It does not really require any special economic expertise, but common sense, that to arrest the financial drift, we need to earn at least as much as we spend or at least spend only as much as we earn. That should be the classic economic sense of any ordinary household even.
Unfortunately, the current government in the state has proved that it lacks even this much of common economic sense. Instead, it appears to have resigned to bankruptcy as the fait accompli and hence has been borrowing continuously and so wantonly.
Punjab at present is a classic case of borrowed and indebted glory, if at all any glory has been left out there, beyond the newly constructed Badals’ fortress at Badal village and other parts of the country. Punjab is virtually bankrupt. If borrowing money to pay the interest on already existing debts is not bankruptcy, what else is?
A state that is running a recurring revenue deficit of Rs 7,000 crore every year will try to make everyone believe that
there is nothing wrong with it. To the extent, some of them will even compare Punjab’s debt with business behemoths like Reliance, without telling the complete truth. Reliance generates revenue from debts, while Punjab only generates more debts from the existing debts. It takes debts to service the old debts and the vicious cycle goes on. The result is that the total debt of the state, from the government’s own estimates, will cross Rs 1.13 lakh crore in March.
It is not that the problem cannot be solved. But for that you need to first recognise the problem and must have the will to solve it. Instead, what this government has been doing is either outright denying that anything is wrong with the economy -- and those who are saying so are only the enemies of the state out to defame it -- or it will try to shift the blame on to others, like the Centre till May 2014. Since then they have been denied even that privilege also (of blaming everything on the Centre), although they remain more disappointed with the new regime of which they happen to be part and parcel.
Remember, Badal pronouncing Jaitley to be the finance minister who will send truckloads of money to Punjab after getting elected from Amritsar, much before the elections. Neither Jaitely won from Amritsar, nor did the truckloads of money arrive though he did become the finance minister as the soothsayer Badal had forecast. This is because economy, unlike Badal’s sangat darshan programmes, works according to a set system and procedure which nobody can interfere with.
That is why the Akali-BJP government, despite accusing the Congress-led UPA government of discrimination, got generous grants worth thousands of crores, which we later learnt, it had squandered away. And it was their own finance minister Jaitley who made these revelations and asked for the accounts. A bit surprising and disappointing for Badal though, as instead of truckloads of money, he got memos asking for accounts.
No doubt the current revenue-sharing arrangement between the Centre and the states does not favour the states much, but that has been the case for over 60 years now and it is the same for every state. It was under this arrangement only that Punjab was a revenue-surplus state for a long time. It topped in per capita income for long. And it is under this revenue-sharing arrangement that many states, including some economically backward ones, have done far too well and left Punjab far behind. This actually reflects poorly on the powers that be in the state itself.
Where’s the will?
You need to have the will and competence to perform. In 2002, we inherited empty coffers as our worthy outgoing chief minister Parkash Singh Badal had splurged all the money on various unplanned things, including his favourite sangat darshan pastime. We could not allow the drift to continue and decided to arrest it. Not many people know and even those who know do not acknowledge that in the 2006-07, the last year of our government, we closed with a revenue surplus of Rs 2,000 crore. This was after two decades that Punjab was again revenue surplus. Besides, we also squared up irregularity in the food account to the tune of `4,500 crore, paid up the outstanding special term loans amounting to Rs 4,000 crore and improved the plan performance from the abysmal 60% average to over 100%.
No sooner did we leave than the drift started again and accelerated at an economically alarming speed. The revenue deficit has ballooned to over RS 7,000 crore with the state debt estimated to cross Rs 1.13 lakh crore. For years, the state’s economy has been growing at a rate less than the national average. Consequently, the state has slid to the eighth position in terms of per capita income, among the states of the country. The real financial position of the state though is buried beneath these dry statistics.
Staff without salary
Month after month, one or another section of employees goes without salaries, central funds are diverted and misdirected, even old-age and pensions for the widows and scholarships for the Scheduled Castes remain undisbursed for months, employees are yet to get their full DA and Pay Commission arrears and bills of hundreds of crores are lying uncleared in various treasuries. Even then, the government remains in perpetual overdraft and under frequent threats from the Reserve Bank of India to stop payment.
The government has already started selling the family silver for running the day-to-day affairs. Public lands are being sold and proceeds are channeled for discretionary disbursements outside the consolidated fund of the state.
Massive loans are raised through state public sector undertakings (PSUs) that don’t form part of the government debt.
Most alarmingly, massive mis-utilisation of the cash credit (CC) limit granted by the banks for procurement of foodgrains seems to be on.
It is evident from the initial refusal by the Centre to release the CC limit unless the state government accounted for the gap between the value of foodgrains stocks and the outstanding cash credit limits amounting to Rs 17,000 crore.
Surely a part of it can be on account of payments due from the Food Corporation of India (FCI). Still the gap is too large to be fully explained by this alone.
As I have said earlier, the permanent solution lies in generating revenues. We cannot depend much on the primary sector, the agriculture, if we do not change. We need to ‘value-add’ our agriculture produce by setting up food processing units. That will generate both revenue and employment.
Our secondary sector, the manufacturing, is shrinking fast. The manufacturing units are either closing down or moving to other states like Bihar, Gujarat, Chhattisgarh and Madhya Pradesh. This is because they do not get any support from the government and have no faith in it.
Instead of denying the problem or blaming others and cooking up the books and going for cover-ups, the government should acknowledge the problem and start finding solutions lest it should be too late. We need drastic and emergency measures to arrest the drift before the state actually lands into financial emergency. Only if Badal could listen amid the din of his sangat darshan pastime!
(The writer is Amritsar MP and a former chief minister of Punjab. Views expressed are personal.)