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Govt stares at salary abyss

Finance secretary who was sent to Delhi has come back empty-handed. Avijit Ghosal reports.

kolkata Updated: Apr 21, 2011 14:53 IST
Avijit Ghosal

With 19 days out of 30 in April already gone, the West Bengal government has no idea how to pay salary for its employees for the current month.

Finance secretary CM Bachawat who was sent to New Delhi twice over the past three weeks has come back empty- handed as the state has already raised and consumed whatever debt it was entitled to.

The state needs Rs2,900 crore for salary and pensions every month and another Rs1,000 crore for day-to-day committed unavoidable expenditure. About Rs1,600 crore will trickle in as taxes and other revenues. None knows about how the gap of Rs2,300 crore will be plugged," said a senior bureaucrat on Tuesday.

While finance secretary Bachawat refused to take HT's calls and respond to text messages, officials admit the finance secretary was asked to arrange funds from Hidco, but that option too appears closed. "We are aware of the crisis. The government is running from pillar to post desperately seeking debts so that it can meet the salary and pension obligations," said Kamal Chakravarti, general secretary, state government secretariat officers' forum. Hidco's money is not government money. Moreover, permission from the Centre is required even to take loan.

A crunch in 1991 had forced the Jyoti Basu government to take loans of Rs60 crore from Peerless General Finance and investment at 20% interest. But the situation is far grimmer now, with the amount involved being far bigger. Moreover, the Centre's nod is required even to raise loans from the private sector and with the state's ability to pay hitting rock bottom, such approvals do not seem likely, argue officials.

Worse may follow. With three phases of polling scheduled on May 3, 7 and 10, a delay in salary and pension can wreak havoc in the polls, said a bureaucrat. That the state government may not be in a position to pay salary and pension was unambiguously stated by Union finance minister Pranab Mukherjee on April 15 from an election rally in Jalpaiguri in the presence of UPA chairperson Sonia Gandhi. "The state government would not be able to pay and then it would blame me," he said.

A couple of weeks ago, the state government has issued a circular putting a stop to all government office expenditure in a desperate measure to cut down on expenditure. It had already stopped paying contractors for several months.

The Centre had been warning the state government of the dire need to improve its poor debt serviceability ratio, without which it can not be eligible for a raise in its borrowing limits. Expenditure secretary Sushma Nath had summoned chief secretary Samar Ghosh and finance secretary Bachawat to New Delhi late last year and warned of the government falling over the precipice.

She had then asked for a consolidated fiscal roadmap that would have allowed the state to emerge out of the crisis. "However, that roadmap has yet not been presented to the Centre," admitted a bureaucrat. With 92% of the tax revenue spent to service past debts (2011 figures), the state government has to depend on debts to pay salaries and pension.

The situation turned grim in 2010 when because of the inability to pay back its debt, the Centre could not agree to the state raising Japanese debts for the 600 MW unit VI of Bakreshwar thermal power project. The project would have cost Rs2,850 crore and 85% of the cost would have accrued from Japan International Cooperation Agency loans. But the Centre turned down the funding request as West Bengal was deemed unable to pay back its debts.

After the loan was refused a worried Buddhadeb Bhattacharjee had written to finance minister Pranab Mukherjee for help, but with the arithmetic going against the state, Mukherjee could not bail out the government. Similarly, the financial crisis has ruled out all externally funded projects involving agencies.