Punjab out of cash, halts bill payments

As it faces the heat of the Opposition over fresh taxes levied last month, the cash-strapped Parkash Singh Badal government is showing signs of more distress with each passing month. The beleaguered finance department, which was earlier forced to stop all payments from the state treasury in the fag end of the month, has run out of cash in the mid of September.

With almost a fortnight remaining, the state has already exceeded its Reserve Bank of India (RBI) overdraft limit — it is Rs 367 crore at any time of the year through ways and means advances — by Rs 60 crore. The first casualty of the depleted cash reserve is the monthly power subsidy bill of Rs 300 crore. All pending payments to various government departments executing development works have also been postponed to next month.

The finance department contends that the months of September and October are critical for state's finances. "The budget was passed in June and by this month government departments start sending their bills to the treasury. We have also to make arrangements for procuring foodgrains for the next two months. After the procurement season, state's coffers will fill up again. The decision on retirement age will release further Rs 250 crore per month," said principal secretary finance, Satish Chandra.

Notably, Punjab levies a whopping 14.5 per cent in taxes — it includes VAT, rural develpoment fee, mandi fee and infrastructure development cess — on foodgrains. In fact, much of the credit for higher VAT collection of the state in the recent years goes to higher minimum support (MSP) for crops. The recent hike in diesel will also boost state's VAT collections.

But despite mobilising additional resources and call for "austerity" in government spending, the state will face a daunting challenge in implementing its Rs 14,000-crore annual plan, mounting revenue expenditure mainly on account of subsidies and most importantly, doling out even the most economical of its long list of poll promises.

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