Punjab Deep In Economic Morass With Debt At A Staggering Rs 2.63 Lakh Crore And Investment Collapse: State Finance Minister

Punjab is in an economic morass and debt trap, said the White Paper on state finances presented in the state Assembly here on Saturday.

The document presented by Finance Minister Harpal Singh Cheema blamed previous governments for the fiscal mess.

According to the document tabled two days ahead of the presentation of the state budget in the House, 'Today, Punjab is in an economic morass and debt trap.'

'The previous governments, instead of applying necessary correctives, continued to slip into fiscal profligacy, as evident from unchecked increase in unproductive revenue expenditure, freebies and unmerited subsidies, virtual collapse in the capital and social sector investments vital for future growth and non-realisation of its potential tax and non-tax revenues,' it said.

The White Paper said the current effective outstanding debt of Punjab stands at Rs 2.63 lakh crore, which is 45.88 per cent of the SGDP.

'The current debt indicators of the state are probably the worst in the country, pushing it deeper into a debt trap,' it said.

The previous government professed of bringing fiscal prudency in management of state finances while discreetly choosing not to discharge the pending liabilities of the state government, it said.

Sadly, they have also followed their predecessors and while demitting office, handed over immediate and medium-term staggering liability of Rs 24,351.29 crore that the new government has to discharge over the coming years, said the document.

In the last five years, the debt of the state has grown by 44.23 per cent translating into a compounded growth rate of 7.60 per cent per annum.

The state is in a classical debt trap--a significant portion of the annual gross debt/borrowings contracted by the government is being applied towards repayment of the old debt and interest payments and not for the future development and prosperity of the state, as per the document.

It pointed out that the outstanding debt of state has increased from Rs 1,009 crore in 1980-81 to Rs 83,099 crore in 2011-12 and further to Rs 2,63,265 crore in 2021-22.

The 6th Punjab Pay Commission, which was otherwise due from January 2016 was implemented in July 2021, with quite a delay and in haste with just six months before the State Assembly elections, according to the White Paper.

'The previous government could not pay the arrears of revised pay with effect from January 1, 2016 to June 30, 2021 on account of implementation of 6th Punjab Pay Commission. The pending liability on this account alone is expected to be around Rs 13,759 crore,' it said.

The amount of arrears of power subsidy and interest thereon that has been indicated by Punjab State Power Corporation Limited (PSPCL) to be payable to it for agriculture, domestic and industry is Rs 7,117.86 crore.       

The state's tax revenue as percentage of total revenue receipts decreased from 72 per cent to 48 per cent in 2021-22, indicating a perceptible decline in the state's ability to raise resources internally and higher reliance of state finances on transfers from the Union government.              

The previous governments being unable to evolve with the changing indirect tax framework could not consolidate state's own tax revenues and became over-dependent upon GST compensation and revenue deficit grant by the 15th Finance Commission.

The GST compensation regime is ending in June and based on the trends of previous years, the state government would be staring down a big hole left in its finances to the tune of Rs 14,000 crore to Rs 15,000 crore in 2022-23 itself.

To revive Punjab to its old glory days, serious relook into the expenditure commitments coupled with direct revenue enhancement measures needs to be done.

To consolidate the state finances, economic revival and growth and reduce reliance on debt, structural and policy initiatives are required with unheard levels of ground-level enforcement, the document suggests among the corrective measures.