West Bengal seeks faster release of Central funds | The Financial Express

West Bengal seeks faster release of Central funds

The state government contends that states’ GSDP growth, which was higher than national average in recent years, would help it to tide over the fiscal crisis, with prompt support from the Centre.

West Bengal seeks faster release of Central funds
However, state government employees' unions, especially those belonging to the Opposition camp, have hit the streets protesting against the grant, given the hike in their dearness allowance has been held back since 2019 citing financial crunch.

West Bengal chief minister, Mamata Banerjee’s decision to provide the state’s over 40,000 registered Durga Puja committees a grant of Rs 60,000 each has brought the issue of state’s weak fiscal health into sharp focus.

Banerjee’s announcement, if implemented, would translate into an outgo of just Rs 258 crore to celebrate ‘Durga Puja in Kolkata’ being inscribed by Unesco as the Intangible Cultural Heritage of Humanity, which according to the chief minister, would also help in promoting tourism and bring about social upliftment.

However, state government employees’ unions, especially those belonging to the Opposition camp, have hit the streets protesting against the grant, given the hike in their dearness allowance has been held back since 2019 citing financial crunch.

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According to the Economic Review 2021-22, published by the state government’s department of planning and statistics, West Bengal’s debt stood at 37.5% of the gross state domestic product in 2020-21, much higher than the 20% limit set for states’ debt by the NK Singh-led FRBM review committee in its 2017 report. Clearly, West Bengal is among the most indebted states in the country.

The state has to repay debt of Rs 60,401 crore in FY 23. The state’s fiscal deficit has been pegged at 3.64% of the GSDP in FY23 and revenue deficit at 1.65%. Though Covid-19 has resulted in a deterioration of the financial health of both the Centre and states due to the additional healthcare and welfare expenditures and a dip in revenue, West Bengal’s fiscal situation is a cause for concern. The cessation of the GST compensation from July has amplified the concerns over revenue flows, although robust GST collections over the recent months have come as a relief.

Also, the Centre has fast-tracked tax devolution to states and started releasing the capex loan announced in the Budget.

According to the state government’s estimate, central dues of over Rs 1 trillion to the states are yet to be released. In a recent letter to Prime Minister Narendra Modi, Banerjee wrote that the central government’s outstanding dues to the state, as on July 31, 2022, were Rs 1,00,968.44 crore. This amount included GST dues, revenue deficit grants.

The state government contends that states’ GSDP growth, which was higher than national average in recent years, would help it to tide over the fiscal crisis, with prompt support from the Centre.

The state has projected GSDP of Rs 17.13 trillion for FY 23 with a growth of 11.54 % CAGR between FY 16 and FY 23.

Given that revenue deficit is all likely to widen in the short term, the state has already asked the Centre to release the entire revenue deficit grant of Rs 5,031 crore in three instalments, as provided by the 15th finance commission. The Centre has so far released only Rs 417 crore as revenue deficit grant to West Bengal, a state financial department official said.

While three public interest litigation cases have been moved at the Calcutta High Court, challenging the Durga Puja grant, the court has finally found that no official notification has been issued in this regard despite the chief minister’s announcement. Last year with a grant of Rs 50,000 for each and every Puja committee, the total outgo from the state exchequer stood at Rs 203 crore.

“Grants for festivities comes under non planned head and such grants are illegal when the budget has already estimated both fiscal and revenue deficit,” Ashok Ghosh, a financial analyst and a former state finance department official, said.

However, as the main contentious issue has been holding back the 31% hike in DA while the state has been granting financial aids to the Puja committees, a state finance department official said the two issues can’t be compared. The impact of 18% hike in DA for the state government employees in 2018 was Rs 5,000 crore, the official noted.

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First published on: 03-09-2022 at 02:00 IST