To meet its ever-increasing expenditure, the Punjab government is planning to raise Rs 1,386 crore through the issuance of state development loans, or market borrowing by states, by the end of this financial year.
The state government has already raised Rs 8,200 crore in the current financial year. Overall, the state’s total borrowing was likely to touch Rs 9586 crore during FY13.
Speaking to Business Standard, a senior official in the finance department said, “We have already raised Rs 8,200 crore by means of borrowings in the current financial year. Further, we plan to raise Rs 500 crore by the end of this month. Our total borrowing in the current financial year would stand at Rs 9,586 crore against Rs 8,600 crore in the last financial year.”
Data show the state had raised much more capital from the market in the current financial year, as compared to the corresponding period of previous year, though the borrowings are in the state limits.
The state is allowed to raise 3.5 per cent of its total gross state domestic product (GSDP) from the market through state development loans (SDL).
As far as debt is concerned, the total outstanding debt, as on March 31 was Rs 78,236 crore, which is 31.51 per cent of state GSDP, but well within the targets fixed by the 13th Finance Commission.
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The loans are projected to increase the total debt to about Rs 87,000 crore by the end of FY 13.The mounting debt burden has resulted in increasing liability of servicing debt and its annual interest liability is over Rs 6,500 crore.
Further, the mounting debt might also pose as a stumbling block in the government’s ambitious plan to bring down the revenue deficit to Rs 3,123.31 crore in the current fiscal year from Rs 5,584.38 crore (revised estimates) in 2011-12.
During the first four months (April-July) of the current fiscal, the revenue deficit of the state touched Rs 1,347 crore compared to Rs 1,111 crore during the corresponding period of the previous year.
Revenue deficit has always been a problem area for the state of Punjab. The rising salary bill, pension and retirement benefits, financial assistance to Electricity Board(now Power Corporation) and interest payments have contributed to increase in revenue expenditure over the years.
Senior officials in the state government said the state was heavily dependent on borrowings for its expenses and growth in state taxes. Earlier, in order to increase the resources and bring down the gap, the state government announced a slew of measures in August 2012 which would yield Rs 900 crore a year. But exercise taken up by the resource mobilisation committee of the state government, with the imposition of new taxes may not really help it achieve its revenue deficit target for the current fiscal.
Against the target, the imposition of taxes will help the state generate an additional revenue of Rs 525- 600 crore, as the announcement was made in August, four months after the commencement of new financial year.