IN a fresh warning that Maharashtra’s fiscal outlook is worsening, the state’s budget for 2018-19 has projected that the state’s public debt will cross Rs 4.61 lakh crore by March 2019, which could force the government to spend a staggering Rs 34,385 crore from its spending plan for 2018-19 on servicing this debt. In its fourth budget since assuming office in Maharashtra, the Devendra Fadnavis government on Friday spelt out a Rs 3.06 lakh crore expenditure plan with enhanced allocation for capital investments in the farm-intensive and rural infrastructure sector headlining the budget.
With the rural economy, which caters to the livelihood of 52 per cent of the state’s population, the farm sector was again the focal point of Finance Minister Sudhir Mungantiwar’s budget speech in the Legislative Assembly. No new tax levies were announced, however. Politically, the budget attempted to make the right noises. Facing heat over negative growth in the agriculture sector, Mungantiwar devoted a major part of his budget speech to farm related announcements. “Through this budget, the government would like to reaffirm its commitment of standing firmly behind farmers,” he said. “An amount of Rs 12,773 crore will be made available for the Pradhan Mantri Krishi Sinchai Yojana by NABARD to enhance irrigation capacity and to complete 26 major irrigation projects in the state on a priority basis up to 2019-20.
But it was the worsening outlook of the state’s economy that stood out more prominently than new announcements and interventions that Mungantiwar made in his speech. Just as the Centre’s 14th Finance Commission norms require states to maintain a revenue surplus position, Maharashtra has consistently missed the target since 2012-13. In 2017-18, the revenue deficit number worsened alarmingly. Even worse is the forecast of the deficit gap widening further in 2018-19. While Mungantiwar had forecast a revenue deficit of Rs 4,511 crore at the start of 2017-18, he said the actual revenue deficit for the year ending March 2018 would cross Rs 14,843 crore or 0.59 per cent of the Gross State Domestic Product.
In 2018-19, this deficit is further projected to grow to Rs 15,375 crore, making it the worst ever deficit in the state’s history in absolute terms. The government’s fiscal policy statement has pointed a finger at some of the populist decisions taken by the Fadnavis government for the worsening of the deficit. “Various public welfare decisions taken by the government, e.g. cancellation of local body tax, cancellation of toll collected through public-private partnership on some roads, have increased the burden on the state exchequer,” it stated. The budget document further said that, “the loans availed for capital-intensive projects in the irrigation and the road development sector, and the government’s committed share in Metro rail projects had tremendously increased the financial burden. In addition, the state also undertook the liability of farm loan waiver.”
Mungantiwar informed the house that the government had so far cleared the loan waiver benefit worth over Rs 23,000 crore. According to him, the government has so far distributed Rs 13,782 crore under the farm loan waiver scheme. It warned that on account of the lingering impact of the loan waiver and the additional burden owing to the implementation of the Seventh Pay Commission recommendations, the revenue expenditure will increase further on a large scale, which would lead to a further increase in the revenue deficit.
The government’s budgetary provisions for fulfilling the Seventh Pay Commission commitments may prove inadequate, admitted officials. Against an estimate that the pay hike for state government employees, as per the Commission’s recommendation, would cost the state exchequer an annual additional burden of Rs 21,300 crore, the state’s fiscal managers said the budget for 2018-19 currently has an outlay of Rs 10,000 crore for the provision. “The state government has already indicated to give revised pay scales for its employees and pensioners with effect from January 1, 2016. Accordingly, the Bakshi (retd bureaucrat K P Bakshi) committee has been constituted.
The Seventh Pay Commission will be implemented for state government employees on receipt of the committee’s report. Adequate provision has been kept in the budget to meet this requirement,” Mungantiwar said. While the government thumped its back for surpassing the income target of Rs 2,43,738 crore set for 2017-18 with collections expected to touch Rs 2,57,605 crore by March 2018-end, an exponential rise in revenue expenditure from the targetted Rs 2,48,249 crore to Rs 2,72,448 crore resulted in the widening of the deficit gap. In 2018-19, Mungantiwar has forecast the revenue expenditure to further grow to Rs 3.01 lakh crore.
With the government’s salary and pension bill accounting for nearly 58 per cent of the revenues, the fiscal manager has cited a concern. “The committed expenditure on salary, pension and interest is increasing consistently, thereby increasing the revenue expenditure. Consequently, capital expenditure cannot be increased in the required proportion,” Mungantiwar said. Starved of funds, the public sector investment on capital expenditure has been squeezed further. Due to spending cuts announced by the government for 2017-18, the capital expenditure target of Rs 35,504 crore could not be met, with the government ending up spending Rs 33,615 crore. For the coming fiscal, it has now set aside Rs 37,477 crore for capital works. This accounts for just 9.88 per cent of the total spend estimates. A white paper of the health of Maharashtra’s finances had earlier slammed the government for the consistent decline in the share of capital spending.
The fiscal deficit, or gross borrowings of the state government, in 2017-18 was Rs 46,201 crore against a budgeted target of Rs 38,789 crore. It stood at 1.85 per cent of the GSDP as against the budgeted target of 1.55. For 2018-19, an optimistic fiscal deficit target of 1.81% or Rs 50,586 crore (in absolute numbers) has been set. Replicating the Centre’s policy, the cash-starved government has taken recourse to off-budget borrowings for all big-ticket infrastructure projects —- including the Mumbai Metro rail projects and the Mumbai-Nagpur Samruddhi Corridor —- keeping them off the government’s balance sheet. Mungantiwar said that the fiscal deficit to the GSDP ratio was well within fiscal parameters.
The downward slide in the share of non-tax revenues is another worry, admitted state government officials. “The share of non-tax revenue in total receipts is 8.27 per cent. This needs to increase. Accordingly, it is proposed to raise the present rates/fees under various laws and rules related to departments,” the finance department has said. To shore up revenues and cut unproductive expenditure, the government has said it would ensure time-bound completion of projects and use direct benefit transfers to plug leakages in subsidies.
Meanwhile, after netting the highest collection under the Goods and Services Tax in 2017-18, the government is banking on a further growth in tax collections. “After the implementation of the GST, the number of tax payers in Maharashtra has increased significantly. In the state, 5.32 lakh tax payers are newly registered taking the number of tax payers (under GST) to 13.62 lakh. At the end of the February 2018, the state has garnered Rs 45,886 crore under GST,” Mungantiwar said. The government has targeted a collection of Rs 90,140 crore through state GST and another Rs 15,163 crore under Integrated GST in 2018-19. For 2018-19, the government has allocated Rs 3,115 crore from the state budget for the scheme. The total outlay for the irrigation sector to Rs 8,233 crore,” said Mungantiwar.
For improvement in road infrastructure, Mungantiwar has pushed the ambitious project of construction and improvement of 10,000-km roads under a Rs 30,000-crore hybrid annuity model. To improve roads in rural areas and to provide new roads for improved connectively, funds have been made available under the Mukhya Mantri Gram Sadak Yojana. The outlay for the road sector has been enhanced to Rs 10,828 crore. The government also allocated Rs 1500 crore for its flagship Jalyukt Shivar scheme aimed at drought-proofing villages.
The Finance Minister also invoked Maratha warrior king Chhatrapati Shivaji right at start of his speech while announcing provision made for projects for building a Shivaji Memorial on an islet in the Arabian Sea and the Dr Ambedkar memorial at Dadar’s Indu mill. Mungantiwar has also announced the setting up of the Maharashtra International Education Board to promote “quality education of international levels”.
The government has also enhanced the income limit for eligibility of educational benefits for students from economically weaker sections from Rs 6 lakh to Rs 8 lakh. The government has also rolled out a naming and rewarding scheme- Sukurmi (Good Doer) Award scheme-for its efficient employees.
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