Poll promises to drain Maharashtra

Home to India Inc8217;s richest barons and companies, contributor to 14.7 per cent of the national GDP, Maharashtra stares at an unprecedented crisis.

8226; The state8217;s borrowings will cross Rs 1 lakh crore 21.73 billion in fiscal 2004-05, a 431 per cent rise from Rs 18,827 crore in 1994.

8226; Maharashtra remains the only defaulter in a list of six states Gujarat, Andhra Pradesh, Karnataka, Goa and Tamil Nadu with rated creditworthiness.

8216;8216;We put the state in the default grade in October 2002 and there8217;s no change in the financial profile since then,8217;8217; said an official from the credit-rating agency Crisil, which downgraded Maharashtra to the D defaulter grade.

The result: Maharashtra won8217;t get investor funds and its rising interest burden is weakening its fiscal health, a vicious circle that needs to be urgently addressed.

None of this particularly worries the alliances. They8217;re simply looking for handouts from Delhi.

8216;8216;The Centre will have to draft a new scheme for restructuring of loans,8217;8217; said Prakash Jawdekar, BJP spokesman and former chairman of the State Planning Board. 8216;8216;The new government will have to mobilise resources, completely stop leakages and drastically cut down wasteful expenditure.8217;8217;

Of course, both free-spending manifestoes are silent on these issues.

8216;8216;We will have to redraft our planning process, mobilise resources and ensure that wasteful expenditure is drastically cut,8217;8217; said NCP spokesman Gurunath Kulkarni, hastily blaming the BJP-Sena for the mess.

During the past decade, both alliances exhibited no such inclination to cut costs.

From bailing out the mismanaged electricity board, funding a monopoly cotton-procurement scheme, bailouts of sugar cooperatives controlled by politicians to freely buying new cars, making foreign trips and refurnishing offices and residences8212;fiscal caution was cast to the winds.

That profligacy is reflected in its his fiscal deficit borrowings to meet the government8217;s expenditure: from Rs 2,265 crore in 1993-94, the deficit touched a whopping Rs 18,460 crore in 2003-04. It8217;s set to come down to Rs 15,258 crore in 2004-05.

8216;8216;But whether this will fall as per projections will be known only later,8217;8217; a top government official told The Indian Express.

What happened to Maharashtra8217;s economy in the last ten years of BJP-Sena 1994-1999 and Congress-NCP 1999-2004 rule?

The answer lies in a memorandum prepared by the state government for the 11th Finance Comission.

8216;8216;The state8217;s finances were on a more or less even keel till 1995-96 with the impact of the rising interest rates being managed through prudent borrowing limits,8217;8217; the report said.

8216;8216;The major causes for the stress since 1996-97 were: revenue slowdown induced by a slowdown in the manufacturing sector, heavy borrowings to finance infrastructure programmes which sic were serviced from the budget, higher interest rates and 5th Pay Commission award.8217;8217;

The rot was gradual. After the Sea-BJP took over, they invested huge sums for infrastructure, water supply and irrigation.

One example: the Maharashtra Krishna Valley Development Corporation and five regional compatriots, which spent Rs 18,000 crore.

8216;8216;One of the corporations even offered 17.5 per cent interest then,8217;8217; explained a merchant banker who requested anonymity. 8216;8216;After Crisil put the state in the D category, investors refused to go for their bond issues.8217;8217;

So far, none of these projects have been completed. So, there8217;s a double whammy: no income from them, while the state has to pay out interest between 14 and 17 per cent.

After the Congress-NCP took over, politics reigned firmly over economic prudence. They released Rs 1,000 crore for cooperative factories owned by senior Congress and NCP leaders, while issuing guarantees of Rs 3,500 crore.

8216;8216;The tragedy is that the government violated its own guidelines and continued bailing out various sugar units,8217;8217; said the government official.

Today, while huge amounts are now blocked in unfinished infrastructure, the allocations for core sectors like primary and public health, tribal development, education, energy, social welfare and environment haven8217;t changed in the last five years.