Free power unsustainable: FM to plead before Cabinet
Punjab Finance Minister Manpreet Singh Badal has decided to plead before the CoMs that the continuation of subsidies like free power is not sustainable, reports Manish Tiwari.Updated: Apr 18, 2007, 13:34 IST
Finding it difficult to sustain freebies amounting to Rs 4,000 crore per annum promised by the SAD-BJP combine in its 2007 election manifesto, Punjab Finance Minister Manpreet Singh Badal has decided to plead before the Council of Ministers that the continuation of subsidies like free power was not sustainable and the government should seriously consider its withdrawal in the larger interest of the state, it is learnt.
After evaluating the fiscal health of the state, Badal conveyed to the top bureaucrats of the Finance department that he would strongly advocate doing away with the free power promise (expected to cost Rs 2400 crore a year), department sources said. The Minister, they said, was of the view that hard decisions were needed to be juxtaposed with the financial crisis faced by the state, if at all, the state wanted to repay the interests and funds taken in form of special ways and means advance and, at the same time, initiate developmental works.
The idea, however, is bound to put Chief Minister Parkash Singh Badal and the ruling combine in an unenviable position. In its manifesto, the SAD had explicitly promised various subsidies, including include free power to farmers and SC families (2,400 crore), aata dal scheme (Rs 1,000 crore) and Shagun and other schemes (Rs 500 crore). Moreover, the state also requires about Rs 4000 crore every year for servicing of debts.
The Finance Minister, the sources said, was more concerned about the fact that the entire state?s income amounting to Rs 8,200 crore through main sources, including VAT collection (5200 crore), stamp duty (Rs. 1,500 crore) and excise duty (Rs. 1,500 crore) was bound to be spent only on freebies and servicing of debts. ?In this scenario, it would be difficult to even pay salaries and pensions, leave aside initiating developmental works. The government will have to take a call whether it wants to create capital assets or only live on a day-to-day basis,? they added.
Meanwhile, political observers said that abolishing free power in one stroke would not be a difficult administrative and legal exercise, which could save the state government exchequer around Rs 2400 crore a year, but the political fall-out of the same was not one, which the nascent SAD-BJP government could withstand, without major erosion of its political base. Already, the ruling SAD-BJP combine has suffered a major setback in its traditional Malwa vote bank in the recently concluded elections and any decision to withdraw the freebies at this stage, might send the voters (mainly in the rural areas) to the Congress-fold. ?This political cost would be too high to bear,? they added.
However, a top Punjab bureaucrat who also advocated against the freebies, pointed out that withdrawal of free power might not necessary be a loose-loose situation. Apart from sending a clear signal to the private investors that Punjab is providing an economic environment in which adequate return on their capital is assured, this would also open up healthy line of credit from World Bank. ?It will also render the state eligible to stake its claim for the huge development fund created by the Union government that is earmarked for those states, which would embark upon reforms in sectors like power, healthcare, education and drinking water,? he added.
Even the previous Congress regime that had promised to continue free power to farmers in its 2002 election manifesto had done away with the freebies soon after assuming power in Punjab, citing poor financial condition of the state. However, the Capt Amarinder government had to again implement free power facility to the farmers after a few years in light of the Assembly elections in Punjab.