Deputy Chief Minister Sukhbir Singh Badal on Monday claimed that the state government has not mortgaged government properties to banks to pay salaries.
Speaking to The Indian Express,Sukhbir said the government had raised a loan of Rs 1,500 crore from five banks as an advance to carry out development works on lands that these banks have kept as surety. Justifying the governments move,Sukhbir claimed this was done not to pay salaries but to optimally utilise vacant government lands for development purposes.
During the last one month,the Punjab Urban Planning and Development Authority (PUDA) had mortgaged government lands to banks,mopping up Rs 1,500 crore. The move had invited severe criticism from the Opposition with some even suggesting that the government cannot legally mortgages its properties to raise funds for the day-to-day running of the state.
The government,in a cabinet meeting held May 25,had approved the raising of this loan under PUDAs optimum utilisation of vacant government land (OUVGL) scheme. Under OUVGL,land worth Rs 4,000 crore is lying with us. It is a part of PUDAs mandate to utilise these lands in a manner that something can be earned from them. Normally,we auction these lands and raise funds, said PUDA Chief Administrator Manvesh Singh Sidhu.
Sidhu added that the loans from five banks have been taken at the base interest rates,which averages at 10 per cent. There is a substitution clause in the contract with the banks. This means that in case we want some land back,we can take it back from the bank at any point and instead give it another piece of land as surety. This way we can keep developing these lands out of the loan money and keep unutilised lands with the banks as surety, he said.
According to sources,for the last few years,the government has not been able to successfully auction properties under OUVGL. Thus,it was decided that till the market picks up,it is best to mortgage these to raise loans and use the amount to develop these lands and then auction or sell them.
The mortgage conditions fixed with the banks give PUDA right to develop these lands. We will develop these lands even while these are mortgaged. It could be a colony or an urban estate or an IT park. Once we develop these,we intend to sell these and from the proceeds,repay the loan and also make a profit. By the end of March 31,2014 we will earn at least Rs 500 crore from these properties after having paid back the loan, said Sukhbir.
Criticising the move,the Congress leadership has demanded imposition of financial emergency in Punjab. It has claimed that the government was indulging in reckless borrowing and sale of public properties to clear its debt,pay salaries of staff and other day-to-day expenses.
When asked,Sukhbir said: I dont understand what is the big hullabaloo about. It is an economic model by which we are able to use useless piece of land to generate funds and then develop these lands or other lands that can be sold at better rates and also repay the loan. What is wrong with this?