Punjab chief minister Capt Amarinder Singh and finance minister Manpreet Singh Badal repeatedly blamed the huge debt left by the previous Shiromani Akali Dal (SAD)-Bharatiya Janata Party (BJP) government for fiscal woes throughout the year. The expectation was that the two would wind down on borrowings to stanch the flow of red in their account books. But, the budget shows, debt will go further up this year.
Ironically, a ‘white paper’ brought out by the state government had painted a grim picture, saying the state was in the “tight grip of a debt trap” and its finances in free fall, after the 10-year rule of the SAD-BJP.
In the 2018-19 financial year, the state government is estimated to borrow Rs 15,545 crore, closing the year with an outstanding debt of Rs 2.11 lakh crore as per budgetary estimates. This is up from Rs 1.96 lakh crore in the current financial year (figures rounded off to second decimal). But a bigger worry is that these borrowings would go into debt servicing — that is, repaying existing loans — and not in creation of income-generating capital assets.
The outgo on account of debt servicing (both principal and interest) is estimated to be a whopping Rs 24,870 crore, including interest alone of 16,260 crore, which is substantially higher than the net borrowing of Rs 15,545 crore approved by the Centre this year. In comparison, capital expenditure is estimated at merely Rs 6,385 crore.
Unproductive borrowings have already pushed the state into a debt trap, wherein the interest liability plus debt repayment is substantially higher than its fiscal deficit. If the borrowed funds are invested into capital formation, the assets so created would pay for themselves over a period of time.
{{/usCountry}}Unproductive borrowings have already pushed the state into a debt trap, wherein the interest liability plus debt repayment is substantially higher than its fiscal deficit. If the borrowed funds are invested into capital formation, the assets so created would pay for themselves over a period of time.
{{/usCountry}}Considering a longer period, the state’s debt burden has more than doubled in the past five years — from Rs 92,282 crore in 2012-13 to Rs 1.96 lakh crore in the current fiscal. The funds were mostly used by the government for redemption of past debts and day-to-day needs of the state.
In addition, the state also extends sovereign guarantee for the loans raised by various public sector undertakings (PSU) and other organisations. The total liability on this account will be Rs 19,357 crore as on March 31, 2018. “In case a PSU fails to return its debt liability, it becomes the government’s liability,” reads the finance minister’s speech.