In a bold and uncompromising response to Punjab Governor Banwarilal Purohit’s inquiry about the State Government's borrowings, Chief Minister Bhagwant Mann on Tuesday delivered a stark revelation — a staggering Rs 27,016 crore, constituting a whopping 57 percent of the total borrowings of Rs 47,000 crore, has been funneled solely into servicing inherited debts. Mann didn't stop there; he fervently called for Purohit's intervention to take up the issue of the Rural Development Fund (RDF) with Prime Minister Narendra Modi and also to secure a five-year debt repayment moratorium.
The issue of state’s borrowings gained attention amidst the continuing exchange of letters between the Governor and the Chief Minister when Mann initially reached out to Purohit seeking his intervention in getting Rs 5,637.40 crore ‘pending’ RDF dues released from the Centre. In response, Governor Purohit sought detailed information on the state's borrowings, prompting the Chief Minister Mann's comprehensive reply on Tuesday highlighting the allocation of funds and the state's efforts to address legacy debt issues.
Debt Allocation and Utilization
The core of the matter revolves around the substantial loan taken by the Punjab Government under the AAP regime. In his detailed response, Mann made an attempt to provide a breakdown of the Government’s financial transactions over the past 18 months, shedding light on how the borrowed funds were allocated and utilized.
Out of the approximately Rs 47,000 crore borrowed by the Punjab Government, a staggering Rs 27,016 crore was solely directed towards servicing interest on legacy debt inherited by the current administration. Mann explained that his Government had prioritized addressing lingering financial issues left behind by previous administrations. He said that the AAP Government employed both debt and the state's own revenue resources to support organizations and schemes that had been overlooked by their predecessors. Additionally, new debt was utilized to create capital assets and drive development activities within the state.
Mann, in his Demi Official (DO) letter to the Governor, emphasized that his Government had not just used debt to maintain past financial commitments, but have strategically employed the borrowed funds in a manner that serves the state's developmental goals and the welfare of its citizens.
The Chief Minister pointed out that the borrowed amount, including market loans, loans from NABARD, externally aided project loans approved by the Government of India, and long-term loans under special assistance for capital asset creation, amounted to Rs 47,107.6 crore from April 1, 2022, to August 31, 2023.
Giving the account details, he maintained that the Government spent Rs 48,530 crore, against the total borrowing of Rs 47,107 crore. He pointed that the Government had to handle the legacy debt of Rs 350 crore of Punjab State Civil Supplies Corporation or PUNSUP, Rs 798 crore of Punjab State Cooperative Agricultural Development Bank Limited or PSCADB, Rs 845 crore repayment of loan against Rural Development Fund (RDF), power subsidy arrears of Rs 2,556 crore, sinking fund investment of Rs 4,000 crore, Rs 1,008 crore arrears of sugarcane farmers, and Rs 1750 crore unpaid of central-sponsored schemes; besides Rs 10,208 crore on development as capital expenditure.
Resource Mobilization Efforts
Underscoring his Government's relentless efforts to mobilize additional resources for Punjab, Mann highlighted significant increases in revenue collections across various sectors, showcasing the state's ability to generate income despite economic challenges. He pointed that GST collections increased by 16.6 per cent in 2022-23, totaling Rs 18,128 crore compared to Rs 15,542 crore in 2021-22; excise collections surged by 37 per cent reaching Rs 8,437 crore in 2022-23, up from Rs 6,157 crore the previous year; taxes on vehicles recorded a 13 per cent increase, generating an additional Rs 315 crore in revenue; stamps and registration collections experienced robust growth, rising by 28 per cent and contributing an extra Rs 919 crore to the state finances. “I am committed to honour the state's rightful liabilities and servicing the debt in a timely manner while I strive to mobilize resources to fund development of the state. Our government is working 24X7 to mobilize additional resources for the state which is evident from the major revenue receipt heads,” he said.
Prudent Investment and Debt Management
In his letter, Mann highlighted the Government's prudent investments, made possible by increased receipts and revenue growth. “The funds were allocated strategically, encompassing essential areas such as implementation of the Sixth Pay Commission, adoption of University Grants Commission (UGC) scales, clearance of power subsidy arrears for the Punjab State Power Corporation Limited (PSPCL), payment of arrears related to the Atta-Dal scheme, resolution of sugarcane farmers' dues, and settlement of unpaid central-sponsored schemes,” he added. Mann proudly reported that his Government had contributed a substantial Rs 4,000 crore to the sinking fund since April 1, 2022, significantly surpassing the previous government's accumulation of Rs 2,988 crore. The sinking fund serves as a financial buffer, alleviating some of the state's future debt pressures.
Challenges and the Path Forward
Acknowledging the challenges stemming from legacy debt, Mann expressed hope that the information provided would offer Governor Purohit a clearer understanding of the state's financial situation. The response demonstrated responsible debt utilization and the government's unwavering commitment to consolidating state finances. Additionally, Mann expressed confidence that the Governor could effectively convey to the Prime Minister that the borrowed funds were judiciously used and that the Government was dedicated to strengthening the state's fiscal position. These efforts were conducted while simultaneously creating employment opportunities for over 36,000 youth in the state. “I am grateful that the Governor has sought the information which allowed me to put many things in perspective,” he added.
Appeal for Debt Moratorium
Making a fervent appeal, Mann urged the Governor to convey to the Prime Minister Narendra Modi the urgent need for both releasing the pending RDF and granting a moratorium on state debt repayment for at least five years. Underscoring the critical importance of the request, Mann said that it would provide much-needed relief to the state's strained financial position. Moreover, it would offer the state government the fiscal flexibility necessary to accelerate revenue growth and expedite the pace of development. The Chief Minister's letter concludes with a strong appeal to prioritize Punjab's interests and consider the larger goal of advancing the state's financial stability and development.
Breakdown of Debt Utilization
· Rescue of Troubled Organizations, including Rs 350 crore for bailing out PUNSUP, and Rs 798 crore for PSCADB
· Rs 845 crore for repaying loans against RDF
· Power Subsidy Arrears of Rs 2,556 crore
· Sinking Fund Investment of Rs 4,000 crore
· Sugarcane Farmers' Arrears of Rs 1,008 crore
· Rs 1,750 crore for unpaid central-sponsored schemes
· Rs 10,208 crore allocated for development as capital expenditure