Blaming the Omar Abdullah-led coalition Government of pushing the State into “virtual financial emergency”, the Opposition Peoples Democratic Party (PDP) said that “inefficient governance and politically motivated commitments” are leading to a financial crisis in Jammu & Kashmir.
“Market borrowing of `300 crores by the State Government reflects not just liquidity deficit but an acute fiscal crisis,” PDP leader and former J&K Bank Chairman Haseeb Drabu said in response to recent media reports on fiscal situation of the State. “It is a mismatch between revenues and expenditures; revenue inflows have been delayed even as committed expenditures have been made. This mismatch has been aggravated by unfunded liabilities of around `8,000 crores that have been created by pre-election freebies,” he said.
He said while market borrowings are a part of the State finances, these are to be used for financing capital expenditure and building assets. The problem with these borrowing is that it is being used to defray current expenditures like salaries and pensions and that too on the non-plan account. “This is surest route to a debt trap,” Drabu said.
Giving reasons of the prevailing financial crisis, he said the real reason why the liquidity crisis has become binding is because of the institutional change which this Government made: replacing J&K Bank by RBI as the lender of last resort for the State Government. “Earlier J&K Bank would bridge this gap on call through the overdraft facility. Now, with the RBI as the banker, the State doesn’t have such mechanism to meet mismatches,” he added.
Drabu said if the situation continues like this, the present liquidity problem will graduate into a solvency crisis which can result in a financial emergency. This would be yet another inglorious first of this Government, he said, even as the State Government doesn’t have money to pay salaries and pensions on time, not to speak of advance payment ahead of the festival season, it is adding to its liabilities.