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Goa sliding into debt trap

Sandesh Prabhudesai in Panaji

Goa is slowly getting into a debt trap, thanks to its unproductive spendings, huge amount of borrowings and allegedly indiscriminate policy of central assistance based on the Gadgil-Mukherjee formula.

Adding to its piled-up borrowings of Rs 1.5 billion under statutory liquidity ratio, the central finance ministry has sanctioned yet another SLR-based loan of Rs 500 million last week to complete the ongoing developmental works.

Although Chief Minister Luizinho Faleiro feels relieved at the Centre partially meeting its demand of total Rs 1.5 billion, local officials wonder how the loans would be repaid, which have mounted to over Rs 8 billion.

With around Rs 100 million being spent every month only to pay the interest to the Indian government on the loans it has taken, it has come to notice that the state has been actually paying lot more than what it receives from the Centre annually.

The eleventh Finance Commission, which recently visited the tourist state, has pointed out that the state has been borrowing primarily to repay the old debts. "The basic purpose of borrowings to support the development has been forfeited," points out A M Khusro, the commission chairman.

The situation came to such a pass that the government had to borrow Rs 250 million from the state co-operative bank to partially clear the bills of PWD contractors. The state's 58 per cent revenue expenditure is also spent merely to pay salaries to the large number of government servants, thanks to the Fifth Pay Commission.

Contrary to this, the central allocation has reduced from around 88 per cent in 1989-90 to around 28 per cent in 1997-98 since funds are now allocated as per the Gadgil-Mukherjee formula, giving more weightage to population rather than population control measures.

Goa, which has the best performance in birth control and infant mortality rate, thus suffers while its high per capita income rate has also become a deterrent in receiving more funds. It has obviously affected the state's financial health severely.

The only relief is Khusro's assurance to set up special funds to provide incentives to the states phasing out non-merit subsidies. He agrees with Goa government's argument that weightage should also be given to merit and performance while deciding Central allocation.

Being a major exporter of iron ore in the country and a favourite international tourist destination, Goa earns around Rs 20 billion annually towards the foreign exchange. The finance commission now agrees that part of it should be transferred to the respective state to build necessary infrastructure.

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Goa