Economist fears fiscal anarchy after waiver
Maharashtra, once a financially sound state, can now be described as debtridden, having to bear the burden of more than Rs 4 lakh crore total debt. It has a fiscal deficit of Rs 4,500 crore for 2016-17 financial year and more than Rs 72,000 crore is stuck in legal disputes or as un-recovered taxes, bringing down the tax revenue.
Also, the state has to bear a burden of Rs 15,000 crore for the proposed seventh pay commission. With the new announcement of a farmers’ loan waiver of Rs 34,020 crore the debt is likely to push the state towards bankruptcy.
Vishwas Utagi, an economist and a banker, fears Maharashtra will face fiscal anarchy in the forthcoming days if no immediate solution is chalked out.
According to official from the finance department, the state has to bear the heavy burden of over Rs 4 lakh crore for this loan. The revenue deficit stands at over Rs 4,500 crore. In addition, the state government will have to prepare itself for giving the seventh pay commission dues and revised salaries to its employees. The amount for that is expected to be around Rs 15,000 crore.
The state had put forth a target of raising non-tax revenue from the current level of around Rs 15,000 crore to Rs 26,000 crore. However, data given by the finance department shows the government machinery has failed to recover Rs 3,192 crore from non-tax revenue sources last year. With this kind bad performance, the target to raise the non-tax revenue to nearly Rs 11,000 crore appears a challenging task.
The same is the case with the recovery of around Rs 72,000 crore of revenue through taxes. While a major part of the unrecovered sum (over Rs 51,170 crore) is stuck in legal disputes, over Rs 21,630 crore hasn’t been recovered because of the lax approach and staff shortage.
The amount to be recovered was Rs 51,643 crore until 2013-14 but as the government failed to recover dues amounting to Rs 11,264 crore, the figure rose to Rs 62,907 crore in 2014-15. It now stands at Rs 72,800.
The state government announced an amnesty scheme during this year’s budget session to recover the tax dues. It hopes to recover around Rs 20,000 crore through the scheme. But the response to the scheme was dismal and could achieve not even a tenth of its target in the past few months.
Around 70% of the pending tax dues are from the sales tax department and are pending because of appeals filed by traders, some of which are over 15 years old.
Most these appeals pertain to the disputed value added tax (VAT) on various goods. Other dues are from taxes on vehicles, land revenues, minor minerals, entry taxes, among others.
On the other hand, Finance Minister Sudhir Mungantiwar announced immediately after the decision of loan waiver that the funds needed to finance the scheme would be raised through various means like increasing non-tax revenue, pooling up PLA funds with the state-owned corporations into a separate Non-Banking Finance Corporation and recovery of pending tax dues. However, the task does not appear easy at all.
On the contrary, economist Utgai said it would be fiscal anarchy. “The state has no proper plan, preparation and resources to implement loan waiver. Bank will not allocate such a huge loan to the state, despite, it will give guarantee,” said Utagi.
“It is up to Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) to sanction loan to the state. Also, every state has its quota to borrow loans and Maharashtra has reached up to 25%, the permitted limit,” Utagi, leader of nationalised bank officer’s union. He added that once Goods and Service Tax is implemented, the state will lose its right to introduce or increase in tax amount. This will crunch financial powers of the state and ultimately it will push towards financial anarchy.