The Valley of debt

He told The Indian Express: “Our financial situation is very bad and even salary cheques have been bouncing. Everything — construction of roads, schools, hospitals — has stopped and major projects for public health and flood control have been grounded.”

And there is every indication that the state of bankruptcy of J&K is going to worsen. A report on the State’s economy and economic reform submittedrecently by former home secretary Madhav Godbole, describes the fiscal situation as “totally untenable, unenviable and unsustainable.” Godbole has concluded that in view of the “precarious”position, the Government needed to evolve a new strategy for financial management and bring out a white paper on public expenditure.

Indeed, a white paper may become the need of the hour for in the streets of Srinagar, it is not the threat of the Taliban or the border skirmishes but the empty treasuries which are the talk of town. And the figures speak for the daunting task of financial reconstruction that lies ahead.

J&K currently has a Central loan liability of Rs 2,545 crore — which it wants waived — and an overdraft of Rs 944 crore from the J&K Bank. Together, the annual burden of repayment is around Rs 640 crore.Even more serious is the widening gap between the planned and non-planned expenditure.

In March this year, the state had projected a non-planned deficit of Rs 1,112 crore but later revised it to Rs1,280 crore. This was adversely commented upon by the Planning Commission which called the re-estimated figures as a “further deterioration of the State’s resources” despite the “fantastically high” Central Assistance. Finally, the Planning Commission agreed to an annual plan of Rs 1,900 crore and a non-planned assistance of Rs 559 crore — Rs 720 crore less than what J&K had demanded. Of this too, Rs 262 crore had been withheld for clearance “at a later stage.”

According to Ajit Kumar, Additional Chief Secretary (Finance), the State had by now given the Centre several proposals on how they could be “bailed out” of the financial mess.

One, of course, was a waiver of the central loans and a one-time grant for settling its bank overdraft. “We are not begging the Centre to give us anything which is not due to us,” Kumar said. “We are entitled to everything that we are demanding.”

Yet another “option” placed before the Centre is for J&K’s backlog on what they have categorised as“security-related expenditure ” to be cleared in one shot. A background paper prepared by the State Government on the subject reveals that the SRE has been spiralling: from Rs 138 crore demanded for the year 1990-91, the state has projected SRE totalling Rs 415 crore in the current financial year.

The grouse of the State is that the Centre has been making part SRE payments, resulting in a huge backlog of Rs 796 crore. They have also been complaining that the money comes in driblets and that till June 1998, for instance, only Rs 15 crore had been released by the Centre toward the SRE. There has also been a great deal of quibbling about whether certain items listed as SRE should at all be reimbursed. Among the “disputed” items is one for the Centre picking up the salary bills for the Hindu migrants who are living in Jammu and Delhi, many of whom are Government employees and are getting paid by the State. The other demand is for the Centre to meet all expenses incurred by the State for “sick”Corporations and State Government enterprises, which were reduced to shambles in the years of militancy.

The BJP Government has recently set up a committee to look into such areas of disagreement but for the moment, the National Front leadership is adamant the backlog of Rs 796 crore be picked up. As Chief Minister Farooq Abdullah puts it, “This will be a small begining for the Centre to make. If the backlog of Rs 800 crore of SRE comes in, at least we can settle our bank overdraft.”