MVA govt presents its maiden budget; state’s finances may make fulfilling promises tough

The first budget of the Maharashtra Vikas Aghadi (MVA) government presented by deputy CM and finance minister Ajit Pawar on Friday was high on promises. But will

The first budget of the Maharashtra Vikas Aghadi (MVA) government presented by deputy CM and finance minister Ajit Pawar on Friday was high on promises. But will fulfilling them be easy, considering the state of finances owing to sops worth thousands of crores, dip in revenue collection and economic slowdown?

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The loan waiver announced immediately after assuming power, burden of relief package for farmers hit by unseasonal rain in October-November 2019, reduction in devolution of central taxes, drop in the collection and rise in salary bills of the government employees have put the state finances under distress in the ongoing fiscal year 2019-20. The result – a rise in revenue deficit (gap between the state’s income and expenditure), which is likely to continue in the next fiscal year 2020-21. The revenue deficit in the ongoing year rose to ₹34,443 crore from the estimated ₹19,784 crore, when the budget was presented by the previous government. The projected revenue deficit in 2020-21 is ₹9,510.71 crore.

The MVA government, led by CM Uddhav Thackeray, had announced a farm loan waiver covering more than 35 lakh farmers, with the expected burden of more than ₹35000 crore. Of it, the outlay of ₹15,000 crore was made in 2019-20, while the remaining has to come in the fiscal beginning April 1. The unseasonal rain across the state in October-November last year hit crops on more than 94 lakh hectares and relief package given to the farmers put a burden of more than ₹75,000 crore on the state exchequer. More than ₹1,000 crore had to be given for relief package for the floods in Sangli, Kolhapur and other parts of the state in July last year. Moreover, the funds coming from the Centre, too, have reduced.

“The devolution of central taxes to Maharashtra has been reduced by ₹8,453 crore, along with the delay in payment of compensation towards losses in goods and services tax (GST),” deputy CM and finance minister Pawar said. The drop in the collection of GST by ₹16,290 crore from the projected collection in last year’s budget, too, has led to revenue deficit.

The rise in salary and pension bills of more than 18 lakh employees and ex-employees due to the implementation of the seventh pay commission has added to the stress on the exchequer. The bills rose by ₹36000 crore or by 6% of the revenue receipts. “The dues against the salary hike are to be paid over five years and the burden is more in percentage of receipts for the first two years. The unaccounted burden of loan waiver, relief package and salary bills compelled us to initiate cut to budgetary allocation for the development programme,” said an official from the finance department.

The empty coffers has resulted in cut in capital expenditure meant for asset generation. As per the statement released by the accountant general, the government could spent only 37% of its projected outlay of ₹49,463 crore till January 2020. The allocation for the capital expenditure has been further reduced to ₹47,417 crore in 2020-21.

“The state has been faking figures of its projected income for years to keep the deficit figures low. This results in heavy reduction in spending on development programmes and schemes. For instance, in 2018-19, the government presented a surplus budget of ₹14,960 crore as per the actual figures released in the budget documents. In fact, they spent ₹21,981 crore less on the development programmes in sectors such as rural development, agriculture, infrastructure from the outlay of ₹1.08 lakh crore that year. Similarly in 2017-18 too, the reduction in the outlay for development schemes was ₹16,000 crore. The trend is likely to continue this year too and it would badly affect the development,” said Rupesh Keer of Samarthan, the NGO which studies state finances. “We are pulling strings... We could successfully mobilise more funds than the target sets for sectors such as state excise and stamp duty and registration,” said Pawar.