While the dust has started settling down at the end of polling for the Sangrur Lok Sabha bye-election, the AAP government has another major test on hands.

The results of the Sangrur poll will be declared on June 26.

AAP  will present its maiden Budget on Monday. With a marginalised Opposition, the ruling party may not encounter any major resistance in getting its proposals on putting the State economy back on rails.

Besides a vote of thanks on the Governor’s address, the AAP Government is also expected to take up for discussion various central schemes, including Agnipath, during the Vidhan Sabha session starting on Friday.

Needless to reiterate, the Budget to be presented by Finance Minister Harpal Singh Cheema is expected to be a tax free. How the State proposes to honour its pre-election commitments, including free supply of 600 units of power to consumers with a load of 2 kilowatt or less and payment of Rs 1000 a month to all eligible women of 18 or above, remains to be seen.

Revenue generation is a big challenge. Though the AAP government has been applauding its new excise policy that will generate more revenue than ever before, it still has to come out with a plan to restructure its fiscal health. As of now, the total debt of the State stands at a whopping 2.73 lakh crore. The State faces a big challenge of getting the state back on the fiscal consolidation roadmap as specified under the Fiscal Responsibility and Budget Management Act.

According to reports, the State has already become a highly debt-stressed State by  exceeding its targets of both gross fiscal deficit (4.6 per cent) and interest payment revenue receipts ratio – a measure of debt-servicing measure on state revenues. This has been clearly projected in the “State Finances: Risk Analysis,” report by the apex regulatory bank, Reserve Bank of India.

After assuming power, the AAP government has continued with the earlier policies of raising money from markets, including various financial institutions. In April alone, it added 2500 crore to its debt with new borrowings from the market and various financial institutions.

The returns from taxes have been on the decline. Spendings on various “appeasement” schemes have been growing rapidly. The power concessions and grants to women will cost the State a huge amount that will cross Rs 30,000 crore. How the State is going to generate money to match these proposed disbursements may be agitating the State financial planners.

The State faces a huge challenge in repaying its outstanding loans. The previous governments, both of SAD-BJP and Congress have been borrowing heavily from the market, to stay afloat in meeting its financial contingencies.

As of today, there is a little hope to contain the state’s burgeoning debt burden. Rather, it will only increase further during the current fiscal, as the new government so far has expressed its unwillingness to impose any new taxes. Growing emphasis on populism is further aggravating the situation.

While Chief Minister Bhagwant Mann has been ordering enquiries on where the borrowed money and grants from the central government were spent, nothing much is expected to come out  of such exercises. Of course, action needs to be initiated against those who wreaked havoc with the State finances but the immediate task is to stem the rot and put fiscal health on the right track.

Since no new taxes have been imposed in the state  for the past several years with the exception of a professional tax levied by the previous government, the revenue generation options have been shrinking.  Though the successive governments have been harping on mopping up resources by checking system leakages, nothing much has happened. Mafias continue to rule major areas that could be an ideal source of revenue generation.

Because of global inflation, the populace continues to reel under unprecedented increases in prices of fuel and groceries. Though controlling the price line of daily use items may not be directly under control of the State Government, it could still supply some of these items through its  PUNSUP and Markfed outlets than providing cash incentives or monthly disbursements to one section or the other.

Prabhjot Singh