Faced with a deepening fiscal crisis, a desperate Badal government on Tuesday knocked at the doors of Punjab Urban Planning and Development Authority (PUDA) to borrow Rs. 1,000 crore to meet its urgent fiscal obligations, according to top official sources.
So grim is the plight of the Shiromani Akali Dal-Bharatiya Janata Party coalition government's finances that it is yet to clear the July salary bills of about Rs. 300 crore. This worrisome slide in the state's finances - attributed chiefly to dip in the revenue receipt targets and a ballooning salary/pension bill - flies in the face of deputy chief minister Sukhbir Singh Badal's claims that the state finances are in a good shape.
Another bad news for the government trickled in on Tuesday evening as the overdraft reached Rs. 348 crore after having exhausted the Rs. 367 crore ways and means limit set by the Reserve Bank of India.
Officials said the Punjab's precarious fiscal condition immediately needed Rs. 715 crore (Rs 348 crore plus Rs. 367 crore) to clear the overdraft. Under an agreement with the RBI, the Punjab government has to maintain with the bank a minimum balance on all days. If the balance falls below the agreed minimum balance on any given day, the deficiency is made good initially by taking "ways and means advances" from the RBI and later overdraft from the RBI.
Sources say the finance department on Tuesday asked the PUDA authorities to put in fast track the process of Rs. 1,000-crore loan. PUDA will give the money in lieu of the properties taken from the government under the Optimum Utilisation of Vacant Government Lands scheme.
Under the scheme, vacant and surplus lands of various government departments were transferred to PUDA in the revenue records. The primary objective of the scheme is to generate additional financial resources for the state for infrastructure development and not to fund the day-to-day financial needs.
According to the Comptroller and Auditor General's (CAG) report, in the run-up to the January 2012 assembly elections, the government was running day-to-day affairs by resorting to overdraft seven times a month throughout 2011-12. "During 2011-12, the government obtained Rs. 4,834 crore as ways and means advances from the RBI on 84 occasions…," say the CAG findings.
Rising salary/pension bill, which is between Rs. 1,200 crore and Rs. 1400 crore, is a cause of concern for the government. This consumes a majority of the state's revenue receipts as Rs. 20,000 crore per annum comes from value-added tax (VAT).
As the government desperately needs money, chief minister Parkash Singh Badal on July 26 wrote a letter to union finance minister P Chidambaram seeking his "personal intervention" for an early release of Rs. 664 crore central sales tax (CST).
The Centre has to give Punjab CST compensation for 2010-11 and 2011-12. Badal, in his letter, informed the union finance minister that in this regard two demi-official letters (dated October 25, 2012 and March 14, 2013) were written by the financial commissioner (taxation), Punjab, to the joint secretary (revenue) of the union ministry of finance. "This compensation, though due long back, has not been paid to the state so far," Badal stated.