Getting a raw deal

Nirmal Sandhu

Punjab’s financial management, rather mismanagement, can baffle not just experts but even ordinary citizens. Here is a government that takes loans to waive loans. A state heavily under debt is extending a massive interest-free loan to an oil refinery. The role played by Punjab’s less-than-smart deal-makers in pushing the state to the brink has not been adequately recognised. 

 A state that reels under a Rs 2.11 lakh crore debt and pays Rs 24,870 crore annually to service it is set to lend Rs 1,250 crore free of interest to the oil refinery at Bathinda. Last week, the Cabinet decided to honour the liberal concessions the HPCL-Mittal Energy Refinery had wrested from the Akali Dal-BJP government back in 2007.

Deal-making, like diplomacy, is an art. Politicians and bureaucrats may be good at people management but are no experts on striking complex bargains, like those on road, power or refinery projects. Yet lack of subject expertise does not deter them from entering into agreements with huge financial implications. 

There are no independent and reliable institutions, private or public, that can judge projects on merit. Road users are required to pay tolls — apart from road tax — for years without knowing how genuine and scam-free the corporate-government deals are.  

Given our give-and-take political culture, non-transparent corporate funding of political parties, absence of expertise on the part of people's representatives and general greed and unethical practices of business houses, suspicion always lurks about the terms of agreements reached to undertake works through private-public partnerships. 

When in opposition, Capt Amarinder Singh had dubbed the Badal government's deal to give massive incentives to the refinery “the biggest-ever scam perpetrated in the history of Punjab.” Now in power, his government has become party to — what he had called then — “the loot of the state exchequer”. 

The Chief Minister has not clarified whether he was right then or is right now. If there was a scam as the Captain had claimed, it has been quietly buried. There has been no independent study to assess whether — and how much — Punjab stands to gain from the refinery, and whether the sacrifices it is called upon to make in terms of foregoing tax revenue outweigh the advantages promised. 

In the scramble for credit-taking Akalis and Congressmen had made wild claims about the refinery's benefits, including job creation. Now it turns out that only 20 per cent of the refinery staff is from Punjab. None of the governments since 2007 has made preparations to meet the refinery's need for trained manpower nor has any effort been made to encourage and support local start-ups to take up ancillary projects.  

The rise in petroleum prices due to oil decontrol and the US sanctions on Iran after President Trump walked away from the nuclear agreement have added to the refinery's profitability. At the same time the continued financial deterioration has driven Punjab to the edge. This is a reason enough to reopen the deal. The logic behind the Captain’s U-turn, if any, has not been put in public domain.

This is not the only time the Badal government has been outsmarted in negotiations with the corporate sector. Three private power companies setting up thermal plants in the state have extracted from the state government “excessive” fixed charges and a provision for assured profit. A government desperate to make Punjab power surplus did not go in for competitive bidding and allowed itself to have terms dictated by the companies. 

Congress leader Sunil Jakhar had then cited the fixed charges committed to the Mundra thermal plant in Gujarat and the Sasan thermal plant in Madhya Pradesh to make the point that Punjab had been taken for a ride. The state has become power surplus but due to high costs PSPCL has piled up more debt and domestic consumers in Punjab are paying the highest power tariff in North India.

Earlier the successive governments gave free power to farmers and subsidised the domestic consumer, passing the burden on to industry. Now power to industry is capped at Rs 5 a unit and farmers continue to get free power and it is the domestic consumer's turn to be at the receiving end.   

When the Congress assumed power last year, a relook at the pacts with the refinery and the power companies was expected. Nothing of the sort has happened. Rather despite the cash crunch, a large-hearted Congress government has put its stamp of approval on the refinery concessions. 

Legally it is not easy to revisit contracts once signed. But there are examples of states trashing accords they have found questionable. In February 2017 Odisha withdrew tax incentives to the Paradip refinery. Gujarat backed down on financial incentives given to the Essar refinery and the Supreme Court upheld its decision. It requires a Donald Trump to tear up agreements he considers “horrible, one-sided that should have never, ever been made”. Punjab's laid-back leadership carries on with the state of affairs as they are. No one is as careful with other people’s money as one’s own.  

The worst deal Punjab has ever got is from one of its own, Finance Minister Arun Jaitley, who linked the release of funds for paddy procurement to the clearance of past dues, disputed by the state. Chief Minister Badal meekly surrendered to the blackmail by a man his party had done everything to get elected from Amritsar. For political survival the “Panth Rattan” put personal interests over those of Punjab. 

Last month the Chief Minister met the Union Home Minister in Delhi to seek a Central “strategy” to tackle separatist violence in Punjab. He did not meet the Prime Minister or the Union Finance Minister or lead an all-party delegation to renegotiate the Rs 31,000-crore debt. Back home, he wrote a letter to the PM, hoping that should be enough to bail out Punjab. Since the Enforcement Directorate is probing money laundering cases against him and his family members, the Captain cannot push Punjab’s case beyond a point.

Instead of fighting hard to secure Punjab’s rights and recover what is due to the state, the Congress government has chosen the easier option of filling the coffers by levying new taxes, raising the bus fares and power tariffs, closing down thermal plants, rural schools and “suvidha kendar”, and imposing salary cuts on teachers. Its immediate goal is not a growth pick-up or an economic turnaround of the state but just to have enough in the kitty to pay salaries, waive a portion of the farmers’ debt and continue with government business as usual.

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