Chandigarh: When it comes to fiscal prudence, Punjab, perhaps, is the worst among the Indian states. Over the last five years, the state has been spending a whopping 70 per cent of its total receipts (excluding borrowings) on debt servicing (payment of interest and principal). It lies at the bottom in the pile of states, preceded by West Bengal, which spends 58 per cent of its receipts on servicing its debt.
Clearly, the state has been living beyond its means for one year too many. From 2013 to 17, it has consistently figured among the bottom five laggard states of India that are revenue deficit. This means that the state has been spending more on expenditure heads like salaries and interest payments than what it has been earning through income sources like taxes and providing services. On an average the state has incurred a revenue deficit of -2.1 per cent per year during this period.
Given this background, Punjab Finance Minister Manpreet Badal had an unenviable task at hand when he rose to present the Punjab Budget for 2017 – 18 in the Vidhan Sabha. He was required to balance provision of resources for populist promises like farmer debt waiver and free mobile phones, made in the election manifesto of his party, with the dire need to reduce the crushing debt burden and restoring fiscal stability. On Tuesday, Badal just about managed to carry out a tough high-wire act that lacked the theatrics to please the crowd, but all the same had the most essential of ingredients – the right balance – to ensure that he got across. Viewed from the opposition benches, the performance, however, came across as lacklustre and the ‘worst’ till date.
During his speech, Badal touched the crux of his problems saying, “The government faces the daunting challenge of fulfilling its promises to the people of Punjab under extreme budgetary pressures. In the first year, our focus will be two-fold: to gradually reduce the crushing burden of debt… and restore its fiscal health while at the same time taking immediate measures to ensure efficient use of resources already allocated by minimizing waste and improving accountability,” he said.
With opposition benches baying for Congress blood, the FM has his task cut out for him. The opposition is especially peeved about the provision of Rs 1500 crore for debt waiver and have termed it as a fraud committed on the people of Punjab. Badal said that it was a beginning, a token amount so that farmers do not think that the party had gone back on its promises. “We will work on it and get to know the actual amount in the time to come,” he said after presenting the Budget.
Manpreet Badal proposed a total budgetary outlay of Rs 1,18,237.90 crore, with an emphasis on the conventional education and social sectors in the Punjab Budget 2017. He proposed a sum of Rs 1,500 crore for waiving the debt of distressed farmers of the state. Remember, Punjab CM Captain Amarinder has already committed waiver of crop loans to small and marginal farmers. Overall, the minister has laid most emphasis on the agriculture sector where he proposed to increase allocation by 65.77 per cent to Rs 10,580.99 crore in 2017-18.
The total outstanding debt of the state as on March 31 was Rs 1,86,618 crore, including informal debt of Rs 4,435 crore, which have been raised by previous state governments through various agencies without approval of the central government, Manpreet told the Assembly.
Revenue expenditure has increased to Rs 62,733.81 crore in 2016-17, from Rs 18,544 crore in 2006-07, a jump of 238 per cent, the minister said further.
During the same period, expenditure on salaries rose to Rs 19,800 crore from Rs 5,783 crore, pension to Rs 8,140 crore from Rs 1,905 crore and interest to Rs 11,982 crore from Rs 4,152 crore.
“Thus, the growing share of salary pension and interest payments in its receipt expenditure prevented the state from achieving revenue surplus,” he explained. Punjab has incurred an average revenue deficit of -2.1 per cent in the last five years.
Sticking to its pre-poll promise, the government proposed Rs 10 crore in the budget for providing smart mobile phones to the youth, which the opposition has termed as too little. To give a fillip to the real estate sector the minister proposed to reduce the stamp duty to 6 per cent from 9 per cent for registration of properties in urban areas.
The Finance Minister did not levy any fresh taxes in view of the roll out of GST in the coming days.
The outlay of the urban sector has been raised to Rs 4,610.59 crore, from Rs 2,268.18 crore, a raise of 103.27 per cent over the previous year. This includes programmes of Smart Cities, AMRUT, Punjab Municipal Infrastructure Development Fund and Swachh Bharat Mission.
The Shiromani Akali Dal, which was present in full force in the House along with its top leaders Sukhbir Badal and Bikram Majithia, was the most vociferous in its opposition to Manpreet Badal with Sukhbir Badal comparing his cousin’s present speech to the one he made while presenting the Budget as a Finance Minister in SAD government for 2006-07.
SAD-BJP members rushed to the Well of the House demanding complete debt waiver. The opposition members created a ruckus and shouted slogans in support of their demand. At one stage, they tore off papers and hurled them towards the Chair though they fell short of the Speaker’s seat. The main Opposition, the AAP, staged a walkout on the issue of debt waiver.
The Opposition demanded total waiver of agricultural debt, saying this was what the Congress had promised at the time of election in Punjab. Meanwhile, Manpreet said a fiscal consolidation map for all states was one of the major recommendations of the 14th Finance Commission and the state was required to limit fiscal deficit within 3 per cent of Gross State Domestic Product (GSDP).
“Unfortunately, this has not happened and rather than achieving the target of 3 per cent of GSDP, the fiscal deficit has jumped to 13.89 per cent during 2016-17…,” he added.
“When this government took over in March, it was welcomed with the additional liability of Rs 29,919.96 crore (as on March 31, 2017) in the form of loans to settle the so-called Cash Credit Limit (CCL) legacy accounts. As a result, the state government shall have to bear an additional Rs 270 crore per month resulting in an annual liability of Rs 3,240 crore for the next 20 years,” he said.
“Further, the government of the day (previous SAD-BJP govt) had been forcing agencies like PIDB, RDB, PUDA and others to incur debt on its behalf. Most of the time, this debt was used for purposes beyond the mandate of that agency,” Manpreet pointed out.
During his speech Manpreet Badal quoted philosophers and poets ranging from Socrates to Alama Iqbal to drive home his point. He would do well to remember some more of them. For the Punjab Finance Minister would be needing all the creativity and imagination he can possibly muster to pull Punjab out from the financial quagmire that has become the bane of a progressive state.
(With inputs from Agencies)