A financial crisis is brewing in Uttarakhand, thanks to the implementation of the Sixth Pay Commission and the global meltdown, which together have created a double whammy for the state government.
The crisis emerged as the government will have to pay till March 31, 2009, Rs 3,500 crore in terms of arrears and increased salaries to its employees in view of the Sixth Pay Commission. This has put extra an burden on the state government whose total budget stands at Rs 5,600 crore in the current fiscal.
Officials here said the government has now sought permission from the Centre to take additional market borrowings of Rs 750 crore to overcome the crisis.
But experts said the financial crisis is likely to be more severe in 2009-10 when the government will be paying 60 per cent of the arrears. This will again jeopardise the plan size, which includes various infrastructure and social sector projects of the state government as the non-plan expenditure gets heavy.
Last month, the government was forced to bring Rs 1,468 crore supplementary budget in the state Assembly to pay salaries and arrears of its employees.
“The situation is very tough and we have to tighten our belt,” said Principal Finance Secretary Alok Jain. But he exuded confidence that the government would devise ways to overcome the crisis. “Additional borrowings would help us a lot,” Jain said.
The state government is finding it tough to fulfil its commitment of giving arrears to nearly 163,000 employees and 60,000 pensioners. This is largely due to absence of any budgetary provision for the implementation of the new pay report.
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There has also been a slump in the collection of taxes this year following the global financial crisis. There has been a 20 to 30 per cent decline in revenue tax collections in sectors like transport and stamp duty due to the meltdown.
The Uttarakhand government in October decided to implement the new pay report which increases the salaries of its employees by 25 per cent and pensions by 40 per cent with retrospective effect from January 1, 2006.
According to an estimate, the government would have to shell out Rs 1,500 crore for the payment of arrears alone. Under the provision, the government has committed that 40 per cent of the arrears would be deposited this year and the rest in the next financial year.
The acceptance of the new wage report would put an extra burden of Rs 1,000 crore every year on the state exchequer.