State gets legroom for development

Ruchika M Khanna

Tribune News Service

Chandigarh, February 12

The apex regulatory bank, Reserve Bank of India (RBI), has increased the ways and means advances limit of the state government from the present Rs540 crore to Rs925 crore.

This 71 per cent increase in the state’s WMA limit (which is the credit that RBI allows to state governments in case of mismatch in receipts and payments), will give enough elbow space to the otherwise cash-strapped state government to unleash the “development agenda” and continue raining sops on all category of voters in this election year. The new limit for availing this credit is effective from February 1.

With elections round the corner, the SAD-BJP government, which is targeting a third win at the hustings, is on a sop-giving spree.

From cashless insurance to a wide section of voters to recruiting over 1 lakh employees; from doubling various social security schemes to the much-hyped Urban and Rural Mission of providing basic infrastructure in all towns and villages; and from assuring the state government’s over five lakh employees of enhanced salaries to mulling absorbing of contractual employees of the state government, the one question being asked was — where is the money.

Considering the fact that over 76 per cent of the state’s total revenue receipts are expected to be used only for payment of salaries, pensions and interest, the state is left with just Rs 10,792 crore for meeting its other liabilities and expenditure.

Thus there is no room for carrying forward a “development agenda” — as promised by the government when it came to power in 2012. The enhancement in the WMA limit comes as a reprieve in this phase of slow revenue growth for Punjab.

On an average, the state spends almost Rs 500-Rs 600 crore per month extra than what it earns. But with the WMA limit being enhanced, on the recommendation of an advisory committee set up by the RBI, it will come as a breather for the cash-strapped state government.

This year, the state has gone into overdraft (which is a credit limit once you exceed the WMA limit) on at least five occasions. Officials in the state government’s Finance Department feel that the enhancement of the WMA limit by Rs 385 crore now will prevent the state from getting into overdraft and thus avoid panic situation for the state government.

The WMA will generally be restricted to a maximum of three months from the date of making the advance. The interest rate on WMA will be the Repo rate, announced by the RBI. In case WMA outstanding continues for more than three months from the date of such advance, a higher interest of Repo rate plus 1 per cent will be charged on Punjab.

“However, the chances of this are a few. Punjab does avail its WMA limit, but it’s never for long periods of time. It is generally cleared within less than a month,” said an official in the Finance Department.