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'Fiscal mess Sena-BJP legacy'
October 16, 2004
Maharashtra Chief Minister Sushilkumar Shinde, who has won the assembly election from Solapur South was in his constituency on the last day of campaigning for the assembly election.
Taking time out from his busy schedule he outlined the state's financial situation to Renni Abraham and held the Shiv Sena-BJP responsible for the debt burden in his state.
Manohar Joshi, former Maharashtra chief minister of the Shiv Sena and Lok Sabha Speaker, says the Democratic Front government is responsible for the financial mess in Maharashtra. He says that his government raised only Rs 26,000 crore loans over the existing Rs 16,000 crore debt the previous Congress government left behind. Do you agree?
Not at all. When the Shiv Sena-Bharatiya Janata Party government came to power in Maharashtra, the liability book of the state read Rs 17,485 crore. By the time they relinquished power, they had raised an additional debt of Rs 43,000 crore (to this figure).
The Battle for Maharashtra
Their regime started a new practice never witnessed before in any state. The various state corporations (eg: Krishna Valley Irrigation Corporation), for the first time started raising loans for projects directly from the market at as high as 17 to 18 per cent rate. More importantly, these loans were short-term (five to seven year tenure) loans.
This meant that while an irrigation project would take a minimum of 15 to 20 years for completion, only after which it could begin paying back (generating revenues through water charges etc).
When we took over the reigns of government, we had to immediately start making huge principal and interest payments on the matured loans at high rates of interest.
Joshi has charged that today the liability book of Maharashtra stands at Rs 1 lakh crore, the bulk of which was raised by the DF government. Do you agree?
No. The fact is that today the state's liability books stands below Rs 1 lakh crore. Moreover, as I told you earlier, their government (Shiv Sena-BJP) raised Rs 43,000 crore during their tenure.
So in effect, during the Democratic Front government we have only raised money to the tune of Rs 50,000 crore. Much of the funds raised by my government went for repaying the maturing (high cost) debt raised by their government.
Let me tell you this. During their tenure they had repaid a total amount of Rs 20,000 crore of existing debt.
In the last five years, we have made principal and interest payments to the tune of Rs 65,000 crore. They only perfected the art of raising funds at any cost.
During our tenure, we got permission from the Union government (despite the National Democratic Alliance being at the Centre) and raised Rs 3,000 crore from the open market at six per cent interest.
In the last fiscal, we repaid Rs 3,000 crore of high-cost debt through open market borrowings raised at a six per cent rate of interest. In this fiscal too, we are awaiting sanction from the Union government (due any time now) for raising another tranche of Rs 3,000 crore through open market borrowings to repay the high-cost debt they raised.
The Shiv Sena-BJP claims that they have the capacity and ability to raise money. Let me inform you that the average revenue generation capability during the SS-BJP government was Rs 20,000 crore per annum.
Under the DF government, the average revenue generation per annum has touched Rs 34,000 crore.
Joshi says that your government did not pay salaries to government employees allowing you to show a revenue surplus. Do you agree?
No. During their tenure most of the expenditure was of the unproductive kind. In comparison to revenue receipts at that time, their expenditure on salaries was 65 to 70 per cent.
During the last five years, we have managed to bring this down to 49 per cent. This has been an accomplishment.
Please also understand the fact that they took loans (high cost) that were of short tenures. We took charge when none of these projects were anywhere near completion.
In addition to this, Maharashtra has faced acute drought for the last four years. Despite such adverse situations -- one created by them (loans) and one natural (drought), we have managed to bring about fiscal prudence. Is this not a credible achievement?
And let me also point out that when they are saying that we did not pay salaries, it is also true that during their tenure policemen were being denied wages also.
What about the indiscriminate guarantees to cooperatives, promises of free power to 27 lakh farmers? Your government failed to enact the Maharashtra infrastructure development and support act, the fiscal responsibility act. Did these not contribute to the financial slide of the state?
Let me first answer your question related to free power for 27 lakh farmers. The fact is that the state had already made a budgetary provision of Rs 700 crore for supplying subsidised power to agriculturists.
The estimated expenditure for this was pegged at Rs 250 crore. Now, after promising free power, an additional cost of Rs 450 crore more is anticipated. We can certainly provide for this sum.
On the issue of our inability to enact the fiscal responsibility bill and the infrastructure act. You must understand that for the last four years, there has been a severe drought in Maharashtra. Despite our repeated requests for funds from the Union government (NDA), we received only Rs 40 crore as relief. There was almost no help from the Centre. The state government had to bear the burden of drought, mostly from its own resources.
On two occasions our case for special structural adjustment loan was not forwarded to the World Bank by the Union government. Andhra Pradesh received two tranches of these loans. Why was Maharashtra denied finance in such telling times?
What are the fiscal steps you plan to initiate if voted back to power in the state?
Now there has been decent rains. Further, we are glad that the United Progressive Alliance, a Congress-led government is at the Centre. We have just submitted a debt restructuring proposal before the state government which should hopefully be cleared soon.
I have already told you how we can meet the free power announcement. We are confident of meeting our liabilities. Since I took over as chief minister, Maharashtra has not had to resort to a single overdraft from the Reserve Bank of India so far. All these show a positive trend towards fiscal correction.