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In poll year, cash-strapped Punjab set for freebie-filled budget

AS IT readies to table its last budget ahead of the 2017 assembly elections, the SAD-BJP government in Punjab is all set to further squeeze the state’s near-empty coffers by doling out more sops to lure voters. Among the initiatives is a government plan to hand out 13,000 sets of utensils, each costing Rs 40,000, […]

Written by Kanchan Vasdev , Navjeevan Gopal | Chandigarh | Updated: March 10, 2016 6:20 am

AS IT readies to table its last budget ahead of the 2017 assembly elections, the SAD-BJP government in Punjab is all set to further squeeze the state’s near-empty coffers by doling out more sops to lure voters. Among the initiatives is a government plan to hand out 13,000 sets of utensils, each costing Rs 40,000, to village panchayats for community purposes.

More than 8,000 dhanis (cluster of houses outside villages) will be given electricity connections and the government has already released Rs 20 crore for electricity to as many as 922 such dhanis. With an eye on the youth vote, the government has earmarked Rs 75 crore for sports kits in the villages.

The budget for 2015-16 reflected a fiscal deficit of Rs 11,895.15 crore, and a revenue deficit of nearly Rs 6,400 crore. With the government on a spending spree, Finance Minister Parminder Singh Dhindsa is going to be walking a financial tightrope.

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The government has already doled out more than it can afford to spend. Among its recently announced sops are the following:

* An enhanced old age pension, doubled from Rs 250 to Rs 500, costing the state exchequer about Rs 86 crore per month.

* The 186 crore Chief Minister’s pilgrimage programe, or the Mukh Mantri Tirath Yatra scheme, rolled out in the wake of the politically damaging pardon to the Dera Sacha Sauda chief and the unrest over the incidents of sacrilege of Guru Granth Sahib last year.

* Government jobs fort 1.14 lakh people. As per Dhindsa, the expenditure on filling 1.14 vacancies would start costing the exchequer once all the vacancies are filled. “That is likely to take 12 to 24 months,” he said. The state’s salary bill is the fattest in the country, he added.

Other sops include pension for those who participated in the Punjabi Suba movement or protested against the Emergency. The remuneration of lambardars has been increased from Rs 1,000 to Rs 1,500, costing the exhequer Rs 19 crore annually. The government has also announced medical insurance and health insurance to the atta dal scheme holders, traders and farmers. Besides these, a whopping Rs 10,000 crore would be spent on urban and rural renewal mission, an ambitious project of the government being funded by the Punjab Infrastructure Development Board (PIDB) which has raised loans worth Rs 2,500 crore for the purpose. The loans have to be repaid by PIDB in the next five years.

And the PIDB may find that difficult to achieve. This year, its income – from three per cent infrastructure cess on foodgrains, Re 1 cess on diesel and Rs 2 cess on petrol – was just Rs, 200 crore. PIDB also levies cess on electricity and transfer of immovable property. PIDB is banking on such collections to service the debt in the next five years.

Similarly, a loan of Rs 1,500 crore raised against the rural development fund (RDF) has been committed for laying 8,000 kilometers of planned roads. The state generates an RDF of about Rs 700 crore every year. Escrow accounts have been opened against both these funds that will always maintain a balance equivalent to the interest to be paid in one quarter, said the sources.

While the Badal government further loosens its purse strings to target voters, revenue collections are lagging. The VAT collections have not seen more than two percent growth. Dhindsa, however, says that miniscule growth in VAT collections is not unique to Punjab. “It is a pan-Indian phenomenon. I have had discussions with finance ministers of states like Maharashtra, Chhattisgarh and Gujarat and similar trend exists in those states as well,” he said. “The silver lining is that we have not recorded a negative growth in VAT,” he added.

The collections on account of registration of property have also come down from Rs 3,000 crore to Rs 1,500 crore due to a slump in the real estate market. Also, the revenue generated through registration of new vehicles has also come down as lesser new vehicles were purchased by people in the state.

While ruling SAD-BJP government is on sops spree in their penultimate year of current term, it is yet to pay Punjab State Power Corporation Limited about Rs 1,000 crore, part of a nearly Rs 5,000 crore subsidy given by the government to provide free power to farmers.

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