Kolkata: Strapped for cash, the outgoing West Bengal government diverted money from Central government schemes to pay salaries and pensions in the last few months of fiscal 2011, just ahead of the elections that saw the Left Front lose after 34 years in power.
At least Rs3,500 crore of Central government funds provided under various schemes such as the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and the National Rural Health Mission (NRHM) were used for this, according to three persons with knowledge of the matter. All of them spoke on condition of anonymity.
The state government pays about Rs3,000 crore in pensions and salaries to over one million people every month.
Asim Dasgupta, finance minister in the previous government, said he hadn’t heard of any such “complaint”. “But yes, it isn’t unusual to withdraw funds from projects temporarily, but we replenish them very soon,” he added.
The state gets around Rs4,400 crore a month as revenue, whereas it spends around Rs4,000 crore on salaries and interest on loans. “We normally have a surplus every month even after paying salaries and interest,” Dasgupta added.
He said, however, that the state government had, in the first one-and-a-half months of the current fiscal, borrowed Rs5,790 crore, which is about one-fourth of the entire amount that the Central government has allowed it to borrow till March next year.
The Trinamool Congress (TMC), led by Mamata Banerjee, and its allies defeated the Left Front in the elections that were held in April and May. Banerjee is due to be sworn in as the chief minister on Friday.
The fund diversion was revealed during a recent review of accounts by state government officials. This would have required Dasgupta’s assent, according to an official of the rank of additional chief secretary and one of those cited above.
“Unless he did so, it would have been impossible for the state to pay pensions and salaries in the last few months of fiscal 2011,” he said.
A finance department official, also one of those cited above, seconded this. “Funds received from Delhi under JNNURM, NRHM, midday meal scheme and for the East-West Metro project had been used to pay salaries and pensions,” he said.
C.M. Bachhawat, principal secretary in the state’s finance department, declined to comment.
Despite the government’s cash crunch, Dasgupta made sure that government salaries and pensions were paid on time in the run up to the elections, though some embattled state-owned firms delayed payments to their employees.
Dasgupta lost in the assembly polls to TMC’s Amit Mitra, former secretary general of the Federation of Indian Chambers of Commerce and Industry, who is widely expected to succeed him as the finance minister.
Almost every year, the state government has been diverting a substantial part of funds earmarked for planned expenditure, or development projects, to pay salaries and interest on outstanding debt, which is approaching Rs2 trillion. But funds from the Union government-sponsored schemes are normally not used to pay pensions and salaries.
“It happened once in 1992-93, when Dasgupta had to use some Rs1,000-1,500 crore of money provided under Central government-sponsored development schemes to pay salaries,” recalled a former officer of the state treasury, who did not want to be named. “But we could replenish within months the schemes from which money was withdrawn.”
One of the most indebted states in the country, West Bengal’s key problem is its poor tax-state domestic product (SDP) ratio, according to Abhirup Sarkar, professor of economics at Kolkata’s Indian Statistical Institute. At less than 5%, West Bengal’s tax-SDP ratio is among the worst in the country, he said.
The state’s tax collection has not been able to keep pace with the growth in the economy, largely because the tax collection mechanism is flawed, he says. “Under Left rule, people could get away without paying taxes. There is no other reason for West Bengal’s tax-SDP to be at less than 5%.”
Dasgupta said in his defence that in fiscal 2011, the state’s revenue increased by 24.9% as against a target of 18.5%.
Diversion of funds from plan heads also took place in fiscal 2011. Some key departments such as public works received only 50% of the amount allocated at the beginning of the year, according to Kshiti Goswami, erstwhile minister for public works. As a result, Goswami, who also lost in the assembly election, is leaving behind dues to vendors of around Rs400 crore.
In light of the government’s circumstances, Banerjee famously said in a recent television interview that she wished to donate to the state Rs1 crore from the sale of her paintings at a recent exhibition.