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Press for a structured package, not a bailout

Rhetoric is at best a poor apology for a stoical silence on hard facts and ground realities. Demanding federal structure or cooperative federalism is something very different from demanding a special package to bail out the state from the financial mess it has been dragged into.

chandigarh Updated: Jun 14, 2015 10:52 IST
Punjab,Special package,federal structure

Rhetoric is at best a poor apology for a stoical silence on hard facts and ground realities. Demanding federal structure or cooperative federalism is something very different from demanding a special package to bail out the state from the financial mess it has been dragged into.

Militancy is the story of the days gone by. The financial liability of the state on that account was finally written off through a loan waiver of Rs 5,029 crore in 2007. Moreover, Punjab is not the only state that has suffered due to militancy. Naxalites are still active in many areas of our country.

Further, if Punjabis are of robust personality, sword arm of the country and all that, it does not justify a special financial package and clicks the least with a begging bowl.


No doubt, Punjab has played a major role in making the country self-sufficient in food grains. Yet, the determining factors were a combination of a bold policy stance of the Centre to import dwarf wheat seeds in bulk, research and extension support, availability of inputs such as pesticides and fertilisers and market clearance policy through minimum support prices, procurement and public distribution system.

Punjab benefitted the most because of consolidated land holdings, natural resource endowment, water availability for assured irrigation and robust peasantry. This advantage, however, was lost gradually because of land holdings getting smaller though successive subdivisions and fragmentation and water getting scarce and costly due to deteriorating water balance.

Punjab has been contributing to the central pool more than 16,000 crore gallons of water packed into grains annually for the last four decades. Three-fourth of this has been the mined water which has upset the water balance.

Underground water got polluted due to excessive use of chemical fertilisers and pesticides. Air pollution increased as direct outcome of intensive farming around wheat and rice rotation and burning of stubbles. As a consequence, in spite of substantial increases in minimum support prices, farmers of the state have come under financial squeeze.


Since 1997-98, more than Rs 56,000 crore have been doled out to the farm sector in the form of free power. The significant aspect of this subsidy is that it hasn’t landed in farmers’ pockets. For more than 20 million tonnes of food grains contributed to the central pool annually at minimum support prices, the commission for agricultural costs and prices (CACP) counted the electricity cost as zero to farmers which kept the MSP correspondingly lower. Lower MSP led to lower prices for consumers.

Farmers of the state were not thus benefited from this benevolence of the state government. Huge amounts of funds collected through fees, taxes and cess on the proceeds of agricultural commodities have been kept as an extra-budgetary provision. Most of these funds have been splurged on programmes such as sangat darshans aimed at garnering votes.


Leaving aside other financial improbities, by the time this government demits office in 2017, it will have splurged funds on these two accounts almost equal to the amount of debt the state has incurred. If this money was used prudently to help develop the farm sector by focusing on subsidies and productive investment, Punjab would have been moving on a much higher growth path. Unfortunately, right from the year 1997-98, governments of all hues have remained in the ‘maen na manu’ (denial) mode.

The Congress government in 2003-04 took some steps and imposed flat rates on power supply to farmers. It took more than four months personally for me to persuade a defiant group of farmers to pay electricity charges and they happily did so along with paying arrears even. However, as assembly elections came, free power supply was restored.


When the SAD-BJP government took over in 1997-98, five years after the militancy period was over, Punjab had debt of about Rs 15,000 crore only. By the end of this financial year, the debt will increase to the tune of Rs 1.25,000 crore plus sovereign guarantees for the loan obtained through state corporations, having low, zero or negative equities. One cannot sympathise with different political dispensations that have ruled the state for the last 19 years that are responsible for this financial mess pushing the state into the vortex of stress and stagnation.

However, Punjab certainly deserves a long term structured financial package because of very different and cogent reasons. Punjab is a singularly left out case amongst the northern states.

Though it is not the only landlocked state, its neighbours Himachal Pradesh and J&K have been given special financial packages, putting Punjab at disadvantage that forced large number of industrial units to close or shift out of the state.


In addition to being close to the Centre of power, Haryana has twothirds of its area under NCR that has created highly favorable investment environment. Punjab doesn’t even touch any industrial corridor. Further, Punjab is being punished by being labelled as a prosperous state, which it is not now.

On per capita income ladder, Punjab occupies the ninth position. In the farm sector, the economic distress is leading to an unprecedented increase in suicides. Health and medical facilities in hundreds of villages are just on paper. Rural education is suffering due to lack of infrastructure, roads are in a dilapidated condition, sanitation is in a miserable state and youth are getting hooked on drugs. There are no sports facilities and libraries and there is utter lack of gainful employment opportunities for the rural population. Cities are busting with slums devoid of clean drinkable water and sewerage facilities. Traffic snarls are order of the day.

Power shortage both in rural and urban areas is affecting the state’s economic growth and development. Better power scenario in the adjoining states along with more favorable investment climate created through special packages and industrial corridors has put Punjab at a huge disadvantage. This step-motherly treatment meted out to the state is totally unjustifiable.

The state desperately needs a special well-structured financial package to fulfil basic aspirations of its people. The package, however, must be in a shape of mutually worked out projects. There should also be an intensive monitoring so that the funds are not diverted and splurged on unproductive doles and populist schemes. (The writer is an eminent economist and chancellor of Central University, Bathinda)

First Published: Jun 14, 2015 10:49 IST