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EconomyAAP claims Delhi has surplus revenue: How true?

AAP claims Delhi has surplus revenue: How true?

Delhi Chief Minister Arvind Kejriwal and his deputy Manish Sisodia have been trying to establish their government’s 'honesty' by citing a Comptroller and Auditor General (CAG) report that purportedly says Delhi has been a revenue surplus state since 2015, the year the Aam Aadmi Party (AAP) first came to power with a majority. But the picture the national auditor paints about the Delhi balance sheet is not all that rosy. The CAG report was tabled in the Delhi assembly last month.

How is the AAP government misleading people about the CAG report?

The CAG report highlighted huge losses that seven of the Delhi government’s 18 public sector enterprises have incurred year after year. The auditor said that funds earmarked for various schemes in 2019-20 had not been utilised. It pulled up Delhi’s public sector firms for not conforming to prescribed accounting policies and standards. These are the parts that the AAP government is not telling the people for the obvious reason of avoiding embarrassment.

Further, the CAG report calls the bluff of the AAP government that it is so financially astute that it manages to make the Delhi budget deficit-free despite the freebies on water and electric supply besides dole such as incentives for women. "The revenue surplus of NCT of Delhi in 2019-20 of Rs 7,499 crore indicates that revenue receipts of the government were sufficient to meet the revenue expenditure. Revenue surplus stood at 0.88% of GSDP (gross domestic product of the state) in 2019-20 as against 0.81% in 2018-19," noted the CAG report tabled 5 July.

So, is the AAP claim 100% false?

No, a part of it is true. The CAG report stresses that the Delhi government has been able to retain its revenue surplus tag largely because the union government bears a considerable sum of its liabilities like pensions of Delhi government employees and expenditure of Delhi Police, with the latter being a responsibility of the Ministry of Home Affairs (MHA).

What are the liabilities of the Delhi government?

The CAG report on Delhi’s finances for the financial year that ended 31 March 2020 noted that the national capital had 18 state public sector enterprises (SPSE) as on 31 March 2020. Of those, two — Delhi Transport Corporation (DTC) and Delhi Financial Corporation (DFC) — are statutory corporations while the rest are government companies including Delhi State Industrial & Infrastructure Development Corporation Ltd (DSIIDC), Delhi Transco Ltd (DTL), Delhi Power Company Ltd (DPCL), and Delhi Tourism and Transportation Development Corporation Ltd (DTTDC), among others.

What are the earnings, surpluses and losses of corporations that the Delhi government is responsible for?

The CAG report says that a major chunk of the Delhi government’s investments in 2019-20 happened to be in the transport and power sectors. In all, the 18 SPSEs had a turnover of Rs 9,573.56 crore in 2019-20, accounting for 1.12% of Delhi’s gross state domestic product (GSDP). According to the report, 10 of these SPSEs collectively earned Rs 1,123.10 crore in profits in 2019-2020 as against around Rs 894.74 crore the previous fiscal year. 

However, the CAG also found that seven SPSEs incurred losses in 2019-20, with the DTC running up a lion’s share of the losses. "The losses incurred by these loss-incurring SPSEs increased to Rs 5,294.16 crore in 2019-20 as per their latest finalised accounts from Rs 3,859.78 crore in 2017-18 and Rs 4,386.79 crore 2018-19," the CAG report said.

The report noted further that of the "total loss of Rs 5,294.16 crore incurred by these seven loss-incurring SPSEs during 2019-20, loss of Rs 5,280.55 crore (99.74%) was contributed by Delhi Transport Corporation alone".

What reasons for these losses did the CAG identify?

According to the CAG, there are three broad reasons for the losses of the DTC: non-revision of fares since 2009, increase in maintenance cost and pay revision of employees. "As on 31 March 2020, net worth of Delhi Power Company Limited and Delhi Transport Corporation was (-) Rs 37,124.89 crore which was completely eroded by the accumulated loss of these SPSEs," the report stated.

How much money and for what schemes did the AAP government receive from the BJP-led union government that it did not spend?

The CAG report pointed at a trend in the Kejriwal government of falling short of fulfilling its spending commitments in crucial areas. As per the auditor, the Delhi government had in 2019-20 projected expenditure of Rs 493.13 crore on 39 schemes initially. Eventually, it revised the projection to Rs 196.76 crore but ended up not spending a single rupee on any of those schemes.

The Chief Minister Advocates Welfare Scheme, a scheme for farmers’ welfare, a research grant scheme, scholarships for students from minority communities, economically weaker sections and other backward classes (OBCs), and financial assistance for Scheduled Castes (SC) and Scheduled Tribes (ST) were the most glaring cases of non-utilisation of money allocated by the Narendra Modi government for Delhi.

In what explains the protests by Anganwadi workers in Delhi a few months ago, a part of the amount the union government gave was meant for upgrading Anganwadi centres, setting up special courts for cases against MPs and MLAs, and a DNA testing lab using the Nirbhaya Fund, which the city-state government did not spend.

Then, the CAG report highlighted that the Delhi government had projected spending another Rs 2,744.61 crore in 2019-20 on 44 other schemes but withdrew the projection wholly while filing a revised outlay.

This money was to be spent on, among other things, organising sports activities in assembly constituencies, setting up new language academies, upgrading industrial training institutes, managing shelter homes for the elderly and persons with disabilities, constructing a working women’s hostel, installing CCTV cameras in Anganwadi centres, of fisheries, and landscaping of roads.

Is the AAP faltering in the execution of schemes or is its policy flawed?

It's primarily the policy which is to blame. The CAG took some of the Delhi government’s prominent public sector firms to task for failing to adhere to accounting policies that may have significantly impacted their profitability.

What are the state companies that followed a wrong policy?

The CAG found that Pragati Power Corporation Limited (PPCL), for example, neither adhered to its accounting policy nor followed the appropriate accounting standards (Ind AS-10) in the financial year 2019-20. This led to an understatement of the sale of energy by Rs 7.30 crore and consequent understatement of profit and other equity by Rs 5.73 crore and tax expenses by Rs 1.57 crore, according to the CAG.

If PPCL had followed the prescribed accounting standards, it would have had higher profits and, therefore, would have paid more tax.

Another power sector firm, Indraprastha Power Generation Company Limited (IPGCL), overstated revenue from operations by Rs 12.86 crore and consequently understated losses for the year by the same amount, the national auditor said.

The CAG found the Delhi State Industrial & Infrastructure Development Corporation Limited, Delhi /ST/OBC Minorities and Handicapped Financial and Development Corporation Ltd and Delhi Transco Ltd to have done similar mistakes.

According to the CAG assessment, these issues may have impacted the profitability of these public sector companies by Rs 10.67 crore and their assets and liabilities by Rs 103.16 crore.

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