CAG Audit Reveals Significant Financial Management Issues in Gujarat
The Comptroller and Auditor General of India (CAG) has raised serious concerns about financial management practices within the Gujarat state government. In its comprehensive report on state finances for the fiscal year 2024-25, which was formally presented to the state assembly on Wednesday, the national auditor identified multiple systemic anomalies that compromise fiscal accountability and transparency.
Improper Utilization of Funds and Misleading Certificates
The audit uncovered instances where funds were reported as fully utilized without actual expenditure taking place. A particularly egregious example involved the Sardar Patel Institute of Public Administration (SPIPA), which showed Rs 32.81 crore as utilized despite the money merely being parked in bank accounts. The institute submitted Utilization Certificates (UCs) that falsely represented these parked funds as spent, constituting what the CAG report describes as a clear falsification of facts.
This practice was not isolated. The CAG found that various departments routinely reported funds as utilized immediately upon transferring them to implementing agencies, even when those funds remained entirely unspent or were later returned. This creates a misleading picture of financial execution and undermines proper monitoring mechanisms.
Massive Pendency in Submission of Utilization Certificates
The scale of non-compliance with submission requirements is staggering. Audit scrutiny revealed that 4,258 UCs, aggregating to a colossal Rs 7,431.84 crore, had not been submitted as of March 31, 2025. These pending certificates span 18 different state departments and cover transactions from 2001-02 through 2023-24. Such large-scale pendency indicates severe weaknesses in financial oversight and accountability systems across the state administration.
Public Funds Parked Outside Government Accounts
In a direct violation of established financial norms, the CAG report notes that public funds were improperly retained outside government accounts. Specifically, an amount of Rs 445.19 crore was kept in bank accounts instead of being properly routed through the designated public account. This practice bypasses essential treasury controls and creates risks of mismanagement.
Failure to Transfer Cess Funds to Local Bodies
The auditor highlighted a significant lapse concerning funds intended for local authorities. The Gujarat Motor Spirit Cess Act, 2001, established a cess on the turnover of motor spirit sales, with the collected amount meant to be transferred to a Local Authority Fund. This fund was designed to compensate local bodies following the abolition of octroi.
However, the state government never created this mandated fund. During 2024-25 alone, the government collected Rs 4,169.3 crore through this cess on petrol sales. According to the CAG report, none of this substantial amount has been transferred to any dedicated fund for local authorities, raising questions about the intended use of these collected revenues.
Fiscal Health and Growth Context
Despite these financial management issues, the report acknowledges Gujarat's strong economic performance. The state's Gross State Domestic Product (GSDP) registered impressive growth of 10.2% against the previous fiscal year, and it constitutes 8.1% of India's total GDP. The CAG notes that Gujarat's fiscal health is anchored by this robust GSDP growth and an adequate revenue surplus.
However, the report sounds a cautionary note. "Given the decrease in the revenue surplus in FY 2024-25, further contraction will necessitate an increased reliance on market borrowings to finance capital expenditure. This generates potential risks to long-term debt sustainability," the CAG warns. This underscores the importance of addressing the identified financial irregularities to maintain fiscal stability alongside economic growth.
