Governor Buta Singh cost Bihar Rs 8,752cr

Startling facts about fiscal profligacy during the President's Rule in Bihar have come to light in a white paper that is currently under preparation in Patna by the state finance ministry.

The Bihar government's record on debt has never been inspiring, but the paper clearly shows that it was not (NOT) during the Lalu Prasad -Rabri Devi rule that most excesses were committed.

The paper notes that between 1991 and 2004, the Bihar government's debt rose and amounted to Rs 23,900 crore for the entire 13-year period. However, between March 2004 and March 2006 (the period between former Chief Minister Rabri Devi demitting office and the first three months of the Nitish Kumar government), Bihar's debt added up to Rs 8,752 crore over a period of around 24 months.

Bihar's debt was Rs 10,501 crore in 1991 and stood at Rs 34,401 crore in March 2004. This figure rose to Rs 39,344 crore in March 2005, and is expected to touch Rs 43,153 crore by the end of March 2006.

This means Governor Buta Singh ran up bills worth Rs 8,752 crore in two years that Bihar could not and has no means of paying.

The current figure of Rs 43,153 crore Bihar currently owes is unsustainable unless the gross state domestic product (GSDP) grows at 5% for the foreseeable future. The alternative is a permanent debt servicing burden on public finance.

Officials repeat the conventional wisdom - bifurcation of Bihar was the worst thing that happened to the state because the new state ended up being burdened with roughly 75% of the debt while accounting for only 60% of total production and with a much lower per capita income than Jharkhand.

Interest on debt increased from 11% of revenue expenditure in the late 1980s to 26% in 2003-04 (before declining to 21% in 2004/05(RE) for a variety of reasons including central policies), as a share of GSDP to nearly 6% and accounting for nearly 40% of the total increase in public expenditure.

Officials said that since the mid-1980s till around 2004, expenditure on social services remained at a little over 30% of total spending. By contrast, the share of general services, which include debt service and pension expenditure, grew steadily from about 25% to 43% of total spending. Economic services were cut by over half to 16%. Irrigation and rural development spending virtually halved from 23% to 10% of total spending. Expenditure on agriculture fell even further by nearly two-thirds to under 3%.

Bringing out a white paper on finance was one of the committments made after the Nitish Kumar government took office. Last month, Finance Minister Sushil Modi said in the Bihar assembly that a white paper on the mismanagement of finances by Bihar would be made public "next week."