Maharashtra’s debt balloons to ₹6.50 lakh crore

Mumbai: Reduction in revenue, soaring debt and rising expectations after two years of the Covid pandemic: the Uddhav Thackeray-led Maharashtra Vikas Aghadi (MVA) government is caught in an unenviable position

Mumbai: Reduction in revenue, soaring debt and rising expectations after two years of the Covid pandemic: the Uddhav Thackeray-led Maharashtra Vikas Aghadi (MVA) government is caught in an unenviable position.

The debt stock of the state increased to ₹ 6.50 lakh crore in FY 22-23 from ₹ 4.51 lakh crore in FY 19-20 — a difference of ₹ 1.99 lakh crore. (Anshuman Poyrekar/HT PHOTO)

The pandemic induced economic crisis resulted in a collective revenue deficit of an estimated ₹95,000 crore over three consecutive financial years from 2020-21 to 2022-23, leading to a whopping rise in debt as well as a reduction in the outlay for development works and capital expenditure. The debt stock of the state increased to ₹6.50 lakh crore in FY 22-23 from ₹4.51 lakh crore in FY 19-20 — a difference of ₹1.99 lakh crore.

Following the lockdown, imposed to curb the spread of Covid-19, the state’s revenue dropped to ₹ 2.69 lakh crore in FY 20-21, from an estimated generation of ₹3.47 lakh crore. It resulted in cuts of an estimated ₹ 1.09 lakh crore in development works as well as a reduction in revenue expenditure. A drastic fall of over ₹ 78,000 crore in revenue also forced the government to borrow ₹68,000 crore. In FY 21-22, the state expects the revenue accumulated to be ₹3.62 lakh crore, with a deficit of ₹ 30,724 crore (the budgeted projection of deficit was ₹ 10,225 crore). The high deficit resulted in actual borrowings of ₹ 53,302 crore in the current fiscal year.

The ₹ 4,27,780 crore state budget presented by deputy chief minister and finance minister Ajit Pawar on Friday estimated a deficit of ₹ 24,353 crore. The revenue in FY 22-23 is expected to be ₹ 4,03,427 crore against the estimated expenditure.

Pawar said emphasis will be paid on spending on social schemes and capital expenditure to ensure that liquidity is pumped into the market. “We did not shy from borrowing to meet up the expenditure and ended up borrowing ₹ 89,097 crore in the current fiscal. Our spending on the development projects was more than ₹ 1 lakh crore. The deficit could have been lower had we not been compelled to spend ₹ 23,000 crore on unforeseen expenditure including natural calamities, minimum support price (MSP) to farmers and help to the financially bleeding state transport corporation,” he said.

The state government generally borrows from financial institutions through bonds and public sector units as well as from the Central government.

Pawar said that GST compensation dues of ₹ 26,500 crore from the Central government also disturbed the state balance sheet.

The state spends 58.26% or ₹ 2.35 lakh crore of its revenue receipts on salary, pensions and the interest on the debts raised. The percentage is estimated to increase in FY 22-23 compared to the current year in which it is 55.81%.

“The claims by the state government that they have been spending more on development projects are misleading. The state has not been able keep its revenue expenditure in check resulting in the reduction in the spending on development works,” said Rupesh Keer of Samarthan, a non-profit organisation that analyses the state budget.

The outlay on the key social sectors has also reduced in FY 22-23 against the outlay in the current financial year. The allocation for heath and family planning reduced to ₹ 19,920 crore from ₹ 22,734 crore in FY 21-22, while the outlay for social welfare has reduced to ₹ 16,463 crore from ₹ 23,310 crore.