Comptroller & Auditor General report: Punjab’s fiscal stress on the increase

The continuing mismatch between receipt and expenditure of Punjab finances indicates a rising fiscal stress on the state. This has been stated in the report of Comptroller and Auditor General (CAG) of Punjab, in its report on the first year of the Aam Aadmi Party’s rule in the state (2022-23).

The report was tabled in the Vidhan Sabha today. It highlights how the money raised by the state government is being used to repay the old debt, and also for debt servicing. The report shows how Punjab has gone off its fiscal consolidation roadmap, with revenue deficit exceeding its target of 1.99 per cent of the gross state domestic product (at 3.87 per cent) and exceeding 3.87 per cent target for fiscal deficit (at 5.04 per cent).

“The Public Dent is 44.12 per cent of the GSDP. All these indicators show that the state finances are heavily stressed,” says the report that comes at a time when the government is literally scraping the barrel to meet its committed liabilities.

The salaries of employees for the month of August were released today, four days into the month. Debt stabilisation may not be possible in near future, the report says. It points towards the increasing trend of subsidies. In 2018-19, subsidies were to the tune of Rs 13,361 crore, which increased to Rs 20, 607 crore in 2022-23.

After the AAP government came to power, it introduced 300 units of free power for domestic consumers every month and over 80 per cent domestic consumers in the state now get free power.

Though the revenue receipt registered an annual growth of 10. 76 per cent, the expenditure has grown at a much faster pace of 13 per cent. “From 2018-19 to 2022-23, revenue receipts have grown from Rs 62,269 crore to Rs 87,616 crore… in the same period, revenue expenditure has increased from Rs 75,404 crore to Rs 1,13,616 crore,” says the report. As a result, the revenue deficit went up from Rs 13,135 crore in 2018-19 to Rs 26,045 crore in 2022-23.

The report also points out how the upward trend in committed and inflexible expenditure has left the government with lesser flexibility for other priority sectors and creation of capital assets.

It also points out how the state government has been making “Off Budget” borrowings (through public sector undertakings) to the tune of Rs 3,243.48 crore. Which did not flow into the consolidated fund. The state invoked guarantees against borrowings, but could not pay the guarantee amount in full.

Drastic measures needed

Expenditure is rising at a much faster pace than the receipts. This is mainly due to the freebies doled out by the government. The government is surviving by raising debts. Drastic measures have to be taken to reverse the situation, including judicious roll out of subsidies. — Dr Lakhwinder Singh, eminent economist