Fiscal crisis is multidimensional, but Punjab’s policies poor: Study

CHANDIGARH: Rampant tax evasion, high subsidies, poor collection of tax and non-tax revenue, centralisation of collection and distribution of tax revenue by the central government, low investment in capital formation and pitiable resource mobilisation has resulted in Punjab being under unceasing debt. Punjab’s projected debt burden by the end of fiscal 2021-22 is Rs 2.82 lakh crore.
These are the findings of a study titled ‘Public Policy and Governance Reforms for Post-Covid-19 Recovery and Sustainable Growth and Development in Punjab’. The study says the structural problems of the Punjab economy and the development process which took a back seat in the past over three decades became more evident during the period of Covid-19 pandemic. Pointing out the low revenue generation and low investment despite high per capita income in Punjab, the study underlines that it is a widely held principle in economic theory that public investment and capital formation in the developing countries help in attracting private investment.
The study conducted by Professor Sukhpal Singh of Centre for Management in Agriculture at IIM Ahmedabad, Professor Emeritus Lakhwinder Singh of commerce, management and economics department at Khalsa College in Patiala, and Professor Kamal Vatta of the department of economics and sociology in Punjab Agricultural University in Ludhiana is part of the book — Covid-19 Pandemic and Economic Development Emerging Public Policy Lessons for Punjab. The booked edited by them was released on Saturday.
The study has recommended various policy and stakeholder actions on major burning policy issues, like groundwater depletion, free power for irrigation, stubble burning, cropping pattern, land leasing issues, agricultural market reforms, agro-industrialisation strategy, innovations in various sectors and the pro-poor programmes like MGNREGS and small producer livelihood focused policy mechanisms.
RESOURCE MOBILISATION A MAJOR CHALLENGE
Punjab’s public resource mobilisation remains a major challenge as its own tax revenue share in total revenue receipts has been only 51% compared with 63% in Haryana and 62% in Tamil Nadu during the period between 2015 and 2021. Further, the state goods and services tax (GST) is only 42% of own tax revenue, compared with 70% in Jammu and Kashmir, 55% in Bihar and 46% in West Bengal, says the study. Punjab’s land revenue share in its tax revenue is nil compared with 5% in Haryana. Whereas Punjab’s committed expenditure as percentage on its revenue receipt (80%) is the highest in the country. The state spends the highest percentage (10%) on administration and police which is only 6% in Haryana and 4% in Rajasthan and Gujarat. Authors have also observed that state’s debt servicing as percentage of revenue receipts (84%) is again the highest in the country, which is only 40% for neighbouring Haryana and 24% in case of Rajasthan. In fact, Punjab’s expenditure on human development is only 19% of total compared with 27% in Bihar and 28% in Rajasthan. This leads to Punjab under-spending on a per capita basis and the gap is as high as 45%, which is only lower than Goa, highlights the study. Compared to it, Haryana over spent by 2% and Orissa by 4% on a per capita basis. Even the rural development expenditure is only 1.1%, compared with 4.2% in Haryana and 7.7% in Rajasthan. Its health expenditure as share of the budget at 4.2% is one of lowest in the country.
‘Need to enhance public expenditure ’
Observing that the Punjab economy has been undergoing a multidimensional crisis and the Covid-19 pandemic shock has devastated it further, the study points out that Punjab needs to create a demand by enhancing public expenditure. The agro-industrial sector needs concessions to deal with lost markets and revenues which would include exemption from cess like rural development fund cess and agricultural produce market committee (APMC) market fee, like in case of basmati exporters, say the study. It also recommends that the micro, small and medium enterprises (MSME) sector can be given collateral free loans and their employee provident fund (EPF) contribution can be reduced to 10%. Similarly, in the case of perishable produce, the state needs strengthening and building of new infrastructure, like pack houses, cold storages, cold chains, and new wet produce markets. More importantly, given the gendered nature of many sectors and markets, there is a need to design and implement gender centric intervention in the agricultural and rural domain, including agricultural markets, says the study.
The authors have suggested that there is an urgent need for adopting a multi-pronged strategy for efficaciously improving the quality of education at government schools.
Suggestion to cut power tariff
The authors have suggested an urgent need to reduce power tariffs, which would lead to lower total burden of subsidies and the saved resources can be invested in capital formation. “The high procurement rates of electricity fraudulently increase financial burden and show a high amount of subsidies given to agriculture, rural households and to industrial units,” says the study. It adds that on comparison of power tariffs of Punjab with other states, they come out to be substantially higher and burden the common citizens and also productive economic activities.