Despite heavy borrowing, lockdown to leave Punjab with ₹5,009-crore deficit

CHANDIGARH The 21-day coronavirus lockdown is expected to hit the debt-ridden Punjab government hard, leaving it with a deficit of Rs 5,009-crore in the first quarter of financial year 2020-21.

The state is staring at shortfall in April-June period despite market borrowing of Rs 5,300 crore to meet its committed expenditure such as salaries, pensions and interest payments, according to a presentation made by the finance department on the financial impact of the curfew before the state cabinet on Friday.

“This is the scenario if the present national lockdown is not extended, but the financial impact will be much more severe in case it gets extended,” officials said.

As per the scenarios presented by the department, the deficit will rise to Rs 5,948 crore in the first quarter if the lockdown ends on May 15 and Rs 6,700 crore in case it gets extended till June 15.

The state government, which is already grappling with rising debt, plans to borrow Rs 3,000 crore in April, Rs 1,400 crore in

May and Rs 900 crore in June to just meet its committed liabilities. The monthly outgo on salaries is Rs 2,100 crore with pensions accounting for another Rs 720 crore.

“There is no move to cut salaries, but the state government will have no option but to borrow more to bridge the deficit,” a senior official said, requesting anonymity. The state government has already requested Union finance minister Nirmala Sitharaman to relax the borrowing limit under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, from three to four per cent. Under the Act, the state is allowed to raise market loans not exceeding 3% of their gross state domestic product (GSDP).

The enhanced FRBM limit will allow the state government to raise another Rs 6,000 crore this fiscal and help it tide over the financial crisis created by the coronavirus outbreak and the consequent curfew – lockdown in other states – that has brought all business activity revenues in the state to a grinding halt.

As per estimates, the state economy is taking a hit of Rs 1,700 crore everyday due to the present shutdown. The upcoming wheat procurement and payment of Rs 26,000-odd crore to farmers for their produce over a period of two months are expected to provide relief. “This money in farmers’ pockets will give a boost to the state economy as and when the curfew is lifted,” said the official.

STATE STARING AT SHORTFALL IN APRILJUNE PERIOD DESPITE MARKET BORROWING OF ₹5,300 CRORE