With Union Finance Minister Arun Jaitley making it clear that the Centre would not provide any fund for farm loan waivers, the Devendra Fadnavis government in Maharashtra, which has announced a blanket farm loan write-off, may have to borrow to meet most of the burden, which will further worsen the finances of the state. While the state’s public debt stock was estimated to touch Rs 4.13 lakh crore in 2017-18, its fiscal managers are now worried that this number will further rise.
According to initial estimates, the additional burden on the state exchequer on account of a waiver of farm loans up to Rs 1 lakh would range from Rs 25,000 crore to Rs 30,000 crore. Sources said the government was considering the option of spreading this burden over three years to limit the additional annual borrowing to ‘manageable’ levels. In the past 10 years, Maharashtra’s debt stock has spiralled from Rs 1.6 lakh crore in 2008-09 to Rs 3.71 lakh crore in 2016-17.
The growth in spending rose at a must faster rate than the increase in state’s revenue, admitted government sources. But contending that there was still plenty of liquidity since the percentage of borrowings was well within 25 per cent of the state’s gross state domestic product (GSDP), a senior BJP minister indicated that the government preferred using the borrowing route to meet the burden rather than excessive cuts on spending on development work.
According to norms of the 14th Finance Commission, it is necessary to maintain the percentage of interest on government borrowings within 10 per cent of total revenue receipts. But Maharashtra’s debt servicing bill for 2017-18 was earlier estimated at Rs 31,027 crore, or 13 per cent of revenue receipts. This is now expected to rise even further. Besides this, Maharashtra’s fiscal managers have set aside Rs 15,358 crore for debt repayments.
The options of mobilising additional revenue through securitisation of land in metro cities, including Mumbai, Pune and Nagpur, and collecting premiums against additional building rights, said another senior minister, were also being explored by the government. In his budget speech, Finance Minister Sudhir Mungantiwar had announced the formation of a separate corporation for land securitisation.
But the initiative is yet to take off. After coming to power in Maharashtra on October 31, 2014, the BJP had slammed the previous Congress-NCP rule for “leaving the economy in a shambles” and promised a turnaround. It had even released a white paper on finances, which had targeted the previous regime for the worsening debt and fiscal imprudence. Blaming the previous government for an abnormal increase in revenue expenditure and misdirected subsidies, the white paper had pointed out that the state’s debt had spiralled 112 per cent from Rs 1.42 lakh crore in 2007-08 to Rs 3.02 lakh crore in 14-15. But the debt position has deepened further during the BJP reign. The Fadnavis government had earlier defended the borrowings saying most of it were for capital works.