Looking back Punjab 2022: Between promises & debt trap

Ruchika M Khanna

Chandigarh, December 25

The fiscal health of Punjab is going down as its outstanding debt is increasing. Though the Aam Aadmi Party government has managed to fulfil its committed liabilities so far, the ruling party, which came to power promising “badlav”, has fallen into the trap of giving sops to people in spite of empty coffers.

Between April and October, the government has borrowed Rs 13,940.15 crore. Another Rs 4,000 crore is 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 (Rs 8,795 crore). Till March this year, the state’s outstanding debt liability was Rs 2.83 lakh crore. By the end of this fiscal, the state’s outstanding public debt will cross Rs 3 lakh crore, which works out to be a per capita debt of Rs 1.01 lakh.

Nonetheless, the state government, voted to power on the promise of giving several sops like 300 units of free power, Rs 1,000 as allowance to each woman, and regularisation of jobs for contractual/ad hoc employees, has already implemented the first, rolled out the carpet for the third, but remains silent on the fulfilment of the second sop. Even as it has rolled out 300 units of free power to domestic consumers, it is not without bleeding the exchequer. The power subsidy bill of the state is expected to cross Rs 20,000 crore this year, though the state government had reserved Rs 15,846 crore.

Interestingly, the government had come up with a White Paper on stats of finances in June this year. This document had said the previous governments had relied on doles in election years and indulged in fiscal mismanagement. The government had promised to disinvest its stake in loss-making state units, 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.

The government, relying on populism, has also not imposed any new tax. Though AAP had promised to raise Rs 20,000 crore as revenue from the sale of minor minerals (sand and gravel), the mining in the state has been banned. Similarly, it seems unlikely that the government will meet its target of earning Rs 9,647 crore.

Fiscal indicators of the state show that the state has achieved lesser percentage of targeted revenue from excise this year as compared to 2021 though the actual excise collections have shown an increase of 33.44 per cent (from Rs 3,984.06 crore in April to November 2021-22 to Rs 5,316.45 crore in the corresponding period this year).

But to give the government its due, it has so far been managing to fulfil its committed liabilities. It was only once that the salary of government employees was delayed, though it was because of the government diverting funds to make a sinking fund (a fund created for repayment of debt gradually). By the end of this year, the state government would have created a sinking fund of Rs 3,000 crore.

The overall revenue receipts this year are up by Rs 8,872.51 crore, an increase of 23.45 per cent, over the receipts for first eight months of last fiscal. The overall GST collection in Punjab – from April to November this year – has registered an increase of 24.5 per cent. The total GST collection so far during this fiscal stands at Rs 11,967.76 crore as compared to Rs 9,612.60 crore in the corresponding period of 2021-22.

The only major tax revenue head where the state has performed worse than last year is in the area of VAT collection, which is down by 22.77 per cent between April and November as compared to the same period of 2021. Also, with the compensation for GST having ended, the state government will lose Rs 16,000 crore as receipt in its revenues.

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 Rs 13,516.9 crore up to November 2022, which is much more than the power subsidy of Rs 13,443.48 crore paid for the entire financial year 2021-22 by the previous government. We have not defaulted on any committed liabilities, 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.

Per capita debt Rs 1.01 lakh

• Between April and October, the government has borrowed Rs 13,940.15 crore
• Another Rs 4,000 crore is 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 (Rs 8,795 crore).
• Till March this year, the state’s outstanding debt liability was Rs 2.83 lakh crore.
• By the end of this fiscal, outstanding public debt will cross Rs 3 lakh crore, which works out to be a per capita debt of Rs 1.01 lakh