One in every 26 Sikkimese is a contractor with Roads & Bridges Deptt, and still there is cartelization by contractors!

CAG REPORT, THE ANNUAL STOCK-TAKING OF STATE GOVT’S FINANCES AND FINANCIAL PERFORMANCE, TABLED
SAGAR CHHETRI
GANGTOK: The reports on accounts and major audit findings of the Comptroller and Auditor General for the year ended 31 March 2010 on Sikkim Government was laid in the State Legislative Assembly by the Leader of the House, Chief Minister Pawan Chamling Tuesday.
Later in the day, the Accountant General of Sikkim, Dinesh Bhagata, convened a press conference to shed light on some of the major audit findings and recommendations recorded in the CAG Report.
The CAG Report, which always makes for interesting reading for the revelations of financial misappropriation, reckless planning and wasteful expenditure, the auditors dig out, is an important exercise with its findings referred to the Public Accounts Committee and Committee on Public Undertakings for further discussion and suitable recommendations.
This time the CAG report also has undertaken an integrated audit of the Roads & Bridges Department, which, ironically, has been found to have neither incorporated the government’s mission into its functioning nor even formulated any Road Policy till date.

It has also recorded that due to indiscriminate sanction of projects without so much as master plan, the department had mounted up a staggering committed liability of Rs 341.77 crore it owes to contractors, an amount for which there was no financial resource to make payments!
It was also observed that delays in completion of projects ranged from 1 to 10 years due to defective DPRs, non-availability of funds, failure of obtain timely clearance and award of works to incompetent contractors. The presence of incompetent contractors is hardly surprising since there are so many of them. As per the CAG findings, there is one registered contractor for every 26 people in the State with the Roads & Bridges Department alone! Despite this, the level of competition in the bidding process is very poor, indicating “cartelization by contractors”, the Report finds.
Meanwhile, the report on the state’s finances contains audit findings on matters arising from examination of financial accounts and appropriation accounts of the state government and presents an overview of the state government’s compliance with various financial rules, procedures and directives issued during the year.
The audit report includes five chapters comprising performance reviews of three Government departments and 24 paragraphs, based on the audit of selected programmes and activities of the government. This year, there is a separate chapter detailing the integrated audit of the Roads & Bridges Department.
On the financial health of the State, the CAG Report records that the Revenue Receipts have shown a progressive increase over the last five years posting a growth of 33.40%.
“The Tax revenue as well as the non-tax revenue receipts exceeds both the normative assessments made by the Twelfth Finance Commission [TFC] and budget provision,” Mr Bhagata said.
On Revenue and Capital expenditure, the report has recorded that the overall revenue expenditure [operating costs] of the state has increased by 32.49% from Rs 1,380 crore in 2008-09 to Rs 1,829.02 crore in 2009-10.
Out of the total capital expenditure [expenses incurred to create/ improve infrastructure] of Rs 648.53 crore, Rs 285 crore were blocked in 79 incomplete works which were due to be completed by 31 March last year, it was informed.
It has recorded that the ratio of development expenditure as a proportion to aggregate expenditure is higher than the average of north-eastern states which, the Report records, “indicates that the state has given higher priority to the development expenditure as compared to other states”.
The ratio of social sector expenditure which includes expenditure on education and health as a proportion of aggregate expenditure was however lower than the average of the north-eastern states.
The Report has suggested that the state should follow a recruitment and wages policy in such a manner than the total salary bills relative to revenue expenditure net of interest payments and pension does not exceed 35%. The expenditure on salaries stands at a much higher 53.59% at present and constituted 123.69% of the State’s own tax and non-tax revenue during 2008-09.
The report recommends the State ensure effective implementation of schemes and devise an effective monitoring mechanism to avoid the incidences of time and cost overruns and ensure that value of money is channelised in its entirely to the intended beneficiaries.
It further recommends that the state initiate action to restrict the components of non-plan revenue expenditure by phasing out implicit subsidies and resort to need-based borrowings to cut down interest payments.
The reports highlights that there is no monitoring agency and no “readily available data” on the actual expenses incurred in any particular year on major flagship schemes undertaken by state implementing agencies on direct funding by the central government.
On the same, it recommends that a system has to be put in place to ensure proper accounting of these funds and the updated information validated by the state government as well as the Accountant General [Accounts and Entitlement].
On government investment, the report highlights an incongruity in that while investment in government companies and statutory corporations is increasing every year, the returns were 0.52% even as the State exchequer paid an average interest rate of 8.35% on its borrowings during the year. The winding up of 3 PSUs follows from the CAG observation that the government ensure “better value of money in investment” by identifying the companies/ corporation which are endowed with low financial but high socio-economic returns and justify if high cost borrowings are worth being channelised.
The report also records that the percentage of expenditure on revenue collection [sales tax, state excise and taxes on vehicles] was much higher when compared to the corresponding All India averages.
The Report also highlights that the State government awarded hydro power projects to Independent Power Producers [IIPs] “without working out any effective modality and finalizing any plan or policy”.
“Projects were awarded at throwaway charges which compared very poorly with the charges imposed by all other hydro power states in the country in respect of royalty revenue, upfront premium, penalty for delay, local area developments etc. Environmental issues were also neglected and delayed,” it is recorded.
It recommends that the state Public Private Partnership, particularly in hydro power projects, be finalized and all projects awarded through transparent bidding procedures.
It was further suggested that suitable conditions against non performance/ abandonment of the projects and negligence in proper maintenance of the assets may be imposed on the IPPs forthwith and strict vigil over the environmental concerns may be ensured.
In its civil audit on the projects funded under North Eastern Council, it was observed that only 62% of works were completed within the stipulated time and the objective not achieved in 11 out of the 25 schemes test-checked.
These ranged from Rs 60.88 lakhs wasted on setting up a bio-fertilizer unit to the non-utilization of Polyclinic State Veterinary Hospital to a built and ready, but still not utilized Accident & Trauma Centre in Namchi.
On the Public Distribution System in Sikkim, the report noticed that the Food and Civil Supplies Department neither reviewed nor updated the list of BPL beneficiaries despite repeated reminders from the central government and state government’s claim of reduction of BPL from 41.43% to 19.33% leading to extra financial burden of Rs 3.47 crore on the state exchequer.