With an eye on the forthcoming Lok Sabha elections, the Congress government in Punjab announced a Value Added Tax (VAT) cut of Rs five and Re one on every litre of petrol and diesel, respectively, while presenting the state budget for 2019-20 with a total outlay of Rs 1,58,493 crore with no new taxes.
The new prices for petrol and diesel would come into effect from Monday midnight, Punjab Finance Minister Manpreet Singh Badal announced in the Assembly. The cut in fuel prices has been a long pending demand of the residents of the state. But the cash-crunched state had not been able to implement this so far. Finally, it was done in the election-year budget despite the revenue receipts not hitting the target.
With the announcement of reduction in prices, with an aim to bring parity of prices with neighbouring states, Punjab has reduced base VAT rate on petrol from 28 per cent to 20.11 per cent on petrol, and from 13.4 per cent to 11.8 per cent on diesel.
The cut is likely to cost the state exchequer Rs 900 crore annually, with Rs 600 crore on petrol and Rs 300 crore on diesel. The consumption of diesel is three times that of petrol in the state. Badal said it is expected that the cut may not cost the state exchequer anything as it would bring back fuel sales to petrol pumps in border areas, which had lost consumers to other states in the neighbourhood.
With a revenue deficit of Rs 11,687 crore (2.02 per cent of GSDP) and fiscal deficit of Rs 19,658 crore (3.40 per cent of GSDP), the FM presented a budget with a total outlay of Rs 1,58,493 crore. The effective budget size, after providing a budget provision of Rs 32,000 crore towards Ways and Means transactions for the current year is Rs 1,26,493 crore, the FM said while reading out his 53-page budget speech amidst sloganeering by SAD-BJP members, who sought action against Local Bodies Minister Navjot Singh Sidhu over Pulwama attack remarks.
The budget speech was disrupted due to the commotion, when Speaker Rana Kanwarpal Singh had to name the Akali-BJP members, asking them to leave the House. The Speaker adjourned the House, for about 20 minutes.
The total outstanding debt on the state is projected at Rs 2,12,276 crore (40.96 per cent of GSDP), as on March 31, 2019. The outstanding debt is likely to be Rs 2,29,612 crore (39.74 per cent of GSDP) by the end of next fiscal. Blaming the previous government of fiscal profligacy, Badal said, “The state is in worse than a debt trap scenario on account of reckless fiscal management for 10 years. The servicing of state’s huge debt pre-empts its major revenue receipts, leaving it with little resources for credible developments efforts.”
With an emphasis on farmers, industry and fiscal consolidation, the FM has set aside Rs 3,000 crore for farmers debt waiver in the next fiscal, besides hiking the budget allocation to agriculture and allied sector to Rs 13,643 crore. The free power to agri sector is estimated to cost Rs 8969 crore.
Besides setting aside a power subsidy of Rs 1513 crore to industry, the Finance Minister also announced ‘Make In Punjab’ policy for the industry. Under the policy, in a public procurement order, purchase preference shall be given to local suppliers up to 50 per cent of the total quantity, provided that their goods have a minimum local content of 40 per cent.
Badal said that with emphasis on fiscal consolidation, the state finances were on road to recovery. He added that it was after many years that Punjab was primary surplus as the financial indicators were in control. The FM said that he had enhanced allocation to all departments barring just a few.
“When I presented the first budget of this government in 2017-18, there was an unfunded gap of Rs 10,273 crore, which was brought down to Rs 4,175 crore during current fiscal. In the estimates for next fiscal, there is a much reduced unfunded gap of Rs 2,323 crore. But for the Rs 3,000 crore power subsidy, which was a balance of current fiscal and is to be carried forward in the next fiscal, it would have been a balanced budget.”
He said that due to proactive management of cash flows, the government has been able to reduce the days of Ways and Means Advances and overdraft.
“We have successfully reduced the number of days for which the treasury remained in overdraft from 179 days in 2016-17 to 100 days in 2017-18, to 50 days in 2018-19 (till January 31), thereby locking the interest saving by nearly Rs 11.54 crore.”
He rued that as against the allowed net borrowing limit of Rs 17, 335 crore for the next fiscal, the debt servicing would be Rs 30,309 crore.
Badal said that during the first year of implementation of GST, the revenue receipts have been far lower than the expectations. State’s revenues from major commodities like automobiles and auto parts, cycle and cycle parts, hosiery, soft drinks, and cement have decreased in comparison to the corresponding period in the previous years.