Lok Sabha Question No. 2892 (UNSTARRED), answered on 2023-08-07
Subject: Worsening Fiscal Condition of States
Ministry: FINANCE
Asked by: Vinod Chavda, Harsimrat Kaur Badal

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF EXPENDITURE

## LOK SABHA UNSTARRED QUESTION NO. †2892 TO BE ANSWERED ON MONDAY, 7 th  AUGUST, 2023 16 SRAVANA, 1945 (SAKA)

## Worsening Fiscal Condition of States

## †2892. SHRI VINOD L. CHAVDA: SHRIMATI HARSIMRAT KAUR BADAL:

Will the Minister of FINANCE be pleased to state:

- (a) the total outstanding debt of the Government of Punjab;
- (b) whether going by the current trend the public debt of Punjab is likely to cross Rs. 5 lakh crores in ten years and if so, the details thereof;
- (c) whether  the  Government  has  taken  note  of  worsening  fiscal  conditions  of  States  due  to increasing  burden  of  debt  and  excessive  and  injudicious  distribution  of  freebies  by  some States;
- (d) if  so,  whether the Government is bringing fiscal prudence in the finances of the States for safeguarding interests of the people as well as the national interests, if so, the details thereof and if not, the reasons therefor;
- (e) whether the Government allows the debt-ridden States to splurge public funds by offering freebies thus making the people of the State heavily indebted and if so, the details thereof and the Government's policy in this regard; and
- (f) whether the borrowings can be made to spend on unnecessary unscheduled expenditure and if so, the details thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI PANKAJ CHAUDHARY)

(a) As per the Reserve Bank of India's report titled 'State finances: A study of budgets of 2022-23', the details of total outstanding liabilities of State Government of Punjab at the end of March 2021, March 2022 (RE) and March 2023 (BE) are as follows:

(Rs. In crore)

| Year (As at end- March)   | Total Outstanding Liabilities of the State of Punjab   |
|---------------------------|--------------------------------------------------------|
| 2021 (Actual)             | 2,59,266                                               |
| 2022 (RE)                 | 2,82,456                                               |
| 2023 (BE)                 | 3,05,047                                               |

(b) to (f) State Government  of  Punjab  has  enacted  the  Fiscal Responsibility  and  Budget Management  (FRBM)  Act  which  makes  the  State  Government  responsible  to  ensure  intergenerational equity in fiscal management and long term financial stability by achieving sufficient revenue  surplus,  containing  fiscal  deficit,  prudential  debt  management  consistent  with  fiscal sustainability and greater transparency in fiscal operations of the government. Compliance to the Fiscal Responsibility and Budget Management (FRBM) Act is monitored by the State Legislature of the State of Punjab.

Department  of  Expenditure,  Ministry  of  Finance  generally  follows  the  fiscal  limits mandated  by  the  accepted  recommendations  of  the  Finance  Commission  while  exercising  the powers  to  approve  borrowings  by  States  under  Article  293  (3)  of  the  Constitution  of  India. Adjustments  for  the  over-borrowing  by  States  during  previous  years,  if  any,  are  made  in  the borrowing limits of subsequent years.

Instances  of  borrowings  by  certain  State  Public  Sector  companies,  Special  Purpose vehicles  (SPVs)  and  other  equivalent  instruments,  where  principal  and/or  interest  are  to  be serviced out of the State Budgets, had come to the notice of the Ministry of Finance. Considering the effect of bypassing the Net Borrowing Ceiling (NBC) of the States by such borrowings, it was decided and communicated to the States in March 2022 that borrowings by State Public Sector companies/corporations, Special purpose vehicles (SPVs) and other equivalent instruments, where principal  and/or  interest  are  to  be  serviced  out  of  the  State  Budgets  and/or  by  assignment  of taxes/cess or any other State's revenue, shall be considered as Borrowings made by the State itself for the purpose of issuing the consent under Article 293(3) of the Constitution of India.

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