Punjab governor fires another missive, questions AAP govt’s fiscal management
In a two-page letter, governor Banwarilal Purohit has asked chief minister Bhagwant Mann to explain additional borrowing and utilisation for purposes other than creation of capital assets along with accurate data, pointing to variation in feedback from CAG and figures given by the CM
Days after chief minister Bhagwant Mann shared details of debt raised by his government and its utilisation, Punjab governor Banwarilal Purohit shot off another missive to him on Tuesday, raising questions over the state government’s fiscal management, lack of transparency and diversion of funds meant for capital expenditure for “undisclosed purposes”.
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In a two-page letter to Mann, Purohit said the state government is expected to follow prudent fiscal policies to manage its scarce financial resources, but as per the information available, it is not managing its fiscal resources in an effective and efficient manner. He has asked the government to explain additional borrowing and its utilisation for purposes other than creation of capital assets along with accurate data, pointing to substantial variation in feedback from the comptroller and auditor general of India (CAG) and figures made available to him by the chief minister.
The governor’s letter, which questions the government’s lack of fiscal prudence, comes two weeks after the chief minister wrote to him that his government added ₹47,107.6 crore to the state debt in the past one-and-a-half years, and 57% of it had gone into meeting the interest liability on legacy debt of the state. Mann, in his reply to the governor’s September 21 letter, blamed his predecessor for the hefty debt left behind by them.
Purohit had sought accountability from Mann regarding utilisation of ₹50,000 crore debt raised by his government in the past one-and-a-half years. Mann and Purohit have had frequent run-ins on a number of issues, including summoning of special sessions, appointments to various institutions, adherence to legal procedures, etc. over the past one year, and this exchange of letters over the state’s fiscal management is only the latest flashpoint.
Explanation sought on ₹10K crore additional borrowing
In Tuesday’s communication, the governor said that in 2022-23, the state government borrowed ₹33,886 crore, as against the approved amount of ₹23,835 crore, which was over ₹10,000 crore more than the amount approved originally by the state assembly in the budget. “This additional borrowing needs to be explained as, apparently, it has not been utilised for creation of capital assets. This is evident from the fact that the effective capital expenditure dropped by over ₹1,500 crore from a projected ₹11,375.59 crore to ₹9,691.53 crore,” he wrote.
Purohit pointed out said the additional borrowing was not even used to discharge legacy interest obligations, as per the figures projected in the revised estimates in this regard. This, in fact, demonstrated that the total payments defrayed on this account during the year finally stood at ₹19,905 crore, as against a projection of ₹20,100 crore in the budgetary estimates for 2022-23, he added. He expressed concern over the shortfall in the capital expenditure target in the first five months of this financial year, pointing out that only 12% of the projected capital expenditure has been achieved so far this year.
Asked to create capital assets, show fiscal prudence
Referring to power theft and losses of electricity utilities, Purohit advised the chief minister that borrowings should ideally be leveraged for the creation of capital assets and not for rolling out populist measures. “I agree that welfare measures should be implemented comprehensively, but financial prudence demands that such welfare measures should be accompanied by fiscal discipline, resource mobilisation from curbing pilferages, cutting down on unproductive expenditure and shunning fiscal profligacy,” he wrote, giving the example of technical and commercial losses of the power utilities of Punjab.
He said good governance demands that such electricity theft must be curbed, and the resultant savings should be utilised to subsidise the weaker sections of society, lest it amounts to facilitating large-scale pilferage of public funds to wrongly enrich the undeserving.
‘Govt’s performance causing concern’
The governor said it is high time that honest efforts are made to bring Punjab back to robust fiscal health and utilise the savings to enhance the welfare of Punjab by efficient governance accentuated by fiscal prudence. “In this context, the performance of the government is causing concern. All public borrowings should be carefully calibrated so that the youth of Punjab are not imperilled by unsustainable debt,” he said, assuring Mann that once a comprehensive picture was available, they could approach the Government of India for appropriate assistance as the Prime Minister had always expressed his commitment for Punjab.
Mann, while furnishing information to the governor on October 3 on the state debt and finances, had asked him to convince the Prime Minister to release the rural development fund (RDF) of the state and also accord a moratorium on debt repayment of the state for at least five years.