Undeterred by the “denial” of the Union Finance Minister to provide special financial package to Punjab, the State Government has sought a debt relief package from the 14th Finance Commission.
Presenting its case to the Finance Commission, the State Finance Minister Parminder Singh Dhindsa sought debt relief through loan restructuring and change in criteria for devolution of funds to States to overcome financial “challenges” theState is facing.The State has also sought a special term loan and interest already paid by the State amounting to Rs2,694 crore, besides a revenue deficit grant to the tune of Rs3,000 crore.
“We have sought debt relief from the 14th Finance Commission…we have proposed that the same can be done by way of loan restructuring or moratorium on loan repayments…We have also urged the Commission to give the States 50 per cent share out of the central taxes,” a senior official of the State Finance Department.
Punjab’s outstanding debt is expected to reach whopping Rs1.13 lakh crore by March 2015 — which is 30.95 per cent of GSDP, with State Government facing “lower” revenue mobilisation and “growing” expenditure. The SAD-BJP led Punjab Government has projected to make fresh borrowing of Rs14,199 crore during current fiscal.
The State Government attributes its fiscal problems to outstanding debt which is the result of prolonged years of militancy in the State and constant decline in share of State in central taxes.Seeking a change in formula for devolution of funds to States, the State has sought weightage to ST-SC population (15 per cent), GSDP (15 per cent) of the State, fiscal capacity distance (15 per cent), fiscal discipline (5 per cent), Area (15 per cent) and population (35 per cent) to make devolution criteria "just and fair".
As per 13th Finance Commission, the criteria and weights for inter-se distribution of central taxes among various States was population (25 per cent), area (10 per cent), fiscal capacity distance (47.5 per cent) and fiscal discipline (17.5 per cent).The State Government rued that its share in the central taxes dropped from 2.45 per cent in 1970-75 to 1.389 per cent under 13th Finance Commission (2010-15), under the UPA regime.
Debt-ridden Punjab Government has all along been seeking financial assistance and cooperation from the Centre as a special package to bail it out from the mounting debt. Similar demands for debt relief have also been made by the state of West Bengal, Odisha, and Kerala, besides Punjab.Already carrying a dubious tag of “debt stressed” state, Punjab's total outstanding debt has crossed whopping Rs one lakh crore mark in the current fiscal. The state's outstanding debt (excluding reserve funds) has been projected at Rs1,05,483.37 crore — 28.88 per cent of the GSDP for 2014-15.