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PM is right to proceed cautiously on Bengal’s plea for loan waiver

comment Updated: Mar 11, 2015 22:17 IST

Hindustan Times
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The meeting between West Bengal chief minister Mamata Banerjee and Prime Minister Narendra Modi has been timely in view of Centre-state financial relations and some thorny political issues in West Bengal. It is also good that the meeting took place soon after the 14th Finance Commission submitted its report. In their meeting Ms Banerjee asked Mr Modi to intervene in favour of a debt waiver for West Bengal. However, the PM rightly did not make a concession here because it would lead to similar demands from other states. Punjab, for example, made a similar demand in 2010 after having got a loan waiver in 1998.

Over the past years, from the time of the Left Front government, West Bengal has not been particularly known for fiscal discipline, which is the capacity of a state to raise revenue. In 2015-16, the West Bengal government’s debt is set to touch Rs 2,99,274 crore, against Rs 2,74,800 crore in 2014-15 (revised). The recent state budget showed a shortfall in tax collection, while the plan outlay for the coming year has been increased by 16%. The good news for the state government is that the Finance Commission has done away with fiscal discipline as a criterion in deciding transfers to the states. Also, it has created two criteria related to population, giving them a weight of 27% of the financial devolution to states, as against 25% earlier. This should help West Bengal because of the state’s high population density. Also in accordance with the Commission’s method, the devolution for West Bengal will be Rs 35,160 crore, a 178% increase over the figure of the predecessor body.

The other two issues — the Teesta waters agreement and land boundary — they discussed must be handled delicately because they involve Bangladesh, a friendly neighbour. The boundary has not been properly demarcated, and as a result, Indian territory has 111 enclaves with ‘Bangladeshi nationals’ while Bangladesh has 51 of India’s. In 2013 Ms Banerjee had said in a statement: “West Bengal will get about 7,000 acres but will have to cede nearly 17,000 acres to Bangladesh. This cannot be accepted without taking into confidence … the local people who live in the transferable areas.” In all this a constitutional amendment will be required. Ms Banerjee had earlier refused to visit Dhaka in 2011 because she felt the Teesta deal would be against the interests of West Bengal. But she went to Bangladesh in February, arousing hopes. These are two issues in which Mr Modi can justifiably step in.