IEarlier this month, the Aam Aadmi Party (AAP)-led Punjab government failed to pay salaries to its employees on time. This raised questions on financial prudence and in particular on AAP’s pre-election promises of ‘free gifts’.
AAP government has completed six months in Punjab. Government started 300 units of free electricity Every household from July 1, which is expected to put an additional burden of ₹1,800 crore on the state exchequer. As per the annual budget of the state, a total electricity subsidy bill of ₹15,845 crore has been proposed as against ₹13,443 crore in 2021-22. One of the major pre-poll promises of the Aam Aadmi Party, of providing financial assistance of ₹1,000 every month to all women aged 18 years and above, has yet to be implemented. There are about one crore women voters in Punjab. This means that the cost of fulfilling this promise will be around ₹12,000 crore per annum.
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There has been a delay of one week in the salaries of government employees for August. Usually, government employees get salary for the previous month by the 1st of every month. Sources said one of the reasons for the delay could be that the five-year compensation for states under the GST regime has ended. During the last financial year, Punjab received around Rs 15,000 crore in GST compensation from the Centre.
On 7 September, after government employees warned that they would go on strike if there was further delay in payment of salaries, the Punjab government released around Rs 3,400 crore and paid salaries to Class A and Class B employees. Class C and Class D employees were paid the previous day. Finance Minister Harpal Singh Cheema said the delay in salaries is happening as the state is gearing up for the revival of the special drawing facility.
Punjab’s budget for 2022-23 This shows that the effective outstanding debt of the State was ₹2.63 lakh crore (45.88% of GSDP). In addition, state agencies, state-level undertakings, boards and corporations have a debt of around ₹55,000 crore, of which about ₹22,250 crore is guaranteed by the state government. A white paper brought out by the present government after coming to power has said that the debt indicators of the state are probably the worst in the country. Mr. Cheema said that Punjab was facing financial crunch when AAP came to power, but now the government is doing everything possible to improve the financial health of the state along with fulfilling its promises made to the people.
As per the state budget, the government is expecting a 17.08% increase in the state’s revenue receipts in 2022-23 over 2021-22, contributing ₹95,378 crore to the state exchequer, with new policies including excise duty Are included. It also expects a jump of around 27% in GST collections in FY 2022-23, plugging loopholes in GST collections, which will add some ₹4,350 crore more to the state’s kitty. But the state’s income is proposed to be Rs 95,378 crore against the expenditure of Rs 1,55,860 crore.
Economists say there seems to be no road map to revive the state’s economy. “If we take into account all the subsidies and free and committed expenditure, loan service, interest payment, free electricity, free bus service for women (during Congress rule) etc., it spends 116% of the budget revenue. Last year budget revenue was ₹95,000 crore and collection was ₹78,000 crore. Even if this government collects ₹95,378 crore, which is next to impossible, the subsidy will still cost 116% of the revenue,” said Ranjit Singh, eminent (economics) professor at Guru Nanak Dev University, Amritsar. Ghuman said.
The government has also refrained from imposing new taxes. In the budget, it has proposed to raise loans worth Rs 35,000 crore in the current financial year. The government is bearing the current account expenditure by taking loans. It is repaying the loan and interest by taking the loan; And also paying for free by taking loans. It is clear that Punjab is being pushed deeper into the debt trap.
Senior government officials stressed that there is no immediate cause for concern with regard to finances, but in the long run there is bound to be concern given the increasing number of ‘free’ and the state’s debt position. The Sixth Punjab Finance Commission report, submitted in March, said an overabundance of election promises would further exacerbate the crisis, and affect governance and economic growth. While debt may not be your contribution alone, the lack of serious reforms could prove costly to the state and you.