MUMBAI: In its feverish haste to appease voters ahead of the Assembly elections, the state government has been showering populist sops and pushing big ticket infrastructure projects. The government’s over-enthusiasm has sent panic across the finance department, which pointed out that the fiscal deficit of the state has crossed a whopping ₹2 lakh crore.
The department made this observation on Monday when the proposal of three infrastructure projects in Mumbai and Thane -- Thane Ring Metro, a tunnel connecting Thane and Borivali and another tunnel connecting Orange Gate and Marine Drive – were tabled for approval in the state cabinet. The finance department did not mince words as it underscored the strain this would cause on the state’s budgetary health.
According to the department, the state’s fiscal deficit stood at ₹1.10 lakh crore when the budget was presented in June by finance minister Ajit Pawar; it has now escalated to ₹2.04 lakh crore owing to the supplementary demands presented. The unprecedented demands were tabled for the estimated expenditure of ₹96,000 crore on various sops, including Ladki Bahin and Annapurna schemes, and offering stipend of up to ₹10,000 to over 10 lakh youths, among others.
“According to the Fiscal Policy and Budget Management Act, the state cannot raise more than 3% of the debt of its GDP (which is ₹42,67,771 crore). There is restriction on raising the debt and at this given rate of the revenue, it will be difficult for the government to overcome the fiscal deficit. Taking this into consideration, the state government cannot be given permission to take more financial burden,” the finance department stated.
{{/usCountry}}“According to the Fiscal Policy and Budget Management Act, the state cannot raise more than 3% of the debt of its GDP (which is ₹42,67,771 crore). There is restriction on raising the debt and at this given rate of the revenue, it will be difficult for the government to overcome the fiscal deficit. Taking this into consideration, the state government cannot be given permission to take more financial burden,” the finance department stated.
{{/usCountry}}For the new proposed projects in Thane and south Mumbai, the state government was to take a collateral loan of ₹3387 crore and ₹1355 crore respectively.
Meanwhile planning department has stated that MMRDA, which will implement the Lion Gate-Marine Drive tunnel project, should ensure that there is no burden on the state in case it fails to pay off the loan. The department added, that the state government was shouldering the responsibility of ₹1163 crore towards the state’s share for Metro-3 instead of MMRDA, which expressed its inability to pay it owing to financial shortfalls.
The burden of repayment of the loans falls on the state government on the failure of these agencies, which hijacks the government’s capacity to raise fresh loans.
“The urban development department has exhausted its annual outlay of ₹20,955 crore, and considering the shrinking resources of the state revenue, taking additional burden against the state government’s collateral loan would be burdensome,” finance department stated.
“The finance department had already raised the red flag when populist schemes, such as Ladki Bahin, were announced. At the time it had said that it would be difficult for them to release funds even for the mandatory expenditures like salaries and pensions of employees,” said an official from the finance department.
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