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Low tax revenues push Punjab to dire straits

Punjab is virtually passing through a hand-to-mouth existence due to dramatic fall in tax revenues, stepped up repayment of loans to the Centre and poor return from utilities.

An action plan, formulated on the recommendation of a high-level official committee, for augmenting the state's depleted resources and reducing non-plan expenses, is awaiting implementation as the ongoing infighting within the ruling Akali Dal has affected governance, official sources said in Chandigarh on Friday.

The low-tax revenue is on account of current industrial recession as well as damage to paddy and cotton crop towards the end of last year. Low industrial growth has resulted in low-excise yield, the sources said.

The cash-strapped state government has suspended payment of government bills and pensions and other sundry expenses by the state treasuries. The government is finding it hard to pay the employees' salary and has resorted to strict monitoring of the tax receipts, they said.

The Reserve Bank of India, at one stage, ordered banks not to honour the state government's cheques as it had resorted to massive overdraft but the Centre promptly came to the rescue of the state by advancing Rs 3.5 billion as ways and means assistance last month, they said.

The overall revenue from two main sources -- sales tax and excise duty -- has shown only 3.9 per cent growth during past nine months, collecting Rs 20.46 billion against the last year's receipts of Rs 19.69 billion during the corresponding period.

Punjab has been spending one-third of the central loans to pay back its outstanding loans for the past couple of years in spite of the fact that it succeeded in getting a waiver of Rs 58 billion of special loan from the Centre during the regime of former prime minister I K Gujral.

The interest payments and servicing of debts of the state accounted for Rs 18.28 billion during 1997-98 and this year the figure is likely to increase to Rs 20 billion, sources said.

Last year's interest payment was 52.13 per cent of the state's non-developmental expenditure. The state secured a Rs 13.45 billion loan from the Centre and raised a debt of Rs 5.02 billion from the market and financial institutions last year.

When Punjab's annual plan for 1998-98 at Rs 25 billion was finalised on October 7 last, Chief Minister Parkash Singh Badal said the existing pricing mechanism and loss to farm output had been costing the state farmers to the tune of Rs 40 billion every year.

The state's agriculture growth rate of 1.3 per cent suffered further as heavy losses on the paddy and cotton sectors due to unseasonal rains last year wreaked havoc. The Centre has not paid any compensation even after the state government's demand of Rs 3 billion made to Prime Minister A B Vajpayee in November 30.

As the current economic scenario goes, the state is not likely to raise its present industrial growth of 7.5 per cent to 12 per cent as targeted in the current annual plan, the sources said.

The sources said 70 per cent of Punjab farmers were now earning less than the national per capita income and a state government study put rural indebtedness to the extent of Rs 57 billion.

UNI

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Punjab