CAG report on J&K finances: Low returns, rising liabilities, poor transport scheme response

As the per capita Gross State Domestic Product (GSDP) of the Union Territory of Jammu and Kashmir remained consistently lower than the national average during the financial years 2020–25, the Comptroller and Auditor General (CAG), in its report, suggested that the government improve returns on public investments by enforcing a dividend policy for profit-making PSUs.

The CAG also recommended disinvestment from non-performing entities and enhanced monitoring of loans and advances to ensure financial discipline and accountability.

According to the CAG’s Finance Report, the GSDP-to-GDP ratio declined from 0.85 per cent in 2020–21 to 0.79 per cent in 2024–25.

“Revenue expenditure increased from ₹52,634 crore to ₹70,472 crore, of which committed expenditure on interest payments, salaries, and pensions constituted 68–76 per cent,” the report states, adding, “The fiscal deficit declined by 24 per cent during the period 2020–25. However, capital expenditure remained low during this period.”

During 2024–25, the UT government spent ₹12,060 crore (14.61 per cent of total expenditure) on the capital account. Capital expenditure constituted 20.34 per cent of total borrowings, indicating that borrowed funds were largely used to meet existing liabilities rather than for asset creation.

“The total liabilities of the UT government increased by 204 per cent during the period 2020–25,” the report noted, adding, “Besides, liabilities of the erstwhile State of Jammu and Kashmir amounting to ₹82,050.51 crore are yet to be apportioned between the two newly created UTs.”

Undischarged liabilities of the UT government stood at 296.24 per cent of the fiscal deficit for the year 2024–25.

Returns on public investments were low. Against an investment of ₹4,031 crore in PSUs, a dividend of only ₹131 crore (3.25 per cent) was received during 2024–25.

“Strengthen revenue mobilisation by improving tax compliance, enforcing a clear non-tax revenue policy—especially for dividends, mining, and interest receipts—and revising user charges and fees periodically,” the report suggested, adding, “Rationalise revenue expenditure and committed liabilities, better target subsidies, and control interest payments to create fiscal space for developmental spending.”

The CAG further recommended that the Union Territory government enhance the quality and prioritisation of capital expenditure by increasing allocations to infrastructure sectors, avoiding misclassification of expenditure, and ensuring that capital outlay keeps pace with economic growth.

“Ensure fiscal transparency and better fund management by routing all monies through designated government accounts,” the report added.

CAG flags poor response to transport subsidy scheme

Meanwhile, the CAG has flagged significant shortcomings in the implementation of the Transport Subsidy Scheme in Jammu and Kashmir, citing limited uptake, procedural violations, and weak monitoring that undermined the scheme’s core objective of phasing out old, polluting public transport vehicles.

Launched in November 2019, the scheme was designed to incentivise private transporters to replace buses older than 15 years with new, fuel-efficient vehicles compliant with BS-IV and higher emission norms.

Each eligible vehicle owner was entitled to a subsidy of ₹5 lakh, subject to conditions including scrapping of the old vehicle and mandatory operation of the new vehicle on designated routes for five years. The scheme was re-notified in December 2022 with additional safeguards, such as a five-year non-transfer clause.

However, audit findings revealed that the scheme failed to generate meaningful participation. Despite advertisements issued in 2019 and 2022, the response from bus owners remained extremely poor at just 0.56 per cent.

The CAG noted that the Transport Department did not expand the scheme’s scope to include mini-buses and matadors, despite these segments forming a substantial part of the public transport fleet. No reasons for this exclusion were recorded or furnished during the audit.

The lack of participation was particularly stark in the Kashmir division, where no applications had been received as of February 2025. In contrast, limited implementation was observed in the Jammu division, where 45 vehicles were replaced and subsidies amounting to ₹2.25 crore were disbursed.