India has paid over ₹400 crore in the last four years as commitment charges to the Asian Development Bank, Japan, Germany and the International Bank for Reconstruction and Development (IBRD) for unutilised external loans taken to fund development projects.
Japan and ADB are the two biggest beneficiaries of these slippages, according to a study compiled by the Comptroller and Auditor General in its latest report on the Union government accounts for 2014-15. “This points towards continued inadequate planning,” the official auditor has observed. During the first year of the NDA government, the commitment charges paid exceeded ₹110 crore, CAG has noted.
Commitment charges are a fee charged by a lender to a borrower for an unused credit line or undisbursed loan. They are incorporated in external financial assistance negotiated by the central government. Though pushed as soft loans, much below market lending rates, once these commitment charges are added, the interest components sometimes become costlier than external commercial borrowings.
India currently has an external debt of ₹3.66 lakh crore till 31st March 2015, of which ₹2.37 lakh crore (or 65%) is unutilised committed loans. An earlier study by finance ministry had found that between 1991 and 2009, the government had paid close to ₹1,400 crore as commitment charges for loans not utilised.
The official auditor has pointed out the sectors that lag behind in matching the pace of the expenditure committed by the government while negotiating the loans. The large undrawn external assistance are in the sectors of urban development (₹33,700 crore); atomic energy (₹31,300 crore); roads (₹29,500 crore); power (28,500 crore), railways (25,100 crore), water supply & sanitation (₹14,900 crore) among others.
The auditor has mapped the inefficiency of the governments in utilising funds. In 2011-12, the unutilized committed external assistance was ₹1,76,090 crore which went up to ₹2,36,882 crore in 2013-14 and ₹2,37,012 crore the next year. The statistics show the performance of the Narendra Modi government in utilising external assistance has not improved much compared to the UPA regime.
The federal auditor questioned the government’s decision to put such commitment charges under the head “interest obligation” as they don’t truly reflect the nature of expenses and as such are misleading.