Burden of farmer loan waiver hits Maharashtra’s budget for development
To make sure spending on development works does not drop further, the state will have to raise loans or implement austerity measuresmumbai Updated: Dec 12, 2017 10:44 IST
The cash-strapped Maharashtra government, which has already initiated a 30% cut to the developmental budget, will have to now divert funds further for the ‘historic’ loan waiver announced by it. The government made an additional allocation of Rs15,000 crore on the first day of the winter session on Monday, besides Rs20,000 crore already set aside for the waiver four months ago. Earmarking a further Rs 5,000 crore will hit allocation for welfare schemes and developmental works in the state as populism prevails over fiscal discipline.
The government made the Rs15000-crore allocation through the supplementary demands of Rs 26,402 crore tabled in the legislature on Monday. Supplementary demands are made to seek approval of the legislature to spend more funds than provided for in the annual budget. The state’s plan budget, meant for social schemes and development works, is about Rs77,000 crore, which will now be cut short to facilitate the disbursement of the loan waiver amount. The total allocation for loan waiver has now reached Rs35,000 crore.
Soon after the announcement of a loan waiver of Rs34,022 crore on June 24, the government initiated 30% cut to its development budget. Out of the budgeted amount of Rs77,000 crore for the development and infrastructure works in 2017-18, it has been releasing only 70% funds for building and road constructions, scholarship and educational schemes among others. The percentage of the release is unlikely to improve in the remaining months of the fiscal. To ensure that the cut to the budget does not cross beyond 30%, the government sought the Centre’s permission in September to raise the loan of Rs 20,000 crore more than budgeted estimate of Rs41,997 crore this fiscal. This would lead to the debt of the state mounting to more than Rs4.40 lakh crore this year.
The government is likely to face flak for diverting the funds of Rs4,000 crore from social justice and tribal development department for the loan waiver. “The government has drawn Rs2,000 crore each from these two departments allocated for residential schools, scholarships for socially backward and tribal students. The schemes will be badly hit due to the diversion. The diversion from these two departments is to meet the mandatory figure of allocation in the proportion of the population of Scheduled Caste (11.8%) and Scheduled Tribes (9.5%),” said an official from finance department.
Although the government has estimated the loan waiver expenditure to be Rs34,022 crore benefiting 89 lakh farmers, the number of beneficiaries is likely to be about 55 lakh with the estimated expenditure of Rs30,000 crore. “Government has made the allocation of Rs35,000 crore to pacify critics that have been calling the loan waiver a sham,” an official from the cooperation department said. To make sure spending on development works does not drop any further, the government will now have to either raise more loans or resort to austerity measures.
The experts studying state finances slammed the government for rising debts. “The financial condition of the state has totally collapsed. Besides cutting short expenditure on school education, social welfare, public health and women welfare, the debt burden is continuously mounting. Although it has been maintaining that the debt is within the permitted limit against the Gross Domestic Product, one should take into account that the state has lost its repayment capacity. Secondly, the government has crossed norms of financial discipline by proposing huge supplementary demands, which have crossed 20% of the budget size against the permitted percentage of 3,” said Rupesh Keer of Samarthan, a non-government organisation studying the state budget.