Punjab: Financial trouble results in political turmoil

Finance minister loses job for insisting on querying politics-as-usual

The conundrum of debt waivers in Punjab has resulted in political turmoil. Chief Minister Parkash Singh Badal has dropped his finance minister, Manpreet Singh Badal, also his nephew, from the cabinet.

Manpreet was also suspended from membership of the ruling Shiromani Akali Dal last week. Punjab’s FM for the past four years, he had through his tenure been discomfiting his colleagues for making statements that went against the political orthodoxy.

Angering, among others, both the Chief Minister and his son, Sukhbir Singh Badal, Deputy CM, party president and his father’s heir-apparent. Manpreet made it clear that he thought both were mortgaging the state’s future for political benefit.

Fiscal management was the issue in contention.

The Punjab government has a debt burden of Rs 70,000 crore. A proposal of the Union government to waive half the amount on the condition of rollback of subsidies was not endorsed by the ruling SAD-BJP alliance. The firm stand of Manpreet Badal on this issue led to the final parting of ways.

The internal debt is Rs 56,257 crore, loans and advances are Rs 3,592 crore and Employees Provident Fund liabilities are Rs 11,127 crore. The Government of India can at most relax its own loans and advances, but the other liabilities such as internal debt raised from capital markets and the EPF are issues which have not been discussed by policy makers, said a senior bureaucrat.

The Fiscal Responsibility Management Act requires the state to contain the fiscal deficit to three per cent of Gross State Domestic product and the state’s public debt to 40 per cent of GSDP. As Punjab has been spending about Rs 8,000 crore yearly on servicing of debt, economists says it should refrain from more of populist politics.

For instance, they say, farmers at the grassroots would prefer to pay for regular supply of water and power, rather than getting it free but with supply erratic and inadequate. There is no reason to suppose that those at the top now plan likewise.