THE RISING DEBT OF PUNJAB
Many economists wrote a letter to the union finance minister ahead of the budget of 2023-2024, warning about the fiscal situation of Punjab.
The state of Punjab has transitioned from ‘Debt-stressed’ to ‘Debt-trapped’. However the Aam Aadmi Party government has figured out how to satisfy its committed liabilities up until this point, the ruling party, which came to power promising “Badlav”, has fallen into the snare of giving sops people despite empty coffers.
Between April and October, the government borrowed ₹13,940.15 crores. Another ₹4,000 crores are learnt to have been borrowed by the government in November and December. A large amount of money has also gone into repayment of old debt and interest (₹8,795 crores). Till March this year, the state’s outstanding debt liability was ₹2.83 lakh crore. By the end of this fiscal, the state’s outstanding public debt will cross ₹3 lakh crore, which works out to be a per capita debt of ₹1.01 lakh.
Aam Aadmi Party won the election based on freebies, the three major ones of them were 300 units of free power, ₹1,000 as an allowance to each woman, and regularisation of jobs for contractual/ad hoc employees. The first one is already implemented, but the government is silent on the latter two. Even the 300 units of free electricity to domestic households have put a dent in the income of the state, the power subsidy bill is going to cross ₹20,000 crores this year.
AAP raised the issue that previous governments misused the finances and invested in loss-making PSUs. The AAP government had promised to disinvest its stake in loss-making PSUs boards and corporations and proposed to merge and wind up some of the 46 entities. So far, not much has been done in this regard.
AAP relied on populism to win the state election, they haven’t imposed any new tac due to this. The government also promised to raise ₹20,000 through the sale of sand and gravel. But interestingly mining of sand is banned in the state. Similarly, it seems unlikely that the government will meet its target of earning ₹9,647 crores.
Fiscal indicators of the state show that the state has accomplished a lesser level of designated income from excise this year when compared with 2021 however the real excise collections have shown an increment of 33.44 percent (from ₹3,984.06 crores in April to November 2021-22 to ₹5,316.45 crores in the corresponding period this year.
The state has performed far worse in the area of VAT collection compared to last year, which is somewhere near 22.77 percent between April and November when contrasted with a similar time in 2021. Additionally, with the compensation for GST having finished, the state government will lose ₹16,000 crores as a receipt in its income.
Finance Minister Harpal Cheema said that the state has performed very well in managing the finances ever since AAP came to power.
“We have been borrowing within the prescribed limit. The power subsidy paid to the PSPCL is ₹13,516.9 crore up to November 2022, which is much more than the power subsidy of ₹13,443.48 crore paid for the entire financial year 2021-22 by the previous government. We have not defaulted on any committed liabilities, but rather spent money on people’s welfare. For the first time, a sinking fund for the state has been created as a backup plan to raise money,” he said.