The race to Raisina Hill may put a brake on Mamata Banerjee's Ma, Maati, Manush schemes till at least till the next Lok Sabha elections.
The state government was yet to get the bailout package it had been pressing, but small acts of kindness from the Centre kept it going. Banerjee's power, acclaimed as one of the most influential women in the world by Time magazine, is likley to be checked by the finances of her government.
Last year, West Bengal's committed expenditure , which includes loan repayment, salaries, pension and other retirement benefits and subsidy for the whole year, was Rs 61,994 crore, or Rs 5,166 crore every month. Its revenue for the whole year was Rs 59,143 crore or Rs 4,928 crore every month. Leaving a paltry Rs 238 crore every month for development expenditure, which included Banerjee's dream to transform this city into another London.
For 2012-13, total revenue receipts are pegged at Rs 76,943 crore, while the committed expenditure (loan repayment, salaries, pension and other retirement benefits) stands at Rs 67,839 crore, leaving Rs 9,104 crore every year or Rs 758 crore every month for development. The major increase in revenue receipt is grant-in-aid from the central government, which the state expects to increase by 59 per cent this year. In contrast, the state expects only 25 per cent increase in its own revenue.
Last year, West Bengal twice availed a relaxation of the Fiscal Responsibility and Budget Management (FRBM) Act, pushing its borrowing to Rs 22,423 crore, which helped the state meet its expenditure in the last three months of the financial year.
The second big sop was sanction of Rs 8,700 crore as a backward region development grant. The state also got a higher outlay from the Planning Commission at Rs 25,910 crore for 2012-13, against Rs 22,000 crore last year, a rise of 17 per cent.
The Centre also consolidated loans worth Rs 8,633 crore for a fresh tenure of 20 years at an interest rate of 7.5 per cent per annum, with effect from April 2010. Loans taken by West Bengal from the National Savings Fund till 2006-07, a major part of its debt, were reset at nine per cent interest with effect from February 2011.
“For West Bengal, the scenario looks gloomy, if it pulls out of the UPA government. In case West Bengal gets a bailout package, the state's problems would have been solved to some extent, though the bigger question is how the money would be utilised,” said Dipankar Dasgupta, former professor of economics at Indian Statistical Institute (ISI).
In the first two and a half months of the present financial year, West Bengal has already done 25 per cent of its projected borrowing of Rs 20,071 crore. Between April 1 and May 11, it borrowed Rs 3,500 crore. In all likelihood, the government would again need to knock at the Centre's door for another relaxation in the FRBM, if spending is not curtailed.
“These (relaxation in FRBM limit) are short-term measures. West Bengal has to address structural issues to improve its finances,” said Devendra Kumar Pant, director, Fitch’s International Public Finance team.
The government’s debt is set to increase to Rs 2.26 lakh crore in 2012-13, making it one of the most indebted states in terms of ratio of tax to Gross State Domestic Product.
If Banerjee walks out of the UPA coalition, her demand for a moratorium on interest and repayment totaling Rs 22,000 crore on its debt for the next three years, and formulation of a debt restructuring exercise over the interim period, would possibly be rejected. In any case, the London dreams for Kolkata seem farther than ever.
