A record 77 pre-poll sops sanctioned by the Democratic Front government in Maharashtra, in addition to the manifesto liabilities, will cost the new government over Rs 3,000 crore (Rs 30 billion) annually.
The state government is banking on a central bailout, failing which -- as a finance department bureaucrat warned -- the state will have to withhold salaries and pensions in order to fund the election promises.
This additional financial burden is definitely going to impact the fiscal and revenue deficits for fiscal year 2004-05. Maharashtra Finance Minister Jayant Patil had estimated the revenue deficit at Rs 7,303.35 crore (Rs 73.03 billion) and the fiscal deficit at Rs 19,000 crore (Rs 190 billion) in the Budget for the current fiscal year. The additional burden of more than Rs 3,000 crore (Rs 30 billion) now threatens to hollow out the state's not-so-full coffers.
For instance, the state government has cleared Rs 395 crore (Rs 3.95 billion) towards providing free power to 2.3 million farmers for the July-September quarter. This came after much wrangling between its energy and finance departments over reimbursing the Maharashtra State Electricity Board.
Continuing the sop for the rest of the year will cost the exchequer another Rs 790 crore (Rs 7.9 billion). This amount will have to be paid to the MSEB before it can raise zero bills for the farmers for the next two quarters.
The Congress-Nationalist Congress Party manifesto also promised to waive the loans owed by farmers towards cooperative and district urban cooperative banks for the current fiscal in the wake of widespread crop failure. The state government has pegged the cost to the exchequer at Rs 345 crore (Rs 3.45 billion).
Similarly, the manifesto promises a Rs 100 crore (Rs 1 billion) memorial for Shivaji on the Arabian Sea. A similar memorial at the Raigad fort has also been promised.
According to finance department officials, much of the Rs 3,000 crore (Rs 30 billion) of sops and promises made by the Congress-NCP government would require fresh budgetary provisions during the forthcoming winter session of the state legislature.
In addition, the Congress-NCP joint political manifesto has also promised to fund a modernisation infrastructure plan for Mumbai, including a metro and a light rail project, for which Central loans are being sought. The state has also committed, in principle, Rs 500 crore (Rs 5 billion) for a development plan for Asia's largest slum pocket in Dharavi.
Another Cabinet decision seeks to compensate farmers who faced crop losses. The government proposes to pay a compensation of Rs 2,000 per hectare of affected land, with a ceiling of Rs 5,000 per family.
The Cabinet had also sanctioned a grant for the fishing community in Mumbai and Thane districts. Those owning fishing trawlers of up to twin cylinder capacity would be paid Rs 4,700, while trawler owners (up to six cylinders) would get Rs 11,000.
Small fishermen using non-mechanised boats would be paid Rs 4,000 each, while those engaged in the business of drying and selling fish would be paid Rs 1,000 and Rs 2,000 respectively.
While it will be a difficult proposition for the state government to find the means to fulfill its pre-poll promises, matters are about to get worse for it on the liability side. Here principal and interest payments amount to Rs 3,513 crore (Rs 35.13 billion) in 2004-05, Rs 3,734 crore (Rs 37.34 billion) in 2005-06 and Rs 3,110 crore (Rs 31.10 billion) in 2006-07.
