BackNeed to raise state-wise fiscal deficit limit, says Maharashtra's Jayant Patil
Unless migrant workers from other states return to Mumbai, the city won’t be able to regain its original commercial stature, said PatilThe state government plans to resume farming and commercial activities in zones that have nil or very few covid-19 cases
PremiumClosure of businesses and restrictions on movement of people and goods due to the covid-19 pandemic has crippled the country’s commercial activities. While the country’s covid-19 cases are just below 16,000, rapid-tests by local authorities present a grim picture for Maharashtra, with the number of cases crossing 3,300. Mumbai seems to have suffered the worst blow among all Indian cities with over 2,120 covid-19 cases. In an interview, Maharashtra’s cabinet minister for irrigation and water resources, Jayant Patil told Mint that despite covid-19’s attack, the state government is planning to resume farming and commercial activities in zones that have nil or very few covid-19 cases to curb more revenue losses, prevent joblessness and help the population in low-risk zones survive. Patil, as a member of a newly formed committee to revive Maharashtra’s economy and as the state's former finance minister, has urged the Reserve Bank of India (RBI) to defer repayment of state loans and suggested the central government to raise state-wise fiscal deficit limits and extend interest-free advances to states from the Rs. 10-12 trillion surplus capital reserves held by nationalised banks. Even with all this, Patil, however, feels that unless the migrated workers from other states return to Mumbai, the city won’t be able to regain its original commercial stature.
As a member of the committee to revive Maharashtra's economy, how are you planning to resume activities in the state's green and orange zones without compromising on safety?
The areas in which covid-19 positive cases have been found have been sealed now and lockdown is being observed. Subsequently, in the areas where covid-19 patients are not found, and where sufficient time has passed, we can start farming and manufacturing activities in full swing, provided we are able to seal and contain the state borders and the red zones. Looking at the past experience, we have realized that lockdown in urban areas is not followed and people come out for different needs. There is a tendency in people to go out and buy vegetables and groceries. In some areas, multiple individuals living in a single rooms due to lack of space find it difficult to remain together for longer periods of time. Therefore, the government will have to think how to control the pandemic under such circumstances. For instance, Mumbai borders have to be sealed. Additionally, in Pune, areas of Pimpri-Cinchwad where covid-19 patients have been on the rise in the last two weeks, if we can curb people’s movements outside these towns, then there is a possibility to resume farming and industries again in the green zones. Altogether, we must seal the areas where there are higher number of Covid-19 patients, which are majorly urban cities in the state.
As a committee we have decided that all construction activities should begin immediately, the industrial areas that do not have covid-19 patients should also start their commercial activities. The Prime Minister has said that on 20 April, the government will take a decision, but in Maharashtra we have already conceptualized a plan and discussed how to implement it. One meeting has already taken place and there might be one more meeting of the committee. We have taken decisions after taking a feedback of major industrialists and stakeholders. A Suggestion of the committee is to start all commercial activities in areas that are covid-19 free, resume retail businesses, start schools because exams need to take place. Ultimately everything will depend on the trend of the number of covid-19 cases in every region.
How many areas/districts may see resumption of farming activities and re-opening of small industries? Which are these areas and what kind of business activities may be allowed from 21 April in these areas?
I think almost all the districts will see some resumption of activities. Farming activities in Maharashtra were allowed in all districts, diesel is being made available to them for their tractors, harvesting machines and other farming equipment. We never stopped any farming activities. But yes, making groups of labourers and taking them to the farm was prohibited some time back, because of which 35-40% of farming activity did not take place. Now, we will allow farming activities and other commercial activities in the areas where there are no covid-19 cases. We can’t shut everything forever. We need to start the commercial activities otherwise maybe after two months we won’t even be able to pay salaries to the government employees.
Fortunately, covid-19 cases are reducing.
How much will the state's economy gain, in terms of revenue and employment condition, on resumption of commercial activities in green and orange zones?
Mumbai metropolitan region brings in more than 50% of the state’s revenue. And all the rural areas in Vidarbha, Marathwada, and western Maharashtra contribute about 40-45% to the revenue. So it is not going to be a major boost for the state’s revenue even after resuming farming and industrial activities in green zones, but, locally it will allow the population to survive. Right now, many people are sitting idle without any jobs. They are in a real bad shape. Especially, in the case of daily wage workers, we need to ensure all activities resume to ensure their livelihood.
So far, due to the lockdown, to what extent the state’s economy has been impacted?
I personally feel the revenue loss will continue for some time. The lockdown started from around 20th March and it will continue till 3rd May. If the lockdown is extended further by 10 days the revenue loss may continue. Manufacturing has stopped, Mumbai’s commercial activities have almost halted. Everything has come to a stand-still. It will take some time to recover from this state, unless we work over-time and produce more to compensate for the 45-day loss.
When the Government of India first announced the lock-down, they should have given some assurance to daily wage laborers. It was not done and that’s why, irrespective of the true nature of the lockdown, people left cities and headed for their homes in villages. This migration happened only because the lockdown announcement was not done along with a financial assurance for migrant laborers. The government should have announced that it will support the daily ration for the laborers and there is no need for them to go back to their villages in search of food or work. Had this assurance been given we would not have seen this kind of migration. This was one of the largest migrations in recent times, we saw thousands of people walking out of Mumbai on foot and went to Karnataka, Chhattisgarh, Gujarat and Madhya Pradesh. This is because they did not see or get any assurance in the first lockdown statement. This has really created a big problem.
What has been the loss for Mumbai and the state in absolute terms?
We should quantify this in a different way. Mumbai has almost 1.74 crore population and if you include the adjoining urban areas -- such as, Thane, Bhayander, Virar and so on -- the population is almost 3 crore. A large part of this population is sitting idle. This is the financial centre of the country and it has become idle. No tax waiver is given to businesses so far but tax collection is also not happening due to the lockdown. We haven’t made any rough estimate of the potential revenue losses due to covid-19. We are busy fighting covid-19, as that is our utmost priority.
You have been the state's finance minister. Where can Maharashtra get resources for fighting covid-19? How much capital is possibly required to tide over the crisis, and what kind of funds sources will be tapped? Will there be any changes in state taxes or municipal taxes?
There is one ray of hope which is going to help all Indian states, that the mortality rate so far has been low. There is one different phenomenon here, that is, people mostly come to the hospital when they are in the last stage and we are not able to save them. Few such cases have happened in Mumbai and Pune. Otherwise the mortality rate can be brought down further. Maharashtra is concentrating on reducing the mortality rate which was at 7% four days ago. The number of new-found cases is also decreasing if you see carefully. It is likely to go down in the coming days. Maharashtra health department is an extremely efficient department. We have civil hospitals, primary healthcare centres and district hospitals. In many districts there are at least two such hospitals. The governing machinery and the administration are fairly good in Maharashtra. So, I don’t feel that we need more money to build hospitals. Maybe we will need ventilators and some other necessary equipment. So, some budget will have to be diverted this year for our fight against covid-19. I won’t be able to quantify the budget amount though. I don’t know specifically, but I presume at this point it will be Rs. 500 crore or Rs.1000 crore. Actually, what we are hoping that number of cases will reduce now. If it reduces whatever resources, equipment and machinery we have, should be sufficient. We have decided to divert the budgetary fund and make money easily available for covid-19 related issues. All other expenses have been stopped. In fact, the revenue generation of the state has also stopped. Nothing is coming to the government’s kitty from the economy. Neither the GST income is being generated, nor the excise duty. So, we are not receiving anything at the moment and the government has given priority to fighting out covid-19. So, we have mentioned that whatever funds are required we are willing to spend. The health ministry or the revenue ministry have never complained to us about any shortage or difficulty so far.
What steps will be taken by local authorities at tehsil and panchayat levels for the safety of the people engaged in production and supply jobs in the farming and small industries space when activities are resumed from 21 April?
They will have to be proactive if any symptoms of covid-19 is found in anyone. They have to be vigilant all the time. All the systems have to be on high-alert. There is every possibility of both occurrence and recurrence of cases. So, no one should take a situation for granted and get complacent. The government has all the required machineries in place so far.
On 10 April, your constituency Islampur in Sangli district announced that 22 out of 26 patients had tested negative and have been fully cured of covid-19. This is attributed to the quick measures initiated by you. Isn’t it tough to implement such measures across the state if farming and other commercial activities for essential items are resumed? Can you explain the implementation plan?
A: In Islampur we acted quickly to seal the area, taking help of ASHA workers and people from the health department, we conducted a door-to-door survey to find out who has travelled recently. The tracking system was very efficient. So, we gathered those people quickly and put them in quarantine. Today also, in Sangli district, ASHA workers are going to every house to find out if there are any symptomatic tests required.
Other districts in Maharashtra also working in a similar method. The difficulty is in places like Dharavi where the areas are densely populated. There are common toilets, few number of shops and several people. That’s why we were not able to ensure social-distancing and that’s the reason the number of cases in places like Dharavi and Worli-Koliwada have increased. There is no other reason.
Q. Mumbai is the commercial capital of India. What steps, according to you, would be fit to bring Mumbai back to its feet, revive its economy, reinstate the lost revenues and prevent joblessness?
A: We want to re-open Mumbai but we are not able to do it because we are finding patients in places where commercial activities take place. There are cases even outside, such as Thane, Dombivali, and other adjacent areas. So, there is a big fear in people. Even if one starts a factory or a business activity, workers may not come because everyone is scared. We have seen recently that a lot of people want to leave Mumbai. So, they fear that if they remain in this city, they will contract covid-19 virus. Unless we mitigate the fear, and we reduce the number of cases to 10-15 in the entire city, we won’t be able to start. Even if we start, we won’t be able to gear up and bring Mumbai back to its original standard. So, the idea is that economic activities will be started in a gradual manner. Whenever we see the situation improving, we will start lifting restrictions over certain areas and allow some small businesses to resume so that we can assess how the situation shapes up from thereon. Mumbai city has no manufacturing activity. It is all dominated by the service industry and many multinational companies. They may start work from home and allow only a certain number of important officers may be asked to go to their offices. Also, it will take at least a month for the migrant labourers to come back from their villages.
Mumbai depends heavily on these migrant labourers and unless they return, this city will not come back to normalcy. I think it should take a minimum of three months and a maximum of five months to see commercial activities starting in full-swing. It will all depend on how many of the migrant laborers come back.
Q. What kind of stimulus from the central government do you think would be appropriate for the state, especially keeping in mind that Maharashtra has seen the highest number of cases and deaths? What steps could be taken for supporting the daily wage laborers in Maharashtra and provide relief packages to the state’s farmers and workers in small scale industries in Maharashtra?
A: First of all, a lot of wheat is available in Punjab, which has been bought by FCI. More than 13 lakh tonnes of wheat has been bought by FCI. That wheat should be distributed among all the needy people in the country. Secondly, the Reserve Bank of India should defer all the payments which are likely to come from the state government. Interest payments on loans taken by Maharashtra should be deferred by the RBI. The government of India should allow states to defer their payments to the centre. These payments arise from loans to states, loans via bonds and different types of schemes under which the states take loans. Some chief ministers have requested the Prime Minister to consider these issues.
The government of India should allow states to defer payments of instalments of debts (made to RBI) for six months. Maharashtra has a huge debt of close to Rs. 5 trillion.
Then, nationalised banks are today flush with liquidity of more than Rs. 10-12 trillion. In the next six months I don’t think many will take a big loan. So all state governments should be extended interest-free advances by these nationalised banks. This can be another good measure.
Then, FRBM limit should be increased from 3% to 4-4.5%. This will help because today there is a limit on all states that the fiscal deficit should not go beyond 3%. If the government is willing to fight the covid-19 crisis, as a special case, the central government should think if there is any loan that can be given to all the states from banks that are flush with money. The states can then take care of these two-three months expenses that may be allocated for fighting the crisis.
Many states may face difficulty of maintaining FRBM limit of 3%. However, it is a notional thing. Today states have no other choice. The situation is unprecedented and the government of India will have to do something out-of the-ordinary to face this issue. Basically, the government should make money available to all the states. In reality, it is not the government of India fighting the covid-19 crisis, it is the state machinery fighting. Health is a state subject. I hope the government of India recognizes this and respects the state’s request.
As far as supporting the labourers is concerned, relief packages are actually being worked out by states. We are giving relief packages to people who are today left with no food, no work. The government of Maharashtra has given money to all the collectors who, in turn, are providing food for jobless people in all the districts. I believe that money has come from the government of India. The government of India has taken loan of $1.2 billion from the World Bank and $2.2 billion from Asian Development Bank. We have received around Rs. 1600 crore from the centre and we are contributing from our state’s treasury also to help the districts here.
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