Loan waiver fallout: Maharashtra govt’s borrowings to increase, spending on schemes to reduce
Although chief minister Devendra Fadnavis’s announcement of a loan waiver worth Rs30,000 crore for marginal, indebted farmers may have stemmed the farmer’s strike, but the decision could spell financial crisis for the cash-strapped state.
The state has until October 31 to work out how exactly to shoulder this burden, but the officials hinted that both development spending and overall debt position — the highest in the country — will be affected. The state currently owes the highest debt in the country — Rs 4.13 lakh crore — which could spiral to Rs4.5 lakh crore.
“Earlier, we had estimated a possible loan waiver of around Rs15,000 crore because the expectation was that the Centre will split the costs. Now, there is clear indication from the Union finance ministry that there will be no help. So besides loan waiver, we have to adjust any deficit we incur owing to the GST and also think of a provision for the 7th Pay Commission,’’ said a senior official.
The pay commission is likely to cost the state another Rs21,500 crore.
“If the loan waiver has to be given, then there will be development cuts across all schemes,’’ he added.
But finance minister Sudhir Mungantiwar said the state can afford the loan waiver through innovative methods, including increasing its non-tax revenues.
“Whether the loan is Rs30,000 crore or more, we will give it to the farmers as they are our priority. A state like Maharashtra can absorb such costs. We won’t have to take a loan for it. We will try to budget it by increasing our non-tax revenues and cutting down on a lot of frivolous expenses. All departments will be put under a scanner to avoid wasteful expenditure,’’ said Mungantiwar.
In 2016, several departments faced 20% cut in expenditure owing to a shortfall in revenue post-demonetisation, Local Body Tax roll back, drought mitigation measures and making roads toll-free. Budget cuts are likely to be severe this year.
In its budget documents for 2017-18, it has estimated that its annual borrowings for the fiscal will come down to Rs 38, 893 crore from Rs 49,454 crore in 2016-17. However, the loan waiver will lead to an increase in borrowings this year, directly or indirectly. And, this is just one of the targets that is unlikely to be met now.
The capital expenditure (spending that creates assets ) of the state for 2017-18 was budgeted at Rs 35,504 crore around 4.2 per cent less from earlier fiscal. With the waiver, the government is unlikely to spend even this reduced budget this year. This will have impact on infrastructure spending on roads, buildings, bridges, schools etc.