New Delhi, September 15
In a telling reminder to Punjab for its badly managed financial situation, the 13th Finance Commission is planning to set some “conditions” for fiscal management in the state, if the central government chooses to waive-off a portion of Punjab’s long-standing debt.
The debt has accrued due to the spending carried out to meet expenses during the period of militancy in the 1980s and 1990s.
Today was the last meeting of Punjab officials with the commission before the latter announces its allocation of share of revenue to the states and also special incentives. Punjab officials led by Finance Minister Manpreet Singh Badal met commission Chairman Vijay Kelkar this evening.
The Punjab team pleaded that its expenses during the period of militancy had led to spiralling debt. Since the state was largely under central rule during militancy, hence the state needs help. However, the commission is of the view that the state needs to pull up its socks and generate more revenue of its own besides levying some kind of user charges on the services it renders to the citizens.
At present there is no house tax, no property tax while power is free for the farm sector in Punjab. The Shiromani Akali Dal at its Vichar Baithak in Shimla last week had rejected the demands to review various subsidies.
On the other hand, the state finance minister claimed that the commission was receptive to Punjab’s demands.
Punjab presented a strong case today saying the state had a revenue surplus until 1985-86 and its debt burden was only 26 per cent of the GSDP. Nine years later in 1994-95, the debt had risen to almost 40 per cent of GSDP due to consistent revenue and fiscal deficits in these nine years.
Between 1987 and 1992 the central government was running the Punjab administration. A policy of high development expenditure was followed without raising taxes. To achieve this it plugged the gap with special term loans. Total special term loans received during these years were Rs 5800 crore.
The state had no option but to continue to borrow more in order to meet its essential expenses. The centre waived-off Rs 4533 crore of special term loan as militancy related. The major part of the waiver, however, came in 2006-07.
Punjab argued there was a strong case for a comprehensive fresh look as the state cannot come out of the debt trap with its own resources without help from outside. Punjab is one of the states that had faced militancy and long years of President’s rule.
The other state could be J and K, which is a special category state. Any special concession given to Punjab on this account would, therefore, not become precedent for other states, Punjab pleaded.
