drabu said that liabilities of various kinds and cost overruns were constantly increasing in all departments. He said that the government’s utilisation of net accruals on account of provident fund as captive resources to finance its day-to-day expenditures was fiscal ‘hara-kiri’ that had been happening for the past 30 years.
“The net result of this incorrect budgetary practice is Rs 14,058 crore. The same procedure has been followed for state life insurance scheme, for which the liability is another Rs 588 crore,” he mentioned.
Drabu said there was no cash in the PF kitty; the outflows were being paid from current inflows. In his speech, he called it a ‘Ponzi scheme’ (an investment swindle in which some early investors are paid off with money but the later ones are encouraged to take more and bigger risks).
The real threat of fiscal crisis, Drabu said, lay in the state government not being able to pay back what it had borrowed from its own employees.
To fix these systemic flaws, Drabu suggested some solutions, while in other cases he proposed the house to debate whether “frauds were perpetuated by earlier governments or were they an accounting error.”