Why lavish Punjab wants a bailout

State Congress chief Captain Amarinder Singh has said the Centre should not pay for Badal’s profligacy without a guarantee that the government will not squander away the money on meeting the poll promises. “They first brought the state to brink of bankruptcy and are now going to Centre with a begging bowl,which Badal always keeps under his cloak,” he said in a recent statement.

Even before factoring in the poll promises,the estimated total expenditure of Rs 50,883 crore is 28 per cent higher than the previous year’s Rs 39,698 crore (revised estimates),while the income has been projected at 21 per cent higher than last year’s. And most of the expenses will be revenue expenditure,which at Rs 43,902 crore will be Rs 9,910 crore higher than in 2011-12.

This is largely due to rising bills for salary and pensions,subsidies,populist schemes and debt servicing. The revenue deficit and the fiscal deficit are each over 40 per cent higher than the previous year’s shortfalls.

The total outstanding debt will jump from Rs 77,585 crore last year to Rs 90,268 crore.

Subsidies

The preceding year’s revenue deficit had been projected at Rs 3,379 crore to start with before it shot up to Rs 6,200 crore in the revised estimates. This year,subsidies alone are expected to cost the state over Rs 7,000 crore.

“Free power to farmers and the urban poor is expected to cost Rs 4,632 crore,but if the power regulator allows a 15 per cent hike as demanded by the power corporation,the figure will touch Rs 6,000 crore,” the Finance Minister told the Assembly last month. Of other subsidies,the populist atta-dal scheme would cost Rs 509 crore,social security schemes such as Shagun and old age pension Rs 1,350 crore,and welfare schemes for Scheduled Castes and Backward Classes another Rs 540 crore.

Also committed

This is where the bulk of the spending will go into. Such expenditure will account for over 70 per cent of the total revenue expenditure. In the midst of rising expenses because of various subsidies,the government added concessions worth Rs 1,500 crore to employees in November and December,ahead of the polls.

The CAG report every year points out Punjab’s high committed expenditure on salaries,pensions,subsidies and interest payments. This year,with the state needing to pay a Rs 1,500 crore instalment against Pay Commission arrears,its salary bill will be Rs 16,234 crore. Pension and retirement benefits will cost another Rs 5,800 crore; debt servicing Rs 7,118 crore. Also,to keep the BJP in good humour,the SAD-led regime plans to treble allocation for urban bodies from Rs 600 crore last year to Rs 2,111 crore.

A lavish government has appointed 21 chief parliamentary secretaries,the highest number ever,and more than the 17 cabinet ministers. Each CPS will have a new luxury sedan and other perks. If their bungalows fall short of their needs,the chief parliamentary secretaries can demand house rent at market rates,up to Rs 50,000 a month.

Poll sops

The Chief Minister had announced that the promises would be met in the first cabinet meeting after the poll verdict. Now this may well wait,with the minister having put a figure on the expenditure.

Leader of the Opposition Sunil Jakhar says the government promised the moon to voters. “They have held many cabinet meetings but no decision has yet been taken on fulfilling the promises,” he said,vowing not to let the government “escape”. “The Opposition will ensure that the government implements all that it has promised,” Jakhar says.

Former finance minister Manpreet Badal says the government spent mindlessly in the last five years. “It did not expect to come back,” he guesses. “It will now have to walk the minefield it laid for the next regime.” During his tenure,he said,his department had submitted to the Centre a detailed plan on how the government would curtail expenditure. “The Centre said if Punjab can successfully follow this plan,they would waive loans.” He alleged it was when he communicated this that he was ousted from the party.

Annual plan

The planning department has drafted an annual plan of Rs 12,800 crore,approved in Punjab last week and pending final approval at CM Badal’s upcoming meeting with Planning Commission deputy chairman Montek Singh Ahluwalia in May. The state,which had pressed for Rs 3,000 crore in Central assistance,will get Rs 2,406 crore. It is Rs 3,000 crore short in funding its part of the burden,Rs 10,394 crore, and has told the commission it will bridge the gap through “additional resource mobilisation”. Officials said they are trying hard for the Central bailout.

Out of line

With projected expenditures overshooting targets,Punjab has gone way off the fiscal roadmap recommended by the 13th Finance Commission. The commission had recommended that the revenue deficit for 2012-13 be 1.2 per cent of the gross state domestic product; that is likely to be 3.3 per cent. The fiscal deficit,targeted at 3.5 per cent of the GSDP,has been projected at 4.6 per cent. The outstanding debt,however,will be 32.9 per cent of the GSDP,well within the commission’s guideline of 41 per cent.

Looking at options

New chief secretary Rakesh Singh has been tasked with the job of working out a bailout plan. Singh,a former additional secretary in the Union Finance Ministry,has engaged IDBI to propose ways to raise revenue.

A recent IDBI presentation proposed an additional storey in government schools to house call centres,and renting out some space to private diagnostic centres in government hospitals to mop up funds. Departments such as revenue,transport,local government have been asked to send in proposals to curtail wasteful expenditure and increase revenue.

Such proposals range from included hiking user and service charges to utilising the surplus manpower in the transport department by adding more buses. New levies such as professional tax have been proposed. But,as in the case of house tax,the state may not be able to impose these levies in urban areas owing to resistance from coalition partner BJP.

Finance Minister Dhindsa has sought the cabinet’s nod for constituting a standing committee of ministers and officials to look into all such proposals.

Economist Sucha Singh Gill,director,Centre for Rural and Industrial Research,says mobilising resources requires political will which the government seems to lack. “During their last tenure,a committee comprising deputy chief minister Sukhbir Badal and then industries minister Manoranjan Kalia was constituted but many of their recommendations never saw the light of day. In a few months from now there are corporation elections and then there are parliamentary polls. There seems little hope that populism will give way to urgent fiscal reforms,” Gill said.