With the nationwide COVID-19 lockdown extended till May 3, the territorial administration is now solely banking on Goods and Services Tax compensation due from the Centre to fill its empty coffers for meeting next month’s committed expenditure including payment of salary and pension.
The Union Territory, which was walking a tightrope on the financial front after grant-in aid from the Centre started gradually coming down since a separate account was opened for it in RBI in 2007, has almost drained its resources.
The shutdown of business establishments over the past 21 days had robbed the UT of its revenue resources, chiefly coming from GST/VAT, excise and registration.
Officials said on an average per month, the territory collected around ₹120 crore as GST/VAT, ₹60 to ₹70 crore as excise duty, ₹6 crore as property registration and ₹10 crore from registration of vehicles.
The government often managed its financial affairs through open market borrowings due to the mismatch in revenue resources and committed expenditure.
From its own resources, the administration had to deal with the monthly expenditure of around ₹200 crore towards salary and pension payment, around ₹35 crore for pension to old people, widows and differently abled persons.
Besides, the government had to generate around ₹1,500 crore annually to repay interest and principal amount for the legacy loan and also fund its free rice scheme.
“We have been running on deficit for the last several years. Our monthly revenue never matched our expenditure commitments. We often managed with money raised by auction of dated securities through Reserve Bank of India,” a senior official told The Hindu .
Even during the just concluded financial year, he said around ₹900 crore was raised through open market borrowings for meeting the expenditure requirement.
Given the current business environment, the tax collectors expect a meagre amount as tax revenue this month. “We may end up with getting ₹20 to ₹30 crore as non-tax revenue from electricity tariff but that ultimately goes for power purchase,” said a tax collector.
At this juncture, the government was not in a position to raise money through open market borrowings for the current financial year as a full budget was not presented, the official added.
The Centre owed the UT around ₹350 crore as GST due for the last four months, the official said adding that “we are expecting at least ₹180 crore this month. If we are not able to source the compensation money, we are in for difficult times. Unless we will be able to make some internal financial adjustments, payment of salary itself will be a difficult task,” said a senior official.
Concurring with the views of officials, former Member of Parliament (Lok Sabha) and former head of the Department of Economics, Pondicherry University M. Ramadass said that the lockdown was exerting a “deleterious effect on the already battered economy of UT".
The territory has estimated to have lost State Domestic Product to the tune of around ₹2,282 crore during the last three weeks which has dampened the revenue buoyancy of the government, besides causing loss of employment and affecting the purchasing power of different categories of people.
“Uncertainty shrouds the release of grants-in aid from the Centre which itself is engaged in expenditure reducing measures. Further, the Centre has not yet given any financial assistance to combat coronavirus outbreak leaving the entire burden on the local government. All these would even jeopardise the efforts of the government to present its full budget in June,” he said.
