Punjab in Debt Trap, Finances in Deep Red, Reveals White Paper; Will AAP Govt be Able to Fulfil Lofty Promises?

Presenting a grim picture of the state’s finances, the newly elected Aam Aadmi Party government on Saturday unveiled a white paper, claiming the finances were in free fall and with the GST compensation regime ending this month, it will “fall off a cliff”.

The white paper was tabled just two days before the presentation of the Bhagwant Mann government’s first budget. The white paper claimed that the state was in a debt trap, where more debt is being accumulated to repay old debt, and not for the future development of state.

The end of the GST compensation regime will see the state having a revenue shortfall of Rs 15,000 crore in this year, and Rs 21,000 crore per annum thereafter. The state’s debt has grown by 44.23% in the five years of Congress rule, translating into a compounded growth rate of 7.60% per annum, the document said.

The AAP government finds itself in a tricky position with the party having made lofty promises ahead of the polls and will have to make sufficient budget outlays for the same. But the state of finances may not allow the government enough fiscal space to fulfil all its promises.

According to the white paper, the previous Congress government has left immediate and medium term liability of Rs 24,351.29 crore, which the AAP government will have to discharge now. The state’s debt indicators are the worst in the country, says the document.

The Congress had brought out a similar white paper when it came to power in 2017. It had then accused the previous Akali Dal-BJP government of fiscal mismanagement. The then Congress government had claimed that they were saddled with the legacy food credit debt and loans taken by the Punjab State Power Corporation Limited under UDAY scheme.

The white paper also reveals how the previous government announced the implementation of the 6th Punjab Pay Commission in July last year, but did not pay arrears of revised pay amounting to Rs 13,759 crore. The unpaid power subsidy stood at Rs 7,117.86 crore, it says.

“In order to salvage its political fortunes, the previous government resorted to reckless spending during the fag end of its tenure,” it says.
The document states that even the state undertakings, boards and corporations have an outstanding payable amount of Rs 43,204.59 crore, as they have raised a debt of Rs 54948.75 crore. The total outstanding debt of the state is Rs 2.85 lakh crore. The white paper states that return on investment of Rs 23,853.71 crore by the state government in these 46 entities is just 0.016 percent.

It also states that there is need to compensate for the “lost decade” (five years of Congress rule and previous five years of Akali-BJP rule from 2012-17). “The state will have to cautiously take debt and invest heavily in high quality capital expenditure creation and revenue enhancement measures. This will create a cycle of value acceleration,” it says.

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