Finance minister of Punjab Manpreet Singh Badal, who presented his fourth Budget on Tuesday with an annual Plan of Rs 9,050 crore, claims the worst is over for Punjab, which has long been considered a debt-stressed state. He also feels the economy is stabilising, as fiscal indicators are looking up. Speaking to FE?s Swarleen Kaur, Badal shared his concerns over rising debt and revenue deficit, which are denting finances of the state.

How can you say the state is on a recovery path, when debt is touching Rs 64, 924 crore?

Debt is certainly an area of concern, but Punjab is moving closer to the national growth rate of 7.2%. In 2008-09, growth rate of Punjab was 6.4% against the national rate of 6.7%. The advance estimates for 2009-10 peg the figure at 6.7 % for Punjab against 7.2% for the national economy.

I believe that the state?s economy is on a path of resurgence, as fiscal health has shown a major upswing during the past three years. Tax revenue has grown from 0.31% in 2006-07 to 24.27% in 2009-10.

We project Punjab?s tax revenue to grow by 7.54% to gross state domestic product (GSDP) for the next fiscal, against 7.2% for the same in 2009-10. The only drawback is that our revenue stamp duty and registration have decreased. Advance estimates for 2009-10 indicate that nationally, the primary sector (agriculture, animal husbandry) is likely to grow by 1%, while for Punjab , the same is likely to grow by 3.74 %.

How do you intend to reduce revenue deficit, which is pegged at Rs 3787.73 crore ?

Our two-member committee on additional resource mobilisation had recommended measures like partially withdrawing subsidy, imposing an additional surcharge of 10% on value added tax (VAT), rationalising external development charges (EDC) and change of land use (CLU) charges. With implementation of these measures, we expect to raise an additional Rs 2,700 crore. This will bring down our revenue deficit. We hope to see the impact of these measures in next year?s Budget.

Considering the poor fiscal health in the last few years, what went wrong? Did resource mobilisation through partial withdrawal of farm subsidies fulfilled your expectations?

I wish we had implemented the measures suggested by the resource moblisation committee during the very first year of SAD-BJP government taking over, especially when we know that state has such huge debt. A small part of subsidy has now been withdrawn, but this is not enough. We should have taken bold efforts to pull the state out of the debt trap, rather than being so cautious. Subsidies should not remain forever. What worries me on this front is the increase of 15% in the subsidy bills of the state. Around 50% of total plan expenditure will go into paying the subsidy bills. It has been estimated that subsidy amounting to Rs 3,120 crore will go into the power sector, and approximately Rs 400 crore will go towards state?s atta-dal scheme.

With the implementation of fifth pay commission?s recommendations, the revenue deficit has gone up. How do you plan to pay arrears amounting to Rs 3,000 crore in such a scenario?

I agree that an increase in revenue deficit over the previous year is mainly on account of the implementation of recommendations of the fifth Punjab Pay Commission. We had requested the 13th Finance Commission to pay for at least 50 % of the expenditure that we will incur for the implementation of the Pay Commission recommendations, and take cognisance of the expected revenue deficits on pay revision.

You have been criticising the 13th Finance Commission, but at the same time, the Commission has recommended significant grants amounting to Rs 25,686.6 crore for Punjab , from 2010-15. What is your take on this?

I agree that a significant amount has been recommended for the state. But at the same time, interest payments on debt have disturbed the fiscal health of state. We had requested the Commission to either write off or reschedule our debt to come out of the debt trap. But our demand has not been accepted, and we have to grapple with the situation.