Chandigarh: Punjab is likely to find it "extremely" difficult to spend on development activities as over 80 percent of the state's revenue is expected to be "consumed" by rising committed expenditure, including salary, pension and debt-servicing.

As Punjab Finance Minister Parminder Singh Dhindsa in the state's Budget on Wednesday decided not to levy fresh taxes for additional resource mobilisation, the state's dependence on fresh borrowings may further rise, with total outstanding debt anticipated to grow by 12 percent to Rs 87,517 crore in the current fiscal.

As per the Budget documents, the state's committed expenditure has been projected to grow to Rs 30,560 crore constituting 80.44 percent of revenue receipts in current fiscal, which is more than double from government expenditure of Rs 14,468 crore incurred in 2009-10.Punjab's revenue receipts are projected at Rs 38,043 crore for 2012-13.

Showing an upward trend, the committed expenditure as percentage of revenue receipts constituted 80 percent in 2009-10, 100.86 per cent in 2010-11 and 89.09 per cent in 2011-12.

Punjab Finance Minister Dhindsa admitted that rising government expenditure has been the primary cause for revenue deficit, which has reached a "worrying" level of Rs 6,838 crore for 2011-12 against projected deficit of Rs 3,379 crore.

The state has failed in achieving the revenue deficit target of 1.8 percent of GSDP set as per the Fiscal Responsibility and Budget Management Act, 2011, which reached 2.75 percent of GSDP for 2011-12.

"The revenue deficit has always been a problem area for the state of Punjab. The rising salary bill, pension, financial assistance to power utility and interest payment (on borrowings) have contributed to increase in revenue expenditure over the years," he said.

The Finance Minister is also aware of the fact that if revenue deficit, fiscal deficit target and debt to GSDP ratio is not achieved by 2014-15, then the state could lose the annual financial relief from Centre of Rs 500 crore ever year.

"If we fail to meet targets...then we would be losing nearly Rs 500 crore every year," he said.

Punjab, as per the FRBM Act, has projected to bring down revenue deficit and fiscal deficit to zero and 3 percent by 2014-15.

Moreover, additional borrowings by the state are also being used to finance revenue deficit and capital expenditure. "More than 80 percent of net borrowings are being utilised to meet revenue deficit leaving only 20 percent for capital expenditure," he said.

Punjab, which has been declared as a debt-stressed state along with West Bengal and Kerala by the 13th finance commission, has been heavily depending upon borrowings, blaming rising committed expenditure and tax concessions for increased borrowings.

Punjab has projected total outstanding debt of Rs 87,517 crore for 2012-13 and out of projected borrowing of Rs 13,204 crore for current fiscal, interest payment has been pegged at Rs 6,662 crore.
The Comptroller and Auditor General of India (CAG) in its latest report had also found the state's burgeoning debt unsustainable and even asked the Punjab government to restrict further borrowings, otherwise it will face serious problem in servicing the debt.

Although the state has witnessed robust growth in tax revenue by collecting Rs 20,310 crore in 2011-12, up from Rs 16,828 crore in 2010-11, yet it has not been enough for the state to meet revenue expenditure completely.


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