Poll promises may remain on paper in Punjab

While the Congress has made a plethora of promises, it is hamstrung by a bankrupt treasury

The Congress, which has formed the government in Punjab, had made four big promises in its election manifesto for the state. Those were waiving agriculture debt, providing a job for a member of every household, ending the vicious cycle of debt, and freeing the state of the drug menace in the first four weeks of governance.

The financial health of the state suggests it will be an uphill task for the new Chief Minister, Amarinder Singh, and his Finance Minister, Manpreet Singh Badal, the estranged nephew of former Punjab Chief Minister Parkash Singh Badal, to even get close to what they had promised. The Budget Estimates (BE) of 2016-17 show the Punjab government had a revenue deficit of Rs 7,983 crore, which has consistently exceeded Rs 6,500 crore since 2014-15. 

The deficit was mainly on account of moderate revenue receipts, high expenditure and power subsidies.

In the Rs 86,387-crore Budget for 2016-17, the Badal government had allocated as much as Rs 5,600 crore power subsidies to farmers. Free power to farmers and other sops have created a debt of Rs 1.24 lakh crore for the state government. 

The debt is expected to rise to Rs 1.31 lakh crore, according to the 2016-17 BE. The Congress had promised to continue providing free power to the state’s farmers, which means the power subsidies will rise.

“The government of Punjab’s substantial power subsidies and committed expenditure bloat its revenue spending. For instance, power the power subsidy expenditure appropriated 12 per cent of its revenue receipts in FY2016 Revenue Estimates, sharply higher than most other states. Moreover, interest payments were equivalent to 22 per cent of state government’s revenue receipts in FY2017 BE, more than twice-as-high as the norm of 10 per cent set by the fourth Finance Commission. Notably the BE for FY2017 had not provisioned for the debt servicing of the Ujwal Discom Assurance Yojana bonds issued by the state government during the course of 2016,” credit rating agency Icra said in a recent report. 

“The state government is one of the few state governments that has consistently been availing ways and means advances from the Reserve Bank of India (RBI), indicating a tight liquidity situation,” it said.

Both the fiscal and revenue deficits have been consistently rising in Punjab for the past five years. The fiscal and revenue deficits for 2016-17 (BE) were estimated at Rs 13,087 crore and Rs 7,983 crore, respectively. It means the new government has to reduce its expenditure.

Amarinder Singh has announced austerity measures, including a blanket ban on foreign travel, for his ministers and legislators, but that is barely adequate. The state has to find ways to improve the tax collection system, invite fresh investment and take tough political decisions to move away from subsidies.

With such a tight fiscal space, it would be difficult for the Congress government to write off farm loans taken from cooperative societies. A study by Punjabi University had estimated that farm indebtedness in the state during 2014-15 was around Rs 69,355 crore, including Rs 56,481 crore of institutional borrowing. The borrowings from cooperative societies were estimated at 15.74 per cent, or Rs 8,890 crore, of the institutional borrowing. 

“The Punjab government can write off loans taken from only cooperative societies. It is unlikely that the Union government would waive the borrowing from nationalised and commercial banks as it was heard of doing in Uttar Pradesh,” said Gian Singh of Punjabi University. “The Punjab government can take care of the problem by bringing a positive price policy, spending more on research, land reforms and paying crop loss compensation on time,” Singh added. 

The government can begin by arresting the decline in annual growth in agriculture and allied activities, which fell to less than 1 per cent in 2013-14 from 3.82 per cent in 2007-08.  Besides a farm loan waiver and free power, the Congress had announced an enhanced compensation of Rs 20,000 per acre, a farmer pension scheme raising the ex-gratia payment to Rs 10 lakh for the families affected by suicides and an input tax waiver for agro and food-processing industries. The Congress, however, has not revealed its plan of fulfilling its farm promises.

The other tall promise the Congress would find it difficult to implement is one job per household and paying wages of Rs 2,500 per month to the unemployed. This comes when the state is facing a high unemployment rate. The labour bureau estimates the unemployment rate in Punjab for people between 18 and 29 years is 17.1 per cent as compared to 13.2 per cent in India in 2015-16. 

The thinking in the Congress is that it can generate employment by reviving the traditional medium and small-scale industry, which includes hosiery, textile, sport goods, wood work, hand tools, and light machinery, and give a fillip to the “creation of new clusters”. The party also wants to pursue domestic and global investors to set up factories in the state. It is promising the industry power at Rs 5 per unit, water subsidies and better sewage facilities. 

But given Punjab’s record of the past few years, it seems a daunting task. 

The data from the RBI suggest that the number of factories was reduced from 12,770 in 2010-11 to 12,278 in 2013-14. Annual industry growth fell from its peak at 16.61 per cent in 2007-08 to 6.28 per cent in 2011-12. It further declined to 2.55 per cent in 2013-14. 

The state-wise data of Industrial Entrepreneurs’ Memorandum (IEM), filed on the website of the Department of Industrial Policy & Promotion, show that Punjab fared poor than its neighbouring states of Haryana, Uttar Pradesh, Uttarakhand and Himachal Pradesh.

The IEMs implemented in Punjab in 2011, 2012, 2013, 2014 and 2015 were merely two, six, one, two, and four, respectively. The proposed investment for the same corresponding years were zero, Rs 1,042 crore (2012), Rs 38 crore (2013), Rs 162 crore (2014) and Rs 340 crore (2015), respectively. Many critics have linked the unemployment with the drug menace. The state government wants to resolve the drug issue by setting up a special task force and cracking down on the sellers. It believes that chocking supply will end the problem. 

The state, however, needs to adopt a holistic approach. 

A 2015 Opioid Dependence Survey suggested that there were 230,000 opioid dependants and 860,000 opioid users in the state. Opioid dependants roughly spend Rs 1,400 a day on drugs. 

The government needs to find ways to ensure drug addicts use its de-addiction centres. A senior psychiatrist working in a state-run de-addiction centre said addicts would procure drugs from other states. It would be better if the supplies are restricted.
 

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