With Punjab's debt at Rs 3.12 trn, CM's OPS promise faces uphill challenge

With Punjab's current debt of whopping Rs 3.12 lakh crore, the 13-month-old AAP government seems further pushing the state into a debt trap through increased borrowings and offering freebies promised in the run-up to the Assembly elections like free water and electricity up to a limit.

With its liquor policy already under the scanner with those in the trade accusing the government of monopolising the industry in favour of a 'handful of entities', the government is currently facing criticism for the abnormal delay in implementing its major poll promise of restoring the Old Pension Scheme (OPS) for government employees who joined service after 2004.

Agitating employees hit the streets several times in the recent past over the delay in specifying the date from which the OPS is going to be implemented.

With an eye on the Gujarat Assembly elections, the Bhagwant Mann-led Aam Aadmi Party government in November last year hurriedly notified the implementation of the OPS in Punjab that aims to benefit over 1.75 lakh employees, currently covered under the National Pension System (NPS).

In addition, 1.26 lakh employees are already covered under the existing OPS.

The government says the OPS scheme is expected to benefit more than 4,100 employees in the next five years alone. In order to ensure that the scheme being introduced is financially sustainable for the exchequer, the government will be contributing proactively to the pension corpus.

A contribution to the corpus will be Rs 1,000 crore per annum initially and will gradually increase. In addition, the current accumulated corpus with the NPS is Rs 16,746 crore, which the government has requested the Pension Fund Regulatory and Development Authority (PFRDA) to refund but the Centre declined.

Amid the tighter financial conditions and a worse-than-anticipated slowdown, the state Finance Department officials are skeptical over the implementation of the OPS, saying it would put additional stress on finances as the state debt is close to 180 per cent of its annual budget.

They say the state is facing the daunting task to usher in much-needed economic reforms as a major component of government earning and borrowing is meant for servicing debt rather than capital expenditure.

As per the state Budget, the effective outstanding debt to the GSDP has been estimated to be 46.81 per cent in 2023-24.

Despite tighter monetary conditions, the state is annually providing the power subsidy of Rs 7,780 crore to domestic consumers and Rs 9,064 crore free power to farmers.

The AAP government, which stormed to power with a landslide win of 92 of the 117 Assembly seats, is providing 300 units of free power per month to domestic consumers as per pre-poll promise. Almost 90 per cent of the state's households are now getting zero electricity bills.

However, the party's much-hyped pre-poll aguarantee' of Rs 1,000 for every adult woman, a drain on the exchequer, is yet to see the light of day.

Cautioning the states on implementing the OPS, Union Minister of State for Finance, Bhagwat Karad, in a written reply in the Lok Sabha in February clarified that there is no provision under the PFRDA Act vide which the accumulated corpus of the subscribers, viz governments' and employees' contribution towards NPS along with accruals, can be refunded and deposited back to the state government.

Even the Reserve Bank of India has cautioned states against reverting to the dearness allowance-linked OPS, saying it will add to the fiscal burden of states in the coming years.

In the case of Punjab, the government has constituted a Cabinet sub-committee and a sub-committee of officers for formulating the standard operating procedure for implementing the OPS.

Angered over the bureaucratic hassles over mentioning the detailed pension policy, a section of employees unions, under the banner of Old Pension Restoration Struggle Committee, have been demanding the timely implementation of the old pension in Punjab.

They argued the government's notification regarding the implementation of the old pension "is just a political announcement" as it did not specify how it would do so and from which date no the old pension is going to be implemented.

The employees have already issued an ultimatum to the government to issue the standard operating procedure failing which they will launch statewide agitation.

At a recent meeting with the Old Pension Restoration Struggle Committee here, Finance Minister Harpal Singh Cheema said the Cabinet sub-committee and the Chief Secretary-led sub-committee are holding meetings to prepare such a pension model that would ensure a secure and prosperous post-retirement life of the employees, besides the country's best.

"We will introduce such an excellent pension model for the government employees that would be followed by the governments of other states also," an official statement quoting Cheema said.

An official familiar with the matter told IANS that political compulsions and populist announcements by the government have been taking a huge toll on the state's finances and this may surge the debt beyond the projected Rs 2.52 lakh crore.

A report by the Group of Experts (GOE) led by noted economist Montek Singh Ahluwalia, set up by previous Chief Minister Amarinder Singh to revive Punjab's economy, had recommended measures like reducing average cost of government debt, banning recruitment in police and bringing pay scales of government employees on par, among others.

(Vishal Gulati can be contacted at gulatiians@gmail.com)

--IANS

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