Govt failed to cut revenue expenditure

Chandigarh, Punjab’s only hope of reviving its economy through a special package by the Modi-led NDA government was shattered after Union Finance Minister Arun Jaitley turned down the state’s request. This happened in August, a few months after the NDA government was formed. Instead, Jaitley asked the state to rationalise its power subsidy which was more than the state’s revenue deficit for 2013-14.The state government somehow continued to manage its ever-growing expenditure. The situation was not as bad as in 2013 when the government, through its Punjab Urban Planning and Development Authority (PUPDA), was forced to mortgage government properties and raise loans for day-to-day business. This year, the government managed to clear its committed liabilities, even though the treasury has pending bills worth hundreds of crores. Punjab continued to avail its ways and means advances (WMA) and remained in overdraft, though both were cleared by the government in time.What, perhaps, came to Punjab’s rescue was a change in the Centre’s norms for releasing money to state governments. It was decided by the National Development Council last year that beginning the 2014-15 fiscal, all funds meant for centrally sponsored schemes would be routed to states through the state’s consolidated fund. As a result, the centrally sponsored schemes were hit as money was not released on time, but the state managed to wade its way through.State Finance Minister Parminder Singh Dhindsa, explaining the below target growth in revenue, said the effects of the recession had now started to show. “The fall in people’s spending has a direct impact on the state’s tax collection. This year, even during the festive season, the growth in VAT collections was almost flat. We are now hoping that the Finance Commission, which has submitted its report, will come to Punjab’s aid and give a higher devolution of central taxes to Punjab.“With inflation coming down, we are hopeful that the DA instalment to be given to the employees will also be brought down. With the Centre itself is facing a slow growth in its revenue, fund devolution is down by Rs 400 crore,” he admitted. The state government has started taking baby steps to revive its economy.In absolute figures, the state’s total revenue receipts (audited figures till September 2014) are Rs 16,941.17 crore, up by just 12.87 per cent against last year. Though the total Central Government transfer of funds have increased from Rs 2,910.26 crore to Rs 4,032.45 crore (up by 38.56 per cent), the share of central taxes is less than the targeted share by Rs 400 crore. Also, VAT collections have shown a nominal increase of 10.22 per cent, while stamp duty and registration have shown a decline of 1.70 per cent, indicating that the real estate sector is facing a slowdown. However, revenue expenditure shows a higher growth than the revenue receipts. The growth in expenditure was 16.58 per cent. A sum of Rs 19,272.44 crore was spent this year, as compared to Rs 16,531.17 crore spent last year. The mismatch in the money spent and the money earned added to the state’s revenue deficit.Leading economist Dr Lakhwinder Singh said the state government should take steps to check massive tax evasion. “Tax evasion in Punjab is rampant and remains undetected or ignored. The government needs to rationalise revenue expenditure by cutting down unnecessary administrative expenditure. Punjab is not spending on important sectors such as education, health and research and development, which are the key to knowledge-based economy. It is here that investment is needed. The state government should constitute an economic advisory council to put state economy on the right track,” he said.

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