Mann govt to borrow ₹14k cr in Oct-dec quarter

AS MUCH AS 82% OF THE AMOUNT BORROWED TO DATE HAS GONE INTO PAYING DEBT

CHANDIGARH: The Punjab government has planned to borrow ₹14,700 crore in the third quarter (October to December) of the financial year 2022-23.

The state government has indicated the tentative quantum of market borrowings during the three-month period to the Reserve Bank of India (RBI). The funds – ₹4,400 crore in October, ₹5,800 crore in November and ₹4,500 crore in December, are to be raised through the sale of government securities, mostly having tenure of 20 years, through auction, according to the state’s market borrowing plan released by the central bank in consultation with the state government

Of this, an amount of ₹4,000 crore was raised last month by way of the auction on the RBI core banking solution (E-kuber), taking the gross borrowing in the April-october period this year to ₹24,500 crore. Much of this borrowed amount has gone into servicing outstanding debt – repayment of principal amount and interest payments, which stood at a whopping ₹2.84 lakh crore at the end of the financial

PUNJAB’S DEBT BURDEN

Oct

Nov

Dec year 2021-22, as per the official figures. Of the total borrowing in the first seven months, ₹10,843 crore, or say 44%, has gone into repayment of a part of the outstanding debt and another ₹9,221 crore, which comes to 38%, in interest payments. Gross borrowing includes net borrowing for the year and the repayment of past loans. The state budget has pegged the total outstanding debt at the end of the current fiscal at ₹3.05 lakh crore with a net borrowing of ₹23,835 crore in the current fiscal.

(44% of total borrowing)

(38% of total borrowing)

Finance minister Harpal Singh Cheema, in an interview with this newspaper two weeks ago, had stated that debt is a problem that the Aam Aadmi Party (AAP) government had inherited, and it is trying to invest the funds available after loan servicing into development works and creation of capital assets. “The current trend does not help the debt scenario with 82% of the gross borrowings of the state going into debt servicing alone. This needs to change for the state to bring debt under

(as on March 31, 2022)

(as on March 31, 2023)

control. If the borrowed funds are invested into capital formation, the asset so created would pay for itself and generate income for the state over a period of time. The real challenge is whether the fundstarved government would be able to do that with free power, cash dole-outs and other promises,” said a city-based economist who did not want to be identified.

The white paper, tabled by the government in the Punjab assembly in June, had also, in its diagnosis of the legacy debt burden, pointed out that a significant portion of the annual gross debt/borrowings contracted by the government is being applied towards repayment of the old debt and interest payments and not for future development of the state. An official in the finance department, however, said that the state government has stopped taking loans from National Small Savings Fund, etc. which were proving to be costly, and going for the cheapest route (dated securities) that is being widely adopted by the central and state governments, started contributing to the consolidated sinking fund for access to cheap capital and making efforts to increase its revenues. At the same time, it would have to keep a tight check on its expenditure which was higher than the growth in revenue receipts in the first half and impinged on revenue deficit.