Struggles to mop up funds for poll promises, development projects
Maha Vikas Aghadi government comprising Shiv Sena, NCP and Congress faces major challenge to immediately mobilise Rs 20,000 crore towards compensation to farmers affected by unseasonal rains and Rs 35,000 crore needed to give a complete loan waiver to tillers in the state. This apart, the government, which is struggling to distribute portfolios among three alliance partners, will also have to mop up funds to fulfill a slew of poll promises including food at Rs 10, medical check up at Re 1 and unemployment allowance of Rs 5,000. This is because of the tight financial condition.
State has a total debt of a record Rs 6.71 lakh crore comprising Rs 4.71 lakh crore worth loan raised by the government and Rs 2 lakh crore by various government undertakings which is backed by the government. This comes to 24 per cent of the gross state domestic product (GSDP) leaving limited fiscal space to finance loan waiver or compensation to farmers or implement poll promises and more importantly ongoing development projects and those in the pipeline.
Amidst present economic slowdown the government expects dip in its own tax revenue which is estimated at Rs 2,10,824 crore for the year 2019-20. The fall in state GST collection and sales tax/VAT on petroleum products will further lead to paucity of funds.
Chief Minister Uddhav Thackeray has held meeting with the departments of finance and planning and he has directed them to prioritize spending especially expenditure on highly capital intensive projects including Bullet train may take a back seat. Besides, Thackeray has also asked these departments to explore raising of debt from multilateral institutions such as World Bank.
Maha Vikas Aghadi also faces another challenge on curbing the ever rising revenue expenditure and declining capital expenditure. Between 2010-11 and 2019-20, the revenue expenditure has surged to 89% from 85% while the capital expenditure has fallen to 11% from 15%. Nearly 50% of the revenue receipts are spent on salary and wages (Rs 1,15,241 crore), pension (Rs 36,3268 crore), interest payment (Rs 35,207crore). The government may have to bear additional burden because of the implementation of the 7th Pay Commission report which is currently estimated at Rs 24,000 crore annually.