Mumbai: Faced with a cash crunch, the State government has asked all departments to release their unused funds back to the government treasury before the end of the financial year. The finance department has also put a temporary embargo on withdrawal of funds from various development heads, unless the departments are at a stage where they have to make payments for the works or contracts executed.
The decision taken at the start of this year is to ensure financial prudence and rein in the State’s ballooning debt. This would also ensure that rising fiscal deficit remains within the limits set by the State government. Maharashtra has been struggling to maintain targets under the Fiscal Responsibility and Budget Management (FRBM) Act, 2006.
Senior officials said they fear Maharashtra may cross the targets set under the FRBM law because of various factors, the biggest one being the spectre of drought over the last few years, and the farm loan waiver announced by the Devendra Fadnavis government.
The ₹30,000 crore farm loan waiver announced by the government last year is expected to push the State's fiscal deficit to 2.7% of State GDP in 2017-2018 from the budgeted 1.53%, senior officials said.
“The fiscal deficit of 2.7% of gross state domestic product (GSDP) has been growing over a period of time. This is a concerning sign and needs some sort of checking. Therefore, we wanted to bring discipline back to how departments have been spending the allotted funds or withdrawing money to make payments even before the maturity period. It makes more sense if the funds are unused that they stay in the state treasury rather than in the department’s account,” said principal secretary (finance and expenditure) R.A. Rajeev.
The government's fiscal deficit estimate for 2017-18 is ₹37,789 crore, which is 1.53% of GSDP. The 14th Finance Commission has prescribed this limit to be 2.8%, leaving the State little room to fund major projects. Already, the State’s debt stock has ballooned to ₹4,13,044 crore, leaving the government in a precarious situation.
