Government's non-plan spend shoots up by Rs 3,500 crore

Even as the whole country is reeling under inflation and price rise, both Centre and state governments have been doing their best to avoid any bottlenecks. However, this financial year, it seems the budgetary provisions of the state government will be badly affected.

It is believed that the state will have to face non-planned additional budgetary expenditure worth a whopping Rs 3,500 crore. The expenditure, sources add, is most likely to come in the form of increased steel, cement and related commodity prices which will affect the goverment’s ongoing projects. 

A rough estimate puts rise in steel, cement and related material prices at an additional Rs 650 crore for the year. Contractors of ongoing projects for Narmada canal, other irrigation projects, road and building, water supply, and energy and petroleum sectoral projects, have been demanding a hike in contracts by 10-35 per cent which will impact the exchequer by Rs 300-500 crore. 

For the last four years, Gujarat government has been able to successfully keep non-planned expenditure in check as well as reduce it considerably. 

However, this year a global slowdown followed by double-digit inflation is likely to impact the government’s plans. Moreover, the situation may also affect the 11.5 per cent growth rate target set by the Union Planning Commission for Gujarat, said sources. 

Sources also claimed that in the last six months, prices of coal and oil have had a huge impact on electricity generation costs of Rs 322 crore. Also, an increase in gas prices and non-availability of contracted gas supply which Gujarat has to purchase at a high spot price may leave an additional burden of over Rs 603 crore. 

For the past few months, the state government is forced to buy power from private players and other states at higher prices due to increased fuel costs and unavailability of gas which subsequently led to a rise in fuel surcharge in Gujarat. 

“Inspite of a rise in fuel surcharge, we decided not to pass on the impact to domestic consumers by offering them 50 per cent subsidy as well as 100 per cent subsidy to agricultural consumers. Hence, the impact from the fuel surcharge will fall on us to the tune of over Rs 500 crore,” said Saurabh Patel, minister of state for finance. 

Patel added that last month the state government also faced an acute shortage of fuel which forced it to generate power from naphtha which costs Rs 12.5 per unit. “Due to lack of rains till July, demand for power in agriculture sector rose suddenly which forced us to spend around Rs 500 crore to purchase power from private players using naphtha,” he said. 

Citing several other reasons for an increase in non-planned expenditure, Patel blamed the central government for ignoring Gujarat while disbursing financial assistance worth Rs 5,300 crore to states like Maharashtra, Karnataka, Andhra Pradesh, Bihar, Sikkim, West Bengal and Tripura who collected less value added tax (VAT) than the set target. 

“Gujarat has been proactive enough to provide piped natural gas (PNG) and compressed natural gas (CNG) to households, industries and vehicles at a cost of Rs 4,200 crore which saved the Centre subsidies worth Rs 758 crore. Yet, Gujarat remained unawarded for such proactiveness which may lead to an increase in expenditure,” said Patel. 

Add to that, Gujarat will also face a direct burden of Rs 455 crore from hike in petroleum prices. On the other hand, the state will also lose revenue worth Rs 232 crore due to cut in excise and custom duties on petroleum products by the central government.