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Fourteen days after taking over the reins of the state, the Congress-led government in Punjab faced a jolt on Thursday with Reserve Bank of India (RBI) stopping payments to the state after it defaulted on overdraft for over 14 consecutive days.
The state has gone into overdraft of about Rs 760 crore, after exhausting its ways and means advance (WMA) limit of Rs 925 crore. It has now defaulted on a total amount of about Rs 1,680 crore.
It completed 14 consecutive days of overdraft on March 27, said sources in Finance Department. Taking action, RBI, in its communication to agency banks of government of Punjab, has asked them to stop payments with immediate effect.
The letter states, “The account of the government of Punjab has been overdrawn in excess of the arrangements agreed upon the RBI. It has therefore been decided as per extant procedure to stop payments of GOP with immediate effect.”
Sources in Punjab’s Finance Department said they had shut the treasury on March 27 only. “We got the communication from RBI last evening.” Sources also downplayed the issue by saying this was a routine matter that would be sorted out soon. They said the state was waiting for funds from the Centre to the tune of Rs 1,200 crore. “We expect the funds within a day or two. We will be comfortable then,” said a functionary of the department.
As per rules laid down by RBI, if the state exhausts its ways and means advance limit as well as special ways and means advance limit and still continues to remain in overdraft for 14 consecutive working days, the regulatory bank can stop payments to such states.
The state had already stopped payments for the development works already under way. These works were started by the previous SAD-BJP government.
This is after many years that RBI has stopped payments to Punjab. Congress circles were abuzz with talks that the Centre wanted to embarrass the newly elected government.
The RBI falls under the jurisdiction of Union Finance Ministry, headed by Arun Jaitley.
A Congress minister said state would go into overdraft during SAD-BJP regime almost every month. It would juggle resources for a bailout either from Punjab Infrastructure Development Board or the Rural Development Fund. But as the previous government had hypothecated the PIDB fund and RDF for six years, the state did not have a penny to keep afloat.
The new government faces its first challenge as it would have to clear the salary and pension bill of its employees worth about Rs 1,800 crore. As the salary for the month of March is usually delayed every year due to closing of the financial year, the government may get a sigh of relief as it can buy time.
Meanwhile, Chief Minister Captain Amarinder Singh has called a meeting of PIDB on Saturday to take stock of the situation. Sources said the fiscal situation may cast shadow on the ongoing development works. “The CM will see if we can afford to make payments,” said an official.
The development works were started by the previous government on a war footing.