The Hindu : Shinde needs to take hard decisions

Online edition of India's National Newspaper
Saturday, Feb 01, 2003

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Shinde needs to take hard decisions

By Mahesh Vijapurkar

MUMBAI Jan. 31. Trimming ministers' salary and allowances by 50 per cent, making them lower than those of legislators, as announced by the new Maharashtra Chief Minister, Sushilkumar Shinde, is a mere tokenism, given the enormous financial problem the State faces.

The State has moved into a debt-trap and only a massive fiscal infusion from the World Bank to re-structure its finances could help but no such support is yet forthcoming. Though the cuts amount to only Rs. 75 lakh a month, they blunt criticism that by increasing the ministry's size from 58 to 69, Mr. Shinde added to the burden of the exchequer.

Sources point out that ministers draw allowances but ``some department or the other, including lower subordinates always rustled up for the comfort of visiting worthies.'' They are hidden as `other expenses' and ``that is a traditional eye-wash which even auditors know about.''

This tokenism can be meaningful only if Mr. Shinde takes several ``hard decisions'' promised by the earlier Vilasrao Deshmukh Government. Some steps were taken but their impact was diluted with more populist decisions that only added to the State's non-merit subsidies. If bonus is not paid to employees for three years, the gain is neutralised by support to politically-important constituencies.

Already, there is a 40 per cent cut in non-Plan and 50 per cent cut in Plan expenditure. They range from frequent issuance of guarantees to sugar co-operatives despite inability to honour smaller guarantees when financial institutions invoked them. This led to attachment orders on the offices of Secretaries to Government — to monopoly purchase of cotton at prices which Government itself had earlier described as `unrealistic.' It has saved Rs. 2,080 crores on salaries and bonuses but wiped out these gains by other outlays.

The World Bank has warned that Maharashtra is heading for insolvency in three years due to the State's inability to curb revenue deficits and control off-budget borrowings, but the State is still toying with `plans' to deal with the prospect. Given the trend, the off-budget borrowings, from 65,000 crores in 2001-02, are set to reach an estimated 34 per cent by 2005-05.

In the current fiscal, the borrowings have been Rs. 69,800 crores. Soon after taking over, Mr. Shinde conceded that long-term steps would come later.

He would be trying out some short-term strategies which, of course, would take time to get formulated. Because debt-servicing alone in 2003-04 would need Rs. 13,364 crores against a lower Rs. 10,916 crores in the current fiscal. An additional `unexpected liabilities' of Rs. 3,500 crores loom large over the State.

The assumption is that Mr. Shinde may go in for some short-term steps that would boost revenue though in most cases, it has reached saturation levels.

It is possible that he would opt for suggestions from the State's Finance Ministry that non-priority areas be ignored and a new list of priorities be drawn up.

Withdrawal of all stays on disputed revenue recoveries and stopping political interference is being mulled over even as steps are taken to boost small savings collection.

For the first time, Maharashtra has had its liabilities spilling over into the next year and recently, it told the Centre that ``at any point of time, bills to the tune of Rs. 900 crores to Rs. 1,000 crores are pending in the treasury for want of funds.''

It is unable to neutralise this overhang. Pleas for debt moratorium for two years and across-the-board reduction of interest rates by ``at least 3 per cent'' have fallen on Centre's deaf ears.

There has been no tangible gain yet on the request for a roll-over of debts worth Rs. 14,000 crores raised by special-purpose vehicles.

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Shinde needs to take hard decisions