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Tough task for Badal to put finances on right track

Chandigarh: The Punjab Government, which will present the budget for 2008-09 on Monday, may not find it easy to divert the State finances on the right track due to falling revenue receipts and increasing unproductive expenditure, an economist said.

In addition to it, Punjab Finance Minister Manpreet Singh Badal would have to think ‘out of the box’ for taking necessary steps to rejuvenate agricultural sector and address industry concerns, economist and former vice-chairman of Punjab Planning Board S. S. Johal said.

To put a break on the fiscal deterioration, the Minister should make efforts to plug the rampant leakage of State tax revenue, rationalise government expenditure and discontinue free power to farmers, he said.

The measures would lead to mobilisation of additional resources for meeting committed expenditure in Annual Plan of Rs 6,210 crore, he added.

“There is no need to impose any tax at all for State Government for resource mobilisation in the budget. Finance Minister just needs to stop tax evasion, discontinue subsidy like free power and control the government expenditure like overstaffing. These steps will ensure quantum jump in revenue generation for the State exchequer,” he said.

Analysis of Punjab finances reveal that the State government has not been able to fully meet the revenue expenditure out of its revenue receipts for the last several years, leading to facing a situation of revenue deficit.

Punjab has revenue deficits of Rs 3,390.55 crore (2004-05), Rs 1,240 crore (2005-06), Rs 2,190.60 crore (2006-07) and Rs 1,429.49 crore (2007-08 estimated).

Major worry for Punjab is that almost 75 per cent of the total revenue receipts of the government are consumed by salary, pension, interest and subsidy.

“The Government should give immediate attention to control these expenses otherwise there will be a fiscal mess,” Dr. Johal said.

Lack of buoyancy in the State taxes has also been a major cause of concern for the state government in view of the prevalence of rampant tax evasion among traders, he pointed out.

The growth in VAT collections in the state has come down to 11 per cent in 2006-07 compared to growth of 15 and 21 per cent in 2004-05 and 2005-06 respectively, even as the government is hoping to collect VAT revenue of Rs 6,000 crore at rate of 17 per cent in 2007-08.

Giving free power to farmers has also largely contributed in ‘sucking out’ the state finances. The total power subsidy bill of the state is pegged at Rs 2,840 crore, a Punjab State Electricity Board official said. PTI

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