Perturbed over outstanding debt of Rs 77,585 crore as on March 31, 2012, the cash-strapped Punjab government has engaged IDBI Capital (IDBI Caps) as a consultant to study its debt and to suggest measures for resource mobilisation and debt restructuring. The state is also considering to cut down on expenditure.
While speaking to Business Standard, Rakesh Singh, Punjab Chief Secretary, said, “We are considering various options to reduce our debt. As you know, there are three options for controlling the debt. Firstly, to cut down on expenditure by undertaking austerity measures. Secondly, to rely on borrowings while the third measure is to concentrate on resource mobilisation through effective tax collection system which includes strengthening the system by plugging the loopholes. We have engaged IDBI Caps to suggest us ways and means to mobilize additional resources and also other debt restructuring measures.”
He also mentioned that enhancing the loan repayment period are also being considered. Senior functionaries in the state government mentioned that the chief secretary’s previous stint as additional secretary in Union Finance Ministry will be of great help in restructuring the loans.
Earlier, Punjab Chief Minister Parkash Singh Badal met Union Finance Minister Pranab Mukherjee in this regard, seeking his personal intervention for complete waiver of the outstanding small savings loan of Rs 22,202 crore as on March 31, 2012 or else grant a moratorium of repayment of principal and interest on the loan for five years from the current fiscal.
In the meeting they apprised the Union Finance Minister that Punjab was a revenue surplus state till 1986-87. State finances were adversely affected during the long period of militancy and President’s rule.
The state, during the turbulent period, had to incur heavy expenditure on security to the tune of Rs 11,000 crore but little effort was made to mobilise additional resources.
Besides, the tax concessions to neighboring states in 2000-01 rendered the manufacturing sector totally uncompetitive.
Also, the 13th Finance Commission identified three states of West Bengal, Punjab and Kerala which had revenue deficit in the financial year 2007-08 as debt stressed. Subsequently, the Center constituted a committee under the chairmanship of Union Expenditure Secretary. The committee held three meetings, two in August, 2010 and 3rd in November, 2011. However, the committee is yet to submit its report. Currently the state has an outstanding debt of Rs 77,585 crore as on March 31, 2012 and the annual interest liability was about Rs 6,500 crore.
Further, according to the Chief Minister, the 13th Finance Commission had recommended only minor interest relief of resetting the rate of interest to 9 per cent of small savings loan and waiver of outstanding loans of Rs 90 crore granted by various Union ministries other than the Ministry of Finance.
The state had already amended its Financial Responsibility and Budget Management (FRBM) Act to make its consistence with the fiscal consolidation roadmap recommended by the commission.
However, the state was finding extremely difficult to meet these targets.
