There is Rs 14,058 crore Provident Fund (PF) and Rs 588 crore State Life Insurance Scheme (SLIS) liability on the government because of incorrect budgetary practice during the past 30 or more years.
There is no cash in the PF kitty with the result the outflows which get crystalised year after year are being paid from current inflows, Minister for Finance Haseeb Drabu said in the Budget for the year 2016-17 presented in the Legislative Assembly today.
However, he assured the employees that their PF will be paid as and when they wish to withdraw it.
“I will leave it to this House to debate and decide whether it was a fraud perpetuated by earlier governments or a primitive accounting error”, he said in the House when the Opposition had walked out.
He said he proposed to make a few more changes to the accounting structure in the Budget which have been made with a view to cleaning up the accounts further and giving an actual picture of the state of affairs. First is the budgetary treatment of General Provident Fund.
Since 1984, the State Government started the practice of debiting from the gross salary the required PF contribution of the employee and paying the net amount to the employee.
However, he said “Normally the amount deducted should have been earmarked and invested in long term financial instruments, so that the Government gets a return on the corpus to fund the interest it pays to employees. This was not done.”
Instead, the government has been utilising the net accruals on account of PF as captive resources to finance its day to day expenditure. To make matters worse, instead of accounting what it had borrowed from its employees, the net GPF was grossly understated in the budget so as to get a higher allocation of market borrowings.
This fiscal hara-kiri has been committed year after year for the last 30 years or so.
The net result of this incorrect budgetary practice has meant that the total liability on account of PF, which is completely un-provided for, is Rs 14,058 crore as on March 31, 2015. This is not all. The same procedure has been followed for state Life Insurance Scheme for government employees for which the liability is another Rs 588 crore, the finance minister said.