Punjab's "colossal" debt is a legacy of its successive governments' urge to splurge. The Rs 1.03 lakh crore bailout that the Parkash Singh Badal government is seeking from the "friendly" Narendra Modi government at the Centre can at best be termed as delusional as the anatomy of the state's debt reveals its politics of populism that has piled up the debt in the last decade, long after the state had survived the dark era of militancy.
The outstanding debt of Punjab was merely Rs 15,250 crore in 1996-97 when militancy ended. The figures jumped as politics of populism took centrestage and free power was introduced in 1997. The outstanding debt doubled to Rs 32,496 crore in 2002 when the Congress came into power and increased to Rs 48,344 crore in 2006-07 when it went out of power. The last instalment of the special-term loan was waived in 2006-07 but the public debt started piling up.
Since 2008-09, Punjab's public debt has grown by over 50% -- roughly 10% each year -- and constitutes a whopping 74% of state's overall fiscal liabilities. The other 23% comprises small savings, provident fund and other deposits for which the government acts as a banker. Just a mere 3% of the state's total liabilities are in the form of loans and advances from the Centre. What makes this mounting public debt of Punjab beyond the purview of the Centre is that 60% of it is being funded by open market loans, rest through borrowings from banks and financial institutions and the share of loans and advances from the Centre is negligible. In the current year (2014-15), public debt will comprise 20% of the state's total receipts to fund part of staggering non-plan revenue expenditure of Rs 41,480 crore.
And the debt is not being raised to meet "development expenditure" as the Badal regime puts it but for servicing debt and politics of populism. The percentage of debt raised to repay earlier loans is increasing every year and now 70% of the new debt is used to service the old. The rest goes into footing Punjab's "unproductive" expenditure -- salaries of Punjab government employees, which are envy of its neighbouring states, or the power and food subsidy bills and perennial poll sops.
The revenue deficit -- gap between revenue receipts and revenue expenditure -- has now become structural in nature as the state continues to outlive its income. Since market loans are being met to meet these committed expenditure of the government, the percent of capital expenditure to the state GSDP has declined to less than 1%. The budget presented by finance minister Parminder Singh Dhindsa in July pegged the total outstanding debt of the state at Rs 1.13 lakh crore by March 2015 calling it "unsustainable".
But what Dhindsa did not say is how the maturity profile of this debt is even more alarming as over 46% of it will have to be paid in seven years from 2012-13 and the remaining 52% after seven years. In sharp contrast, the militancy-time special-term loan, of which merely Rs 2,694 crore was paid by the Punjab government's own admission -- is just a fraction of the total debt which, if waived, would only fund the power subsidy bill of the state for six months or half of Rs 4,252 crore revenue deficit for the current fiscal or else fund its populist schemes such as atta-dal and shagun for the remaining tenure of the government.
No easy task
Former Punjab finance minister Manpreet Badal says the chief minister thinks asking for funds from the Centre is like his sangat darshans. "He thinks he will demand funds and they will be given. When I was the FM, I had pegged the current value of Rs 2,694 crore paid to the Centre at Rs 10,000 crore. Even if we peg the current value of this loan after five years to Rs 15,000 crore, what makes the rest of Rs 1 lakh crore figure that the state is demanding. The Centre itself is starved for funds. It is foolhardy to believe they can afford to bestow Punjab with such largesse," he said.
Former chief secretary KR Lakhanpal, also a former finance secretary of Punjab, says the central loans do not constitute even 5% of the state's total debt. "Do they expect the Centre to waive public provident fund and small savings? They don't want to levy the right amount of property tax, don't want to charge farmers for power and irrigation water. The structural gap between the revenue receipts and expenditure is Rs 10,000 crore annually, Rs 1,000 crore a month and Rs 30 crore a day. This figure has grown over successive regimes of the state and it is high time they stopped trumpeting militancy as the bane of what ails Punjab still," he said.
Tomorrow: How bureaucracy allies with FMs to juggle budget figures
Revenue surplus: Rs 59 crore
Power subsidy: nil
Outstanding debt: Rs 1,450 cr
Revenue deficit: Rs 766 cr
Power subsidy: nil
Outstanding debt: Rs 10,500 cr
Revenue deficit: Rs 3,562 cr
Power subsidy: Rs 1,351 cr
Outstanding debt: Rs 41,412 cr
Revenue deficit: Rs 5,259 cr
Power subsidy: Rs 4,815 cr
Outstanding debt: Rs 1.01 lakh cr
*1983-84 was the last year when Punjab was revenue surplus. Power subsidy was introduced in 1997.