Battling fund crunch, state saving penny, losing pound

MONEY MATTERS Despite GST compensation, state struggles to bridge funding gap of ₹10,273 crore in budget after Centre refused to enhance its borrowing limit

CHANDIGARH:Every penny saved is penny earned. But in case of Punjab, for every penny it saves, it spends a pound.

While presenting his maiden budget as a Congress finance minister in June last year, Manpreet Badal had hoped a little prudence will help rein in wasteful expenditure while he pegged the revenue deficit for this year at ₹14,784 crore and a resource gap of ₹10,273 crore — something he qualified as the gap between revenue and expenditure after taking state’s current annual borrowing limit at 3% of the gross state domestic product (GSDP) of ₹12,819 crore into account.

It was this gap that saw Manpreet and chief minister Captain Amarinder Singh call on Prime Minister Narendra Modi and Union finance minister Arun Jaitley and pen down requests for enhancing the borrowing limit by ₹10,000 crore to help them procure additional market loans for fulfilling party’s farm loan waiver promise. The Centre refused to oblige. The optimism of Manpreet and Amarinder on the Goods and Services Tax (GST) being a “gamechanger” for Punjab too has so far belied expectations. The earnings of the cashrich Punjab Mandi Board have now been pledged for funding the loan waiver “outside the budget”.

With the Centre refusing to enhance Punjab’s borrowing limit lest it sets a precedent for others, the resource gap in budget remains unplugged. So-called austerity measures have not yielded much and bills worth ₹6,100 crore are stuck as the year ended. “If the situation continues this way, the pending bills by the time we present the budget in March would pile up to ₹10,000 crore,” a state finance department official said.

According to Union finance ministry’s reply to a question on GST compensation to states in the Lok Sabha, Punjab’s GST compensation was the third highest among states. The monthly GST compensation is nearly ₹500 crore. The total GST remittance per month is ₹1,500 crore, including ₹450-₹500 crore each as state GST and integrated GST (IGST). The Value Added Tax on petrol and liquor, which has not been subsumed under the GST, is ₹400 crore. But the tax revenue is consumed almost entirely by the state’s monthly salary bill of nearly ₹2,000 crore.

Likewise, state’s share in central taxes worth ₹760-800 crore a month goes into feeding the monthly pension bill of ₹850 crore. The revenue coming from excise, electricity duty, stamp duty, transport and other sources is consumed by the monthly power subsidy bill of ₹900 crore for farmers. The CM has now promised subsidised power to industry too that will add another ₹100 crore a month. The legacy of ₹31,000 cash credit limit (CCL) debt left by the Akalis has brought additional liability of ₹270 crore per month (₹3,240 crore annually) for the next 20 years.