Most states have already written to the finance ministry, seeking additional funds to tide over the crisis.(Bloomberg file photo. Representative image)
Most states have already written to the finance ministry, seeking additional funds to tide over the crisis.(Bloomberg file photo. Representative image)

States’ revenues dip by up to 80%, seek funds from Centre

State chief ministers are expected to raise the financial crunch they are confronting at a video conference with Prime Minister Narendra Modi on Monday, state government officials said.
Hindustan Times, New Delhi | By HT Correspondent
UPDATED ON APR 27, 2020 03:19 AM IST

With their revenue falling by up to 80% in the Covid-19 lockdown that took effect on March 25 , several states have informed the Centre that they are almost broke and will not even be able to pay salaries unless they borrowed heavily and received interim compensation from the central government.

State chief ministers are expected to raise the financial crunch they are confronting at a video conference with Prime Minister Narendra Modi on Monday, state government officials said. Most states have already written to the finance ministry, seeking additional funds to tide over the crisis.

Kerala finance minister Thomas Issac said on Saturday said that the state had been able to raise only Rs 250 crore in revenue this month. “If we include what the Centre would give us, in all we will be able to touch Rs 2,000 crore. For payment of salaries alone, we require Rs 2,500 crore,” Isaac said.

“Then a way out is to draw from the ways and means {advance} and, including overdraft, it will come to Rs 2,500 crore. After that what happens would be {that} the treasury would be closed. Such is the situation that we are in,” Issac said. A ways and means advance helps states tide over temporary cash flow problems.

Punjab is in a worse state. According to the state finance department, it faces expenditure of Rs 7,301 crore for April on salaries, pensions, debt servicing, power subsidy and coronavirus-related relief measures. The government budgeted for revenue of Rs 3,360 crore, including Rs 1,322 crore form the goods and services tax, Rs 465 crore from value added tax (petroleum products), Rs 521 crore from state excise, Rs 198 crore from motor vehicle tax, Rs 243 crore from electricity dues and Rs 219 crore from stamp duty.

Chief minister Amarinder Singh on Wednesday said the receipts on account of GST and other states taxes were negligible and reduced electricity consumption had resulted in a drop of electricity revenue by 60%. The CM has sought Rs 3,000 crore from the Centre as interim compensation to overcome revenue constraints.

The Bharatiya Janata Party (BJP) government of Uttar Pradesh has experienced a decline of 70% in revenue, and the administration has frozen dearness allowance to employees until end of June and a 30% cut in salaries and allowances paid to ministers to save up to Rs 13,550 crore.

Chief minister Yogi Adityanath has set up a committee headed by additional chief secretary (finance) Sanjiv Mittal to study the financial impact of lockdown and suggest measures to mobilise additional resources.

Uttarakhand’s secretary (finance) Amit Singh Negi said he state needs around Rs 1,500 crores for paying salaries and pensions, and Rs 700 crore to repay loans and interest on them. “Out of the total Rs 2,200 crores (approximately) needed every month, we are earning almost nothing as of now,” said Negi.

He said, “We used to earn a share from the taxes earned by the Central government, which also has been reduced by 20% by the Centre due to which we are staring at a loss of another Rs 200 crores. The state government might soon take a decision on deferring salaries as earnings are very less, but nothing has been decided as of now.”

The situation is no different in Bihar, whose revenue has dipped by 85% as compared to the same time a year ago. The state expects to collect around Rs 300 crore this month as against Rs 1,500 crore in April last year.

Bihar’s finance minister Sushil Kumar Modi said the state government will accord top priority to payments of salary payments, pensions, loan repayments and interest payments“Unlike Kerala and few other states, Bihar government will not defer salary payment or cut salaries of state employees and also pay pension to its pensioners,” he said, adding that the state had asked the Centre to increase the borrowing limit to 4% of the state gross domestic product.

In Madhya Pradesh, officials said the government would lose revenue of Rs 4,000 crore in April and would have to arrange for Rs 6,000 crore to pay salaries of employees. “As 22 districts of the state including industrial capital Indore is in the grip of Covid, I don’t see much improvement in revenue happening in May also,” a finance department official, who requested anonymity, said . Additional chief secretary,(finance) Anurag Jain said: “These are challenges due to revenue being affected but as the economic activities will accelerate the situation will improve.”

West Bengal finance minister Amit Mitra said he had sought immediate central intervention to repay loans because the state is expected to lose revenue of Rs 15,000 crore during the lockdown period. To earn some revenue, the state government is offering a 20% discount for e-registration with a maximum ceiling of Rs 20,000. “Seventy per cent of state’s revenue comes from GST and other taxes,” a finance department official.

Himachal Pradesh is expecting a revenue loss to the tune of 450 crores after the nationwide lockdown. “We have suffered an estimated 453 crores revenue loss in the lockdown period. The industry has also suffered a major setback with the capacity down to 25%,” said chief minister Jai Ram Thakur, who also holds the finance portfolio.

(With inputs from state bureaus)

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