Punjab State well short of revenue growth target

Mar 13, 2016

Punjab State well short of revenue growth target

Punjab is woefully short of meeting the revenue growth target set by the Akali-BJP government for the current fiscal (2016-17), even as Deputy Chief Minister Sukhbir Singh Badal has tried to present a “rosy” picture of the state’s fiscal health.
As against the target of achieving 10 per cent jump in the state’s own tax revenue for this fiscal, the growth has been just 5 per cent. Had it not been for a higher devolution of central taxes from this year, the state’s total revenue growth too would have been in single digit. But with more central transfers coming to Punjab– an increase of almost 70 per cent — the state’s total growth in revenue receipts is expected at about 13 per cent. Punjab was targeting a revenue growth rate of 18.46 per cent this year, mainly through buoyancy in its own tax revenues.

Top functionaries in the state’s Finance Department told The Tribune that Punjab was falling short of its projections for growth, though it was not the only state facing a slowdown. “It has been a national trend and some of the fastest-growing states have even clocked a flat growth. In Punjab, the major reason for the slowdown in revenue growth is the fall in value-added tax (VAT) collections, mainly VAT collected on the retail sale of petrol and diesel. With the prices of these fuels falling sharply over the year, VAT collections have come down drastically, thus hitting the state’s own tax growth,” said a senior functionary in the department. The state’s VAT growth has been around 5 per cent, and its own non-tax revenue has shown a negative growth rate of almost 20 per cent.

As a result, Finance Minister Parminder Singh Dhindsa will be presenting a realistic growth rate in the budget proposals in the Assembly on Tuesday. Though the government is expected to announce more sops — sports kits to youth clubs; utensils to community centres; Rs 100-crore dedicated fund for upgrade of computer labs in schools; higher allocation for the health centres; more allocation for providing relief to families of farmers who commit suicide; higher allocations for paying subsidy to sugarcane farmers and for farm insurance – it will be a tough task for him to manage resources for funding new initiatives. With the Akali-BJP government also launching a major recruitment drive, the government’s committed liabilities will increase further.
Presently, 55 per cent of the state’s total revenue receipts are used for paying salaries and pensions. But sources in the Finance Department insist that fresh recruitments won’t increase the committed liabilities much this year, as the recruitment drive would be over in about a year from now. “We have also changed the service conditions of new recruits, wherein we are paying just the basic salary to employees, which would not put much burden on the state exchequer,” the sources said.

For the next financial year, the state’s total debt is also expected to increase to almost Rs 1.35 lakh crore from Rs 1.24 lakh crore during the ongoing year. A recent study by the Asian Development Bank Institute showed that Punjab’s outstanding debt relative to the net domestic product was among the highest in the country. Though the state government authorities insist that the debt-to-Gross State Domestic Product (GSDP) ratio has been brought down substantially (to almost 30.5 per cent of the GSDP), this study still pegs Punjab’s total debt stock at among the highest non-special category states in the country.
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