Punjab in Debt Trap, Finances in Deep Red, Reveals White Paper; Will the AAP government be able to keep its lofty promises?
Presenting a bleak picture of state finances, the newly elected Aam Aadmi party government unveiled a white paper on Saturday, saying finances were in free fall and the GST compensation scheme ending this month, he will “fall off a cliff”.
The white paper was tabled just two days before the presentation of the Bhagwant Mann government’s first budget. The white paper claimed that the state was in a debt trap, where more debt was accumulating to pay off old debt, not for the future development of the state.
The end of the GST compensation scheme will see the state have a shortfall of Rs 15,000 crore this year and Rs 21,000 crore per year thereafter. State debt grew by 44.23% over the five years of Congress’ rule, translating to a compound growth rate of 7.60% per year, according to the document.
The AAP government is in a delicate position, the party having made lofty promises before the elections and will have to make sufficient budgetary expenditure for this. But the state of finances may not leave the government enough fiscal space to deliver on all its promises.
According to the white paper, the previous Congress government left an immediate and mid-term liability of Rs 24,351.29 crore, which the AAP government will now have to discharge. State debt indicators are the worst in the country, the document says.
Congress issued a similar white paper when it came to power in 2017. It then accused the previous Akali Dal-BJP government of fiscal mismanagement. The then Congress government had claimed that it was grappling with the legacy of food credit debt and loans taken out by the Punjab State Power Corporation Limited under the UDAY scheme.
The white paper also reveals how the previous government announced the establishment of the 6th Punjab Salaries Commission in July last year but failed to pay the revised salary arrears amounting to Rs 13,759 crore . The unpaid electricity subsidy amounted to Rs 7,117.86 crore, he said.
“In order to salvage its political fortunes, the previous government resorted to reckless spending during the lazy end of its term,” he says.
The document states that even the state-owned enterprises, councils and corporations have an outstanding amount of Rs 43,204.59 crore as they incurred debt of Rs 54,948.75 crore. The total outstanding government debt is Rs 2.85 lakh crore. The white paper states that the return on investment of Rs 23,853.71 crore by the state government in these 46 entities is only 0.016%.
It also indicates that there is a need to compensate for the “lost decade” (five years of Congress rule and the previous five years of Akali-BJP rule from 2012 to 2017). “The state will have to take on debt cautiously and invest heavily in measures to create high-quality capital spending and improve incomes. This will create a cycle of accelerating value,” he says.
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