Punjab budget session to begin on stormy note today

NO EASY TASK Borrowings used for debt servicing unproductive, say experts

CHANDIGARH : The seven day budget session of the Punjab assembly, commencing Tuesday, is likely to be a stormy affair with opposition parties deciding to corner the Congress government over issues such as “pending DA and arrears of employees, regularisation of teachers, lack of development and farmers’ suicides”.

CHANDIGARH : As Punjab finance minister Manpreet Singh Badal prepares to present the third budget of the Amarinder Singh-led Congress government next week, there is no dearth of challenges.

Rising debt, huge committed liabilities, burden of election promises, inadequate development expenditure, funds for asset creation, pruning wasteful expenditure and inability to meet revenue targets – all factors which together paint a grim picture of the state’s finances – are areas of concern.

The minister, who inherited an “empty” state treasury from the previous SAD-BJP government, has promised to put things right in four years. HT looks at five major challenges he faces:

A MOUND OF DEBT

The state’s outstanding liabilities, often blamed for its fiscal woes, have been rising consistently. In terms of percentage, the debt will be 41.5% of gross state domestic product (GSDP) at the end of the current financial year – the highest in the country. The debt was ₹1.96 lakh crore on March 31, 2018, and is estimated to touch ₹2.11 lakh crore at the close of the current year. A bigger problem is that much of these borrowings are going into debt

servicing (read repaying existing loans and interest). The state recently also took it up with the 15th Finance Commission for a relief package.

COMMITTED LIABILITIES

A huge burden, the committed expenditure is 40% of the total revenue expenditure – the highest among the major states in the country – against an average 29.4% among major states as per figures given in annual budget 2018-19. The pay and pension outgo was pegged at ₹36,012 crore this year as against ₹34,407 crore in last fiscal. A pay hike is due for the state employees who already get higher wages than their counterparts in most other states. Dearness allowance dues are also pending for 22 months. Interest payment accounts for about 19%

of revenue expenditure.

EDUCATION, HEALTH

The minister needs to focus on expenditure on health and education. Punjab has one of the lowest expenditures on these two key sectors. A study of budgetary allocations of major states done by the Reserve Bank of India (RBI) shows the state allocated 11.6% of its aggregate expenditure, which is the total of revenue expenditure and capital expenditure, on education (includes sports, art and culture) and 3.9% on health. Allocations for both sectors have been lower than most other states in recent years.

REVENUE SHORTFALL

Budget estimates for both revenue and expenditure are off-target. Budget estimate calculations

were off the mark in 2017-18 as actual revenue receipts fell short on account of own tax revenue. This year does not seem to be any different as per indications so far. At the end of first three quarters (April-December) of the current fiscal, only 53% of the targeted revenue receipts of ₹73,811.86 crore have been realised. The government’s expectations of 30% increase in tax and non-tax revenue inflows have not materialised so far.

CAPITAL EXPENDITURE

Asset creation is an area the state government needs to address for long-term gains, but it does not have the financial wiggle room for expenditure on income-generating assets. About 50% of its revenue goes into payment of salary and pension.