PUDUCHERRY: Even as Chief Minister N Rangasamy is for pushing for statehood to the Union Territory, an analysis of the financial data indicates that it would not be a viable option for the UT under the present circumstances.Puducherry being a non-contiguous area with outlying regions of Mahe, Karaikal and Yanam, greater pressure on administrative expenditure could be cited for statehood. However, the weak fiscal reason would defeat the strong democratic reasons.The grants that the UT is getting from government of India at present, which would be halved if Puducherry became a state, will further deteriorate the financial crunch, according to an analysis by R Srinivasan, reader, department of econometrics, Madras University, and former member of planning commission of Tamil Nadu at a convention on fiscal crisis, organised by Pondicherry State Government Employees Central Federation on Saturday.As per official statistics, the UT is getting a grant of 11.8 per cent of the Gross State Domestic product (GSDP) from Government of India as compared to all states which get 5.3 per cent (2009-2010 figures). Once Puducherry becomes a state, the percentage of grant will be similar for Puducherry also, he said.This is important as despite the higher grant, the UT is heading towards fiscal crisis. There is an ever increasing outstanding fiscal liability which stood at 34.54 per cent of GSDP in 2009-2010 compared to all states which are at 25 per cent of GSDP in the same year. Since the debt burden is high, the rates of lending for market borrowings are also high (8.63 per cent) which is increasing the financial burden. The financial difficulties would be reaching a stage where the government would have to borrow to repay the interest for loans. This a vicious cycle which will lead to a debt trap, he said.At present the budgetary exercise is being scrutinized by the Union government and permission is required to avail of loans. The Puducherry government got the permission to borrow Rs 500 crore from open market at the fag end of the current financial year after the government convinced the Union government with a roadmap on greater internal resource mobilisation and greater financial discipline, said P Lakshumanaswami, general secretary, Pondicherry State government Employees Central Federation. “There will be no breaks if Puducherry becomes a state and the government will have freedom to borrow as much as they want, putting the finances of the UT in a mess,” said Lakshumanaswami.The size of the government expenditure is too large for the economy to sustain over a large period of time, said Srinivasan. The committed expenditure is more than 75 per cent of the total revenue expenditure. Out of a plan size of Rs 2500 crore, committed expenditure is Rs 1490 crore.Significantly the UT has a higher percentage of tax revenue at 7.7 per cent as compared to all states of 6.6 per cent, but accumulated arrears stand at Rs 339.41 crore. The revenue deficit is high at 1.46 per cent as compared to 0.7 per cent for other states. The fiscal deficit is also high at 4.42 per cent as compared to other states at 3.3 per cent.The accumulated loss in 13 PSUs was Rs 268.60 crore, when these were financed by long term loans. When the loans were borrowed at 8.6 per cent by the UT, the continuous loss of PSUs became a drain on public money. In two to three years time, the total capital of PSUs, Rs 699.02 crore, wiil be liquidated, a problem with which the UT will have to confront.The government will also have to cope up with revenue deficit in electricity department which has an expenditure of Rs 667 crore in comparison to a revenue of Rs 590 crore (2009-2010), a deficit of Rs 77 crore.
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