Audit impossible: CAG flags lack of NHAI project-wise borrowing data

New Delhi: The National Highways Authority of India (NHAI) does not maintain project-wise records of borrowing costs worth ₹1.44 lakh crore, making it impossible for auditors to verify how much was charged to completed highway projects, the Comptroller and Auditor General (CAG) said in a report tabled in Parliament last week.

The audit also flagged several other financial planning and accounting lapses, including NHAI’s failure to remit ₹4,152.54 crore earned as interest on unutilised capital to the government.

NHAI earned ₹4,152.54 crore as interest on unutilised capital during 2023-24 but did not remit it to the Consolidated Fund of India, despite the requirement under Rule 230(8) of the General Financial Rules, 2017, the CAG said. The cumulative amount shown as “interest on unutilised capital” stood at ₹27,350.33 crore. The CAG said interest from earlier years also needed to be reconciled and remitted.

The audit also raised questions over NHAI’s accounting of ₹10.07 lakh crore of highways as its own assets during 2023-24, as well as the treatment of maintenance expenditure and interest earned on unutilised government funds.

NHAI spent ₹5,812.21 crore on routine highway maintenance in 2023-24, against ₹1,174.07 crore released as a grant by the ministry of road transport and highways and ₹128.99 crore received from other sources. Instead of recording the resulting ₹4,509.15 crore as expenditure through the profit and loss account, NHAI adjusted it against its shareholder’s fund, the report said.

This resulted in both excess expenditure over income and the shareholder’s fund being understated by ₹4,509.15 crore, the CAG said. It noted that the deviation had been repeatedly flagged but remained unresolved.

NHAI capitalised ₹25,900.33 crore in borrowing costs during 2023-24, taking the cumulative amount capitalised to ₹1,44,446 crore as of March 31, 2024. The CAG said this was despite “Accounting Standard 16” requiring such capitalisation to stop once a project is ready for use.

However, NHAI does not maintain project-wise details, preventing the audit from verifying the allocation of the total borrowing costs, the CAG said.

The borrowing costs were included in NHAI’s disputed balance-sheet head of “Assets held on behalf of GoI (completed & ongoing)”, valued at ₹10,07,532.92 crore. The CAG said the accounting treatment does not conform to the approved accounting format or generally accepted accounting principles, noting that national highways belong to the government and NHAI is only an executing agency.

NHAI also capitalised ₹800.79 crore of net establishment expenditure in 2023-24 into the same asset head instead of routing it through the profit and loss account. The CAG said revenue expenditure cannot be booked against completed projects and noted that the absence of project-wise details prevented it from quantifying the impact.

The CAG further found that ₹9,414.73 crore of capital reserves had been shown as a deduction from assets held on behalf of the government instead of being shown under reserves and surplus. It also flagged ₹854.72 crore in under-provisioned liabilities relating to land compensation and payments to contractors, concessionaires and utility departments.

The findings also covered NHAI’s subsidiary, National Highways Logistics Management Limited. The company did not recognise ₹21.22 crore payable to the Consolidated Fund of India from penalties collected from non-FASTag vehicles. Instead, ₹19.81 crore was booked as operating income and ₹1.41 crore was paid to NHAI.

The CAG said this treatment overstated profit by ₹5.28 crore and noted that a similar observation had been made in 2022-23.

Among the positives, the CAG said NHAI was one of the four CPSEs that fully complied with all corporate governance requirements. It was also among the organisations that presented their annual financial statements before the deadline.

HT reached out to NHAI for a reaction, but couldn’t get an immediate response.