Mumbai: Maharashtra finance minister Sudhir Mungantiwar will present his fourth successive budget of the state on 9 March amid a tightening fiscal space and populist pressures due to the agrarian crisis in the state.
Besides accounting for the stress on state finances due to the farm loan waiver announced this fiscal, the budget will also have to factor in an increased wage bill for 1.7 million state government employees and 6.5 lakh pensioners as per the recommendations of the seventh pay panel. With the state’s fiscal space to raise tax revenues virtually ending after the introduction of the goods and services tax (GST), Mungantiwar is likely to tap non-tax and unconventional means to increase income.
This would be the fourth full budget of the Bharatiya Janata Party-Shiv Sena government in Maharashtra. With little more than a year to the general elections, and close to one and half years to the state assembly elections as per schedule, the BJP in Maharashtra is banking on this budget to “help its political messaging", according to a senior BJP minister and leader in the state who did not wish to be named.
“We want the state budget to follow the broader message of the union budget and address the issues of agrarian crisis and jobs. Fiscal discipline is fine, but elections are a greater challenge," said the BJP leader.
Mungantiwar said there was little fiscal space available to the state to raise its tax revenue after the introduction of GST.
“We will have to look at unconventional means to increase income," Mungantiwar told Mint. The finance minister also admitted to the “stress" on state finances on account of the farm loan waiver and the wage bill of state government employees due to the imminent implementation of the seventh pay commission’s recommendations.
In June last year, chief minister Devendra Fadnavis announced a farm loan waiver that was estimated to cost Rs34,022 crore and provide relief to 8.9 million farmers.
However, the number of beneficiaries has come down to 5.6 million after an online application system coupled with biometric identification bared around 3 million bogus and ineligible accounts. Mungantiwar admitted that the total financial burden on account of the farm loan waiver would come down from the initially estimated amount but said it would still be “in excess of Rs25,000 crore.
“The number of farmers we initially thought would benefit from the loan waiver may have come down but there has been an increase in the number of those farmers who will benefit from other provisions of the loan waiver, like the one-time settlement scheme," he said.
Maharashtra governor C. Vidyasagar Rao, in his opening address to a joint session of the two houses of the Maharashtra legislature on 26 February, said the government had so far transferred Rs12,381 crore into the bank accounts of 3.1 million farmers on account of the loan waiver. Ever since June 2017, when the loan waiver was announced, Mungatiwar has raised supplementary demands for more than Rs63,000 crore, of which Rs35,000 crore has been allocated to the loan waiver alone. “This is the highest ever amount that has been raised through supplementary demands in Maharashtra and it just conveys the stress the state finances are bearing due to the agrarian crisis," said an official in the state’s finance department requesting anonymity.
Likewise, Mungantiwar’s other big concern is the implementation of the seventh pay panel’s wage award. Both Fadnavis and Mungantiwar have committed to implementing the pay panel’s award in the next fiscal, with effect from January 2016.
Maharashtra has around 1.9 million state government posts, but nearly 2 lakh of these positions are vacant and won’t be factored in when the pay scales are revised upwards. The state also has to account for revised pensions to 6.5 lakh retired employees.
Mungantiwar said the seventh pay panel’s recommendations would increase the state’s overall wage bill by Rs21,530 crore per annum.
In addition, the state will also have to make budgetary provisions for the arrears of around Rs50,000 crore since the pay panel’s award is to be implemented from 1 January 2016. Maharashtra’s 2017-18 budget showed a revenue deficit of Rs4,511 crore. The state’s overall borrowing has crossed Rs4 trillion, though Fadnavis and Mungantiwar insist it is well within the limits prescribed by the Reserve Bank of India and that the funds raised are being deployed into creation of long term capital assets for the state.