Caught in the tight grip of debt, the Captain Amarinder Singh-led Congress government in Punjab is planning to seek a debt relief package from the 15th Finance Commission to come out of its financial difficulties.
The debt issue will be taken by the state top brass led by the CM in its meetings with the 15th Finance Commission.
The visiting team, comprising commission chairman NK Singh and members Dr Anoop Singh, Dr Ashok Lahiri and Professor Ramesh Chand and among others, will be in Punjab for four days beginning Tuesday.
The state government is also, while pleading its case, likely to call attention to the Rs31,000 crore gap in the food credit legacy account and bonds issued under the Ujwal Discom Assurance Yojana (UDAY) that have added to debt and left its finances in tatters.
“The debt situation, which only worsened further with the issuance of UDAY bonds and conversion of CCL into term loan, warrants a relief package from the finance commission,” according to sources.
The outstanding debt of the state, which was Rs1.96 lakh crore on March 31, 2018, is estimated to touch Rs 2.11 lakh crore at the end of the 2018-19 fiscal, with much of borrowings going into debt servicing – that is, repaying existing loans – and not in creation of income-generating capital assets.
Earlier, the previous SADBJP government had also pleaded before the 14th Finance Commission for a financial bailout package to tackle its rising debt, but the latter rejected the state’s demand.
“Despite high levels of debt as compared to states such as West Bengal, Kerala and Andhra Pradesh, which received revenue deficit grants, Punjab was deprived of it by two successive commissions,” said an official.
The finance commission, a constitutionally-mandated body established once every five years, devises a formula for distributing central government revenues between the Centre and the states as well as among states and local bodies.
The recommendations of the 15th Finance Commission will kick in from April 1, 2020.
Besides pressing for project specific grant and formula for vertical distribution of taxes, the Punjab government plans to also voice its concerns with regard to parameters such as income distance and forest area for sharing of taxes. The state is of the view that the income distance, which is the highest 50% weightage, would overlook the measures taken by various states to enhance the per capita income while penalising developed states.
“The forest cover criterion is also detrimental to agrarian states having larger areas under agriculture and taking care of food needs of the country. This has resulted in loss to Punjab,” said an official, hoping that the commission would address these anomalies.
When the terms of reference of the finance commission were notified, Punjab had joined southern states such as Karnataka, Kerala and Andhra Pradesh over its mandate to use 2011 Census data over the 1971 Census figures for resource allocation, stating that states which have succeeded in reducing their population growth rates in recent decades.
The share of Punjab in central taxes has declined from 2.45% at the time of fifth commission to 1.577% recommended by 14th Finance Commission, limiting its ability to engage in developmental and capital expenditure. The 14th Finance Commission had raised the states’ share in central taxes to 42%.