India’s Comptroller and Auditor General (CAG) has strongly criticized the government of Kerala’s practice of using out-of-budget loans to pay for social security pensions, warned of a debt trap and said not disclosing such commitments raises questions about “transparency”.
The CAG report on state finances – submitted to the Assembly on Friday – said that if the state resorts to an off-budget route to fund its welfare schemes, the state’s liabilities could increase and lead to a debt trap. It also said that since these values are not visible on the state’s annual budget or financial accounts, the legislature is in limbo. “Creating such obligations, without disclosing them in the budget, raises questions about both transparency and equality between generations,” it said.
The CAG’s objection relates to loans taken out of budget by Kerala Social Security Pension Limited to fund the payments of Social Security pensions. To accommodate the pension fund, the government launched KSSPL as a company in 2018.
The CAG also argued that the government’s position that KSSPL’s obligations, which are a separate entity, are not the state’s obligations, is untenable.