Decoding the Punjab budget 2016-17: 5 things to cheer, 5 causes of worry

  • Navneet Sharma, Hindustan Times, Chandigarh
  • Updated: Mar 16, 2016 00:40 IST
Punjab finance minister Parminder Singh Dhindsa on Tuesday presented his fifth consecutive budget. (HT Illustration by Daljeet Kaur Sandhu)

Punjab finance minister Parminder Singh Dhindsa on Tuesday presented his fifth consecutive budget, loosening purse strings with an eye on rich harvest in the coming assembly polls. While his budgetary proposals look all set to bring smiles on many faces, there are several serious challenges that can’t be overlooked. Navneet Sharma decodes the budget for both good and bad news:

5 things to cheer


With young voters to set the tone of the coming assembly elections, the focus on youth, especially those in rural Punjab, is unmistakable. While 200 skill development centres have been planned, the finance minister has also proposed to set up 4,000 gyms across the state at a cost of Rs 2,000 crore and give free sports kits to youth clubs and allocated Rs 75 crore for the same. Also, it has promised to float a scheme to give monthly employability allowance of Rs 1,000 to jobless youth – a promise made before the 2012 polls, but not yet honoured.


With farm income going down, dwindling yields and crop failures, the farmers have been in dire need of government interventions. The agriculture sector seems set to benefit from the FM’s please-all budgetary proposals. The announcements include Rs 5-lakh insurance cover with annual free medical facility of up to Rs 50,000, interest-free crop loan of Rs 50,000 per crop to small and marginal farmers, a farmers’ provident fund-cum-pension scheme and some tax concessions for progressive farmers. A lot more is needed.


With the real estate market in the grip of a downturn, the government has announced 50% rebate on EDC, CLU and licence fee for affordable housing projects and 25% for all new housing sector projects, 20% cut in stamp duty on the first purchase conveyance deed of all new flats and reduction of 15% in collector rates for assessing stamp duty. The booster dose is said to have twin-objectives – to boost housing and revive the sector. Only time would tell if it works.


Rs 70-crore scheme for free schools bags for all girls going to government schools, healthcare kits for girl studying of classes 6 to 12, cheap loans up to Rs 50,000 to women for establishing small business enterprises, three new working women hostels and a women safety app are all aimed at girls and women of different age groups. While the government calls it an effort towards women empowerment, it is no coincidence that all these initiatives have come barely a few months before the assembly polls.


Punjab has been working on smooth delivery of public services to citizens people at the “doorstep”. 2147 sewa kendras, according to the finance minister, would be operational in August 2016 for providing services to people under one roof, earning kudos for its efforts. Among the leaders in Aadhaar enrolment in the country, the state has covered 95% of its population and started disbursing benefits directly under some schemes, besides announcement direct benefit transfer for kerosene. But the SAD-BJP keeps shifting its position frequently, especially when such fund transfers come in conflict with its politics.

5 causes for worry


Before presenting his budgetary proposals, the finance minister had voiced his serious concern over the rising salary-pension-retirement benefits. It’s not hard to see why. The state government’s employee-related committed liabilities – pay, pensions and retirement benefits – will see a jump of 9% in the coming financial year. Dhindsa has pegged the outgo at Rs 27,353 crore in his budget estimates for 2016-17, up from Rs 25,066 crore in revised estimates of 2015-16. Salary and wages, more than pension and retirement benefits, account for this increase.


Revenue deficit, which indicates excess of expenditure over revenue receipts, is another cause for worry. The deficit, which saw a slight dip in 2013-14, is on an upward trajectory with the FM putting it at Rs 7,983 crore, 1.76% of GSDP, in his 2016-17 budget estimates against Rs 7,561 crore in 2015-16 (RE). The number implies lower availability of funds for meeting revenue expenditure and increased dependence on borrowed money. But it actually may end up higher. Dhindsa has missed his revenue deficit target by Rs 1,167 crore (18%) in the current fiscal.


Dhindsa gave himself a pat on the back, citing prudent fiscal management for decline in debt-GSDP ratio. But a close look shows that unproductive borrowings have pushed the state into a debt-trap situation with its interest liability plus debt repayment being higher than its budget deficit. The state is using its borrowings for debt servicing. It has escalated from Rs 48,344 crore in 2006-07 crore to Rs 1,38,165 crore in budget estimates 2016-17. Debt as percentage of GSDP was higher than most non-special category states as per budget estimates 2015 (as at end-March).


Punjab’s own tax and non-tax revenues need attention. While expenditure is going up consistently, its own revenue flows haven’t kept pace. The FM has projected a conservative growth of 7% in the state’s own tax revenue, taking it to Rs 30,547 crore in 2016-17 from Rs 28,514 crore in 2015-16. Though the state was unhappy with its share of funds from the centre for long, its share of central taxes and grants-in-aid from the centre, which have shot up, are proving big help.


The state’s power subsidy bill has soared in the past few years due to free power to agriculture sector. The power subsidy outgo of Rs 5,600 has more or less been kept in the state at last year’s level, but it continues to be a big drain on the debt-ridden state’s finances. But that has not stopped the SAD-BJP government from announcing more than concessions. It has offered power at concessional rates to new industry and decided to become more liberal in giving tubewell connections to farmers with an additional subsidy burden of Rs 700 crore.

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