Himachal Pradesh Govt. shortcomings in financial management.

Shortcomings in financial management included: inadequate funding for sewerage schemes, non-release of 30 percent and delayed release of 43 percent funds by ULBs to IPH divisions, non-utilization of 58 percent funds in 11 out of 16 test-checked divisions, non-utilization of funds received from the Finance Commission by 15 test-checked ULBs, and shortcomings with regard to collection of user charges.

Financial management
Inadequate funding
The activities relating to sewage management in urban areas were being financed through budgeted funds of UDD, grants received from the Central Finance Commission (CFC), and Centrally Sponsored Schemes (JNNURM/ UIDSSMT and AMRUT) Details regarding funds received during 2013-18 in the State for sewage management are shown in the Table-2.2.1 below:

A total of Rs. 271.71 crore was approved for schemes relating to sewage management during 2013-18. In three out of 16 test-checked ULBs (Baddi, Chamba, and Sundernagar) three sewerage schemes could not be completed/ delayed due to shortage of funds as discussed.

In the exit conference the Secretary, IPH stated that funding was a major constraint in the execution of sewerage schemes and efforts were being made to arrange funds from GoI. However, while funding was indeed a matter of concern, it was also seen that ULBs and IPH divisions were not able to utilize a large percentage of available funds.

Non-release/ delayed release of funds by ULBs

UDD was releasing funds to ULBs for capital works for further immediate release to IPH Department for execution.

During 2013-18, 16 test-checked ULBs received Rs. 62.89 crore (including an opening balance of Rs. 1.21 crore as of April 2013) from UDD. However, only Rs. 12.49 crore (20 percent) was released immediately, Rs. 26.83 crores (43 percent) was released after a delay of three to 43 months, Rs. 4.56 crore (seven percent) were utilized on sewage management-related works by the ULBs themselves, and Rs. 19.01 crore (30 percent) was still lying blocked with 13 ULBs66 for a period ranging between two and 62 months as of March-May 2018.

Non-release and delayed release of funds by ULBs was one reason for the lack of progress in scheme execution in Baddi and Chamba. In three ULBs (Baddi, Chamba, and Sundernagar), the respective IPH divisions had to spend funds of Rs. 2.79 crore during 2015-18 from other heads of account in order to keep the work of these schemes progressing.
In the exit conference the Secretary, IPH stated that UDD had been asked to route funds for capital works directly to IPH Department rather than through ULBs.

Non-utilisation of funds by divisions.
In 11 out of 16 test-checked divisions, Rs. 30.23 crore (58 percent) out of Rs. 52.55 crores received during 2013-18 had been lying unutilized for a period ranging between two and 62 months. In the exit conference the Secretary, IPH stated that the matter would be examined.

Non-utilisation of funds received for sewage management component under Finance Commission grants.
During 2013-18, the 16 test-checked ULBs received Rs. 82.99 crores under CFC grants which were to be spent on providing basic services including sewage management. However, except for one out of the 16 test-checked ULBs, the other 15 ULBs had not incurred any expenditure on sewage management from the funds received.

Non-utilisation of funds received under CFC grants on activities relating to sewage management resulted in deficiencies in the collection and disposal of sewage, particularly in the case of domestic-level septic tank systems which was the exclusive responsibility of ULBs.

Violation of financial rules/ instructions
(i) Expenditure in excess of estimates
As per the PWD code, the revised estimate must be submitted when the sanctioned estimate is likely to be exceeded by more than five percent.

In four test-checked divisions, expenditure of Rs. 44.57 crore was incurred in excess of sanctioned estimates for four schemes but revised estimates of these works were not prepared as of January 2019. The excess expenditure was over 100 percent in the case of two schemes: Solan (467 percent) and Sundernagar (167 percent).

The Principal Secretary, IPH stated (March 2019) that expenditure had exceeded the estimated cost due to an increase in the cost of labor and material. No explanation for the non-obtaining of revised estimates was furnished.

(ii) Unauthorised splitting of works
In three test-checked divisions (Dharamshala, Hamirpur, and Sundernagar), the Executive Engineers (EEs) floated 170 smaller-value tenders for four works (estimated cost: Rs. 3.65 crores) keeping the estimated cost of these tenders within their power, in violation of the condition that the works should not be split without prior approval of the competent authority. Thus, competitive prices could not be derived resulting in the award of these components at a cost (Rs. 4.55 crore) higher than the estimated cost by Rs. 0.90 crores.

The Principal Secretary, IPH stated (March 2019) that splitting was done for timely execution of the works. However, it was seen that all these works remained incomplete as of January 2019: only 37,113 rmt. (64 percent) out of 57,940 rmt. sewer lines had been laid due to which only 5,934 (46 percent) connections out of a total of 13,037 planned connections had been released.

Collection of user charges
Under section 5 of the Himachal Pradesh Water Supply Act, 1968, the State Government notified (June 2005) that user charges at the rate of 50 percent of monthly water bills were recoverable from domestic and commercial consumers having sewerage connections. The audit observations in respect of the 11 test-checked ULBs having sewerage systems are as follows:
• In eight ULBs, all households/ establishments using sewerage systems were not being charged for the services: households residing in multi-storied buildings had separate water connections but sewerage charges were being levied only on one or a few water connections registered for sewerage connection by the IPH divisions, instead of being levied on all the water connections in the buildings.

The audit conducted a joint physical inspection and survey (October 2018) of 211 households in these eight test-checked divisions and observed that out of the 484 water connections in these households sewerage charges had not been levied on 246 (51 percent) water connections.

• In two ULBs (Bilaspur and Shimla), the actual amount of user charges collected and outstanding could not be ascertained as accounting was not transparent. MC Shimla was maintaining accounts of only the total user charges collected while no record of user charges recoverable and outstanding at the end of a particular financial year was maintained. In IPH division Bilaspur, sewerage charges were being credited into the water charges head and no separate accounting was being done for sewerage charges.

• In one ULB (Solan), user charges had not been levied since the commissioning of the scheme (December 2009), thus depriving the ULB/ IPH division of an important source of revenue. The Executive Officer, MC Solan stated that user charges had not been levied in order to encourage people to connect to the sewerage system. However, records showed that only 415 connections (17 percent) had been released against the capacity of 2,500 connections, and utilization of STP in Solan was only 17 percent, indicating that the policy of not levying user charges had not served the stated purpose. Further, resolution on non-levying of user charges had not been passed by the House of MC Solan.

Thus, a significant source of revenue in the form of user charges was not being adequately tapped by the ULBs/ IPH divisions.

The Principal Secretary, IPH accepted the facts and stated (March 2019) that the matter was being reviewed and necessary action would be initiated as per rules.

The cases pointed out are based on the test check conducted by Audit. The Department may initiate action to examine similar cases and take necessary corrective action.

Recommendation: The State Government may consider simplifying the fund release mechanism, ensuring timely release of funds to executing agencies, and devising a system to ensure that sewerage charges are levied and collected from every household/ establishment availing sewerage facilities.