Maharashtra may have to pay a whopping Rs 60,000 crore to the Maharashtra State Electricity Board (MSEB) if it fails to resolve the Enron imbroglio amicably, Madhav Godbole, chairman of the energy review committee, has said.
Godbole blamed the inefficiencies of state-run undertakings for the Enron crisis and said the only way to avoid a recurrence was to privatise MSEB. Politicians and the employees' union would oppose privatisation of MSEB, but its dismal performance and growing transmission and distribution losses have left little option but to go for privatisation in a phased manner, Godbole said. He urged the people to mount pressure on the state government on the issue and stressed it was necessary to avoid such disasters.
Delivering the second E F Schumacher memorial lecture here, instituted by Nagpur University in association with Dr Padmakar Sapre, Godbole painted a very gloomy picture of Maharashtra's economy, noting that the state was on the verge of bankruptcy owing to "suicidal policies followed by successive governments."
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Speaking on 'financial management of Maharashtra: problems and perspectives,' Godbole stressed the need to introduce stringent policies to get over the messy financial situation. He advocated re-introduction of zero-based budgeting and fixing priority, so as to curb unnecessary expenditure.
Godbole said, despite ten years of economic liberalisation, very little has changed. Fiscal deficit in 1990-91 was 9.49 per cent, and it remains where it was. Revenue deficit had gone up from 4.2 per cent to 6.2 per cent in 2000-2001. The public sector savings have touched an all-time low of 1.2 per cent and consumption expenditure was on the rise.
Godbole pointed out that 58 per cent of the state budget was spent on wages and 23 per cent on payment of interest leaving very little for capital investment. He claimed that Maharashtra was doling out Rs 18,000 crore as subsidies under various heads and has become the highest subsidy-providing state in the country. When Central assistance was dwindling due to the new formula of allocation from a Central pool, states such as Maharashtra would receive a lesser share in coming years, he said.
He came down heavily on the misuse of state funds by co-operative societies and charged that a promoter had to invest only 2 per cent amount while the rest was made good by the state government. Heavy spending on higher education must be stopped forthwith, he said, adding that the society must learn to take care of such sectors by itself without burdening the state. The money thus saved should instead be diverted towards primary education, he said.
Godbole pointed out that the annual budget was irrelevant because of increasing off-budget transactions, which were out of public scrutiny. He said, due to overall mismanagement, the state government was forced to resort to go for overdrafts for a period of 37 days in 2000-2001.
Godbole said populist schemes such as the monopoly cotton procurement scheme (MCPS) had no place in a globalised economy and its rising losses were a matter of great worry. He criticised the state government for delinking cotton price from the prevailing market price and stated that the basic purpose behind MCPS had been lost in the race for reaping electoral gains.
Godbole strongly advocate enactment of a 'Budgetary and Financial State Management Act' to check unnecessary expenditure and fiscal discipline.
He criticised the state government for extending loan counter-guarantees to various undertakings under its control. Till date, the state government had extended counter-guarantees for loans worth Rs 2.34 lakh crore, he said. "This was done when the total annual receipts of the state were merely Rs 35,000 crore," he said.
Godbole advocated downsizing of the government and a ban on fresh recruitment. An attractive voluntary retirement scheme (VRS) should be offered to employees and contract-system be introduced, he said. He also supported the concept of contributory pension for employees and pointed out that under the present scheme, the state government was burdened with paying a sum of Rs. 2600 crore to five lakh pensioners.
A state expenditure commission must be set up immediately for reviewing of expenses incurred by the state on permanent basis, Godbole suggested. Nagpur University vice-chancellor Arun Satputaley presided over the function.