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Centre used GST compensation cess elsewhere, violated law: CAG

Date: 26-09-2020
Subject: Centre used GST compensation cess elsewhere, violated law: CAG
NEW DELHI: The Comptroller and Auditor General (CAG) has red flagged the government’s “disinvestment” programme involving the “strategic sale” of one public sector undertaking  to another state-run entity, as well as flow of the proceeds from sale of shares held by the Specified Undertaking of UTI (SUUTI) into the kitty. 

During 2018-19, there were four transactions involving the sale of Rural Electrification Corporation to PFC, Dredging Corporation to port trusts, National Projects Construction Company to WAPCOS Corporation and HSCC (India) to NBCC. 

“Such disinvestments only resulted in transfer of resources already with the public sector to the government and did not lead to any change in stake of the public sector/government in disinvested PSUs,” the auditor said in a report tabled in Parliament. These “strategic disinvestments” had generated over a fifth of the disinvestment receipts of Rs 72,620 crore during the year. 

In the previous year, the government had sold oil marketing company HPCL to ONGC. With the Centre’s strategic sale programme proving to be a non-starter, the department of investment and public asset management (DIPAM) has resorted to selling one PSU to another, while failing to dispose of the bulk of the ailing companies cleared for sale by the Union Cabinet. 

Similarly, the sale of shares held by SUUTI, the entity created to take over shares held by the erstwhile UTI, has also come under the scanner as it was treated as disinvestment receipts. 

CAG has argued that neither SUUTI, nor the assets and liabilities are depicted in the Centre’s accounts. During 2018-19, SUUTI had sold a part of shares held by it and transferred proceeds estimated at Rs 12,426 crore to the government. 

The auditor has taken to the classification as nature of “miscellaneous capital receipts”, saying it is “incorrect”, since SUUTI is not a government entity, and receipts from sale of shares, can only be treated as non-tax revenue and not capital receipts. 

“As a result of the incorrect classification, the capital receipts of government for the year were overstated and revenue receipts understated, with corresponding impact on the revenue surplus,” it said. 

Several experts have questioned the rationale to show these sales as disinvestment receipts, with the Centre at one point classifying SUUTI share sales as “strategic sales” on the DIPAM website. 


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