With falling revenues, state set to walk tightrope
With receipts taking a plunge, likely loan waiver for farmers and the Seventh Pay Commission will eat into state’s revenues, increasing fiscal burden
The state government may face its most challenging financial year in 2017-18 since it took reigns of Maharashtra after the assembly polls in October 2014.
On paper, the state’s growth is estimated to power at 9.4 per cent for the ongoing 2016-17 financial year, but the figures in the budget document pose a worry for the growth trajectory.
The revised estimates for 2016-17 show that the state government has failed to meet its revenue targets worth Rs11,283 crore largely from stamp duty and registrations, land lease income and sale of Floor Space Index (FSI), which are largely linked to the slump in realty sector post the demonetisation decision.
The revenue deficit — when expenditure is more than earnings — estimated last year had to be reworked from Rs3,644 crore to Rs 14,377 crore. While the state had hoped to borrow Rs35,047 crore in 2016-17, it ended up borrowing Rs49,454 crore by the end of the year.
In a nutshell, the state’s last year’s estimates went awry leading to up to 20 per cent cuts in some departments.
Going ahead, the big challenge will be to meet the revenue targets for 2017-18.
Much of the next year’s targets will depend on how Goods and Services Tax (GST) pans out for the state. In this uncertainty, the state may have to shoulder a substantial loan waiver or a scheme for farmers to reduce their debt even as it prepares for the burden of the Seventh Pay Commission.
The Seventh Pay Commission is expected to cost the state Rs21,500 crore while a possible loan waiver (where the centre and state take up 50:50 responsibility) may cost a whopping Rs15,000 crore.
“If and when the centre announces a loan waiver, we will have to match it with 50 per cent funds. And, that can cost us Rs15,000 crore. But, this decision will have to be taken by the centre and they may not be in a rush right now,’’ admitted a senior BJP minister.
“Where is the guarantee that the revenue targets for 2017-18 will be met when they have failed so miserably in 2016-17? If you look at their revenue estimates for this year they are hoping for Rs11,000 hike in sales tax, hike of nearly Rs5,600 crore by selling FSI, hiking lease rents,’’ said former finance minister and NCP leader Jayant Patil.
He said he did not expect any recovery in the realty sector soon to enable the government to reap such dividends from it.
The state is also hoping to increase its capital outlay — money spent to create, upgrade capital assets — to Rs33,809 crore this year from Rs30,409 crore. But, this expenditure is only 11.25 per cent of the entire budget.
Against this, the state’s liabilities from interest payments, salaries and pensions are expected to touch 59 per cent of the total budget by end of 2017-18.
“We will have to tighten the purse strings in the future, but that will be by curbing wasteful expenditure and unnecessary schemes. Borrowing money for growth is necessary and if you see the total debt is within 16 per cent of the GSDP, well within the parameters laid down by the state,’’ said a senior bureaucrat.
He, however, admitted that balancing a loan waiver and future liability from the Seventh Pay Commission could potentially trip the budget estimates any fiscal prudence.