Saddled with a debt of Rs 3 lakh crore it inherited from the previous regime, Punjab’s Aam Aadmi Party government is staring at a financial crisis with Center set to stop the GST compensation grant from June. After Centre’s move, which applies to other states as well, Punjab’s fiscal deficit will increase by Rs 18,000 crore annually from next year.
As the state will get Rs 4500 crore for this year’s first quarter till June-end, the shortfall in the current financial year would be Rs 13,500 crore.
The revenue shortfall comes at a time when the AAP is looking to come good on its pre-poll promises of different freebies to voters.
The government has already announced 300 units of power free of cost. While the details of the beneficiaries are yet to be worked out as the scheme would be rolled out in July, financial experts believe that this will cost the state exchequer Rs 7,500 crore annually. This would be in addition to the state already spending over Rs 10,000 crore annually on free farm power and subsidies to other sectors.
The government has also announced that it would be doling out Rs 1,000 to every woman above 18 every month. Dr Baljit Kaur, Social Security, Women and Child Welfare Minister, had a few days ago stated that the promise would be fulfilled in the budget that would be tabled in June this year. With over 1 crore woman population, it is being estimated that the government may end up paying Rs 12,000 crore every year.
Only recently, the government also announced a bonus of Rs 1,500 per acre for the paddy farmers opting for Direct Sowing of Rice (DSR) technique. The total expenditure would be worked out only after it is known as to how many farmers avail the benefit.
The government spends huge amounts from the budget on debt servicing every year. Already, 20 per cent of budget is spent on repayment of loans. For servicing this debt, the government borrows money.
In 2019-20 fiscal, the state had paid an amount of Rs 17,567 crore towards debt servicing. In 2020-21, it was Rs 18,588 crore. By March 31 this year, in the 2021-22 fiscal, it was estimated that the government would pay Rs 20,315 for paying off loans.
The government is now working on mopping up resources to fill the gap. A functional of the government said, “It is not with Punjab alone. All the states are going to face the heat.”
Financial experts have advised the government to look at excise, transport, mining for revenue, besides checking pilferage of power, and evasion of taxes.
A professor at Guru Nanak Dev University, Amritsar, Prof RS Ghuman said that the GST compensation will end on July 1 but the states are taking up the issue with the Centre.
“Punjab is already under a debt of Rs 3 lakh crore. The track record of last 10 years reveals that the annual average of debt being added is Rs 21,000 crore. The subsidies being announced during the previous regimes including free bus travel, have put more financial burden. There is a solution. AAP leaders were saying before elections that they could manage to raise Rs 20,000 to Rs 30,000 crore more annually. My calculations reveal that the state can mop up additional Rs 28,000 crore. They can meet financial liabilities if there is a political will and tax compliance,” he said, adding that freebies and subsidies should be rationalised.
He added that Punjab has to increase its investment to GDP ratio, which is currently half the national average. If the state wants to increase the ratio, it has to increase public as well as private investment.
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