Overwhelming deficits have long been the leitmotif of Punjab’s finances. The state’s debt amounts to 41.13 per cent of its GDP and Shiromani Akali Dal (Badal)-BJP Government’s extravagant subsidies have only exacerbated the situation. With less than a month to go before the state Government presents its second budget, Punjab leaders are desperately scouting for ways to increase revenues. But these efforts are being scuttled in absence of any consensus between the two political partners.Take the case of octroi, for instance. Abolition of octroi is leading to an annual loss of Rs 550 crore for the state. In an ideal VAT regime, there is no place for a levy like octroi, but with the Government not inclined to introduce a new tax, fearing a political backlash, repackaging octroi is the only option. The BJP has agreed to this levy, but only on quid pro quo basis. The party wants the free power subsidy for farmers revoked. This bargain stems from the BJP’s grudge that SAD (B) has followed a policy of rural appeasement and shown insensitiveness towards the urban voters. The latter — regarded as the support base of the BJP — are not happy with the reintroduction of octroi. As Manoranjan Kalia, a BJP minister, said, “You cannot pick and choose the levies. We are an alliance partner and we can’t give a raw deal to people who have voted us to power.”However, the Akalis are confident of convincing the BJP. After all, the levy of octroi itself doesn’t cause much heartburn among the traders. They are upset by the long queues at the municipality barriers and the concomitant delays. One option is to emulate Haryana, by introducing Local Area Development Tax (LADT). But this is likely to have a limited appeal, considering that the validity of LADT has been challenged in the Supreme Court. A more likely option is a one per cent Gross Turnover Tax. But considering that Panchayat and municipality elections are due in April, it is unlikely that any new levy will be imposed.The fiscal deficit, at Rs 5566.50 crore, is gradually building up a sentiment against free electricity, which alone costs state Rs 2,300 crore. There are three reasons for this gradual change in political thinking. First, of late a number of farmers’ organisations have come forward to say that free electricity is of no consequence, in view of the abysmal supplies. Second, the Centre has given an ultimatum that Punjab will not be entitled to grants unless there’s a drastic improvement in its finances. Finally, several politicians, including Chief Minister Parkash Singh Badal, seem to realise that free power in itself does not ensure victories. In the last two Assembly elections, this sop could not prevent the change of government.
