Chandigarh, August 23
Faced with a severe cash-crunch and on the verge of being declared delinquent for its inability to clear its huge overdraft, the Punjab Government has been forced to mortgage its buildings.

In a desperate move to clear its overdraft and generate money to pay salaries to its employees, the government is now mortgaging properties held by the Punjab Urban Development Authority (PUDA).

These properties are reportedly being mortgaged with a leading public sector bank for raising Rs 500 crore, which the state needs immediately to ensure that it can pay Rs 1,681 crore as salaries and pensions to its employees by September 1.

Since the state has already used Rs 400 crore worth of revenue receipts (received so far during August) for clearing its overdraft limit, it is likely to fall short of money to pay salaries and pensions for August.

The state’s rapidly deteriorating fiscal health has not only led to exhaustion of its ways and means limit of Rs 360 crore, but also caused an overdraft of Rs 350 crore. The state had to clear this overdraft by today. As a result, revenue receipts of Rs 400 crore were used to clear the overdraft. By doing so, it has managed to get within the ways and means limit, but it still has an overdrawal of Rs 320 crore (the state can have overdrawal of up to Rs 360 crore for the entire financial year).

The state’s own average monthly revenue earnings (from excise, VAT, stamp duty, land revenue, entertainment tax and motor vehicle tax) are Rs 900 crore. With the state having already used up Rs 400 crore out of this revenue to clear its overdraft, it is now facing a severe crisis as regards the payment of salaries to its employees. Having exhausted all avenues to raise more money, the state has asked PUDA to immediately arrange for Rs 1,000 crore, by raising a loan. Three banks have refused to extend any loan till a physical asset was mortgaged as security. The banks have reportedly told the state government that they are in no position to offer “consumption loans” and the only loans they can offer are “productive loans” meant for infrastructure development.

Because Punjab has a track record of allegedly misusing infrastructure loans, three public sector banks have expressed their unwillingness to help it this time. Sources in the Finance Department told The Tribune that it was with a lot of difficulty that the state had finally managed to convince a leading public sector bank to give loan to PUDA, after taking some properties as collateral.

Senior government officials said they were now hoping that the festival season would end the slump in the market and the state’s revenue would start picking up from the next month.