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Home / Mumbai News / Farm loan waiver impact: Maharashtra government slashes spending on development

Farm loan waiver impact: Maharashtra government slashes spending on development

Mumbai city news: The finance department announced a 30% cut in revenue expenditure and 20% in capital expenditure on Friday

mumbai Updated: Jul 13, 2017 10:44 IST
Ketaki Ghoge
Ketaki Ghoge
Hindustan Times
After eleven days of protests across the state last month, the state government announced a loan waiver of Rs34,000 crore.
After eleven days of protests across the state last month, the state government announced a loan waiver of Rs34,000 crore.(HT)

It is now evident that the farm loan waiver of Rs34,000 crore will come at the cost of development in the state. The finance department announced a substantial cut of 30 per cent in revenue expenditure across departments and a 20 per cent cut in capital expenditure on Friday. With these cuts, the overall spending for this year will come down to Rs1,98,628 crore, much less than the budget of 2016-17 and 2015-16.

Capital expenditure — which refers to spending on creating assets — has now been reduced to Rs28,404 crore, much less than money budgeted in 2016-17.

With this, the government will be able to spend only on the bare minimum, including state grants for central schemes such as Pradhan Mantri Awas Yojana, Smart Cities initiative and Atal Mission For Rejuvenation And Urban Transformation (AMRUT).

Friday’s government resolution on the budget cuts pointed out that the state would have to prioritise funds for the waiver (Rs 34,022 crore) and payout to municipal corporations and councils for octroi and local body tax in lieu of the Goods and Services Tax (Rs13,000 crore).

This means the taxpayer will pay more but see less of that money being used for creation of public amenities, services and social welfare.

“We can’t cut back on the wage bill or interest payments so the burden of the waiver will fall on development budget. This budget had focussed on completing ongoing projects instead of announcing new ones. But now, even the ongoing projects have to be reviewed,’’ said a senior bureaucrat.

For instance, the state had allocated a maximum of its development budget (allocation for schemes) on roads, aviation, ports sector with an outlay of Rs11,000, followed by Rs8,701 for irrigation. The slash now puts a question mark on the state’s plan to complete 10,000 km of new roads in two years. The spending for 132 ongoing irrigation projects is also expected to suffer.

Sources in the state government claimed that state’s big ticket infrastructure projects such as the Mumbai’s metro projects, the coastal road and Navi Mumbai airport may be insured from the cuts. But, this applies to only those projects where loan agreements have been finalised. This is also conditional to the government not dipping into kitties of cash rich agencies such as the Mumbai Metropolitan Region Development Authority and the City and Industrial Development Corporation (CIDCO). Other cities such as Pune and Nagpur may not be as lucky.

“MMRDA is funding civil work of all metro lines besides putting up state share for all big ticket projects. We have substantial land bank and deposits so the projects will not be impacted as long as the government doesn’t propose to use our deposits. If they want us to contribute to the loan waiver then some of the projects will have to take a back seat,’’ said a senior MMRDA official.

In the social sector, spending on health services will take a hit. The scheme to enlarge the scope of Rajiv Gandhi Jeevandayi Yojana — which facilitates treatments for needy patients across 488 hospitals – may also suffer a setback. The government had proposed to spend Rs1,300 crore.

Struggling with finances

State’s primary expenditure on the farm loan waiver (34,000 crore) and grants (Rs13,000 crore) to municipal corporations and councils in lieu of GST stands at Rs47,000 crore. Consequently, state’s capital expenditure has been reduced to Rs28,404 crore (after a 20 per cent cut)

Total expenditure in 2015-16: Rs2,14,281 crore

Total expenditure in 2016-17(revised): Rs2,71,449 crore

Total expenditure in 2017-18 (after a 30 per cent cut): Rs1,98,628 crore

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