Kerala spends controversial ADB loan without keeping proper accounts

Thiruvananthapuram: Modernising Government and Fiscal Reform Programme, implemented by Kerala Government with ADB funding, was aimed at improving efficiency, transparency in administration and fiscal management, among other things. However, several years after its implementation, the government is unable to conclude a proper audit or review of the programme.

The Estimates Committee of the Assembly, which sought details of the Modernising Government Programme (MGP) including its achievements and expenditure as back as in 2014, is yet to get it. (The term of the Assembly and Committee is to end shortly). “There is still no response from the officials,” Committee chairman V. D. Satheesan said.

The Committee in its report submitted to the Assembly a year ago observed that there were serious failure in keeping accounts of the programme and auditing it. Though Rs. 1300 crore, including Rs. 1154 crore provided by Asian Development Bank, was spent on MGP, only Rs. 536 crore was used for institutional reforms. Rs. 757 crore was used for covering the revenue deficit of Power Department.

MGP documents

The Programme is supposed to have been implemented between 2002 and 2008. However, there is no clear indication as to when the schemes were completed. Of 100 schemes taken up across 19 departments, 96 have been completed. The Committee has recommended that some of these schemes should be continued.

The Committee sought details of loan and grant received for MGP and amounts spend under different schemes and amounts remaining unspent under allocations made to various departments. However, the General Administration Department, which was supervising 93 of the projects, did not provide the details on the ground that the files had been transferred to Information Technology Department for digitisation. The Information Technology Department, however, said that many files were with various departments. The Committee had been promised this information as back as in July 2014 during hearing of officials including the Chief Secretary.

In its report, the Committee called for full details of all files transferred to IT Department and files with other departments. Details of posts created for the project and consultancies engaged for implementation should also be furnished.

The Committee was told that ADB had done a programme completion and validation reports. The Bankt had observed that the programme was partially successful. Lack of political support and failure to convince the people of the benefits of the programme affected its implementation.

The Committee said that the government should explain why a final evaluation of the Programme was not done. Information about audit and replies furnished to the Accountant General to queries to various departments should also be furnished.

As of now, there was no clear picture as to how the Programme was completed and proper accounting norms had not been followed by several departments.  Much of the spending was not quality expenditure.

The terms and conditionalities specified by the ADB for the loan had raised a controversy in the State in 2002-03. Interestingly, the program agreement had the following condition: “The State shall maintain, or cause to be maintained, records and accounts adequate to identify the use of Counterpart Funds, to record the progress of the Program (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.”

It noted that Programme had succeeded in fulfilling certain objectives such as delivery of services to the public, improvement of financial position of local self governments and improvement of efficiency of departments to a large extent. Revival of public sector units, construction of water harvesting units, unification of payrolls of government employees, traffic reforms, e-governance and akshaya centres, computerisation of collectorates and paperless offices and training for staff were major achievements.

The Committee called for details on repayment of the loan which had commenced in 2006 after a five year moratorium. Initially, the interest burden was 11.5 per cent. It came down to 9.5 subsequently.

It noted that the government had proposed to avail loans of Rs. 3000 crore to Rs. 5000 core for modernising the remaining departments. However, this was dropped with closure of activities under the Programme.

(The government has availed a loan of 100 million dollars (About Rs. 600 crores) from ADB in 2014 for Additional Skill Acquisition Programme. This, however, is not connected to MGP.)