The government should frame a policy on off-budget financing and sources of such funding in view of its fiscal implication, said a CAG report on the Fiscal Responsibility and Budget Management (FRBM).
In the report tabled in Parliament on Tuesday covering fiscal 2016-17, the Comptroller and Auditor General of India (CAG) said off-budget financing was being used to defer fertiliser arrears, food subsidy bills and outstanding dues of Food Corporation of India (FCI) through borrowings.
It said that off-budget financing being outside the parliamentary control has implication for fiscal indicators as they "understate" government's expenditure in the year by keeping them off the budget.
"Such off-budget financial arrangement, defers committed liability (subsidy arrears/bills) or create future liability and increases cost of subsidy due to interest payment," the report said.
In order to address these issues, it said the government should consider "putting in place" a policy framework for off-budget financing.
The framework should specify the rationale and objective of off-budget financing, quantum of off-budget financing and sources of fund, among others.
(with news agency inputs)