Finance Commission forms panel to look into ₹31K cr food account gap

Thursday, 31/01/2019

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CHANDIGARH: In a big relief for debt-ridden Punjab, the 15th Finance Commission chairman on Wednesday constituted a committee to resolve the ₹31,000 food account cash credit limit (CCL) issue between the Centre and the state government.

The committee set up under commission member Ramesh Chand, also a member of the Niti Aayog, will have representatives of the Union finance ministry, state government and the Food Corporation of India (FCI).

“The committee has been constituted in a departure from the past practice. It will go into the food account debt legacy issue in six weeks and look at all options available with the commission within its mandate,” said commission chairman NK Singh at a press conference after meeting the top brass of the Punjab government and representatives of political parties in the state. He was accompanied by commission members Chand and Anoop Singh.

‘DEBT ISSUE NEEDS WIDER CONSULTATION’ Asked if it would also go into the state’s outstanding debt, Singh said the committee would only look at the food credit legacy account that had led to accumulation of interest of ₹18,000 crore on a principal amount of ₹12,000 crore. “The issue of outstanding debt is a bigger subject and needs wider consultations,” he said.

The commission reopened the contentious issue and set up the committee after chief minister Amarinder Singh took up the matter, demanding that the Centre should take over this amount or give to the state a matching revenue deficit grant to offset the committed annual liability of ₹3,240 crore. Principal secretary (finance) Anirudh Tewari, in a presentation, told the commission that servicing this liability constituted a huge interest burden, making expenditure on development difficult.

CCL is given by the Centre to the state for procurement of foodgrains for central pool, and the huge gap arose because of a mismatch between cash credit availed and the foodgrain stocks in the account books of the state procurement agencies since 2004. The entire liability of CCL fell on the fund-crunched state government, leaving its finances in tatters, as the previous government signed an agreement with the Union finance ministry on March 10, 2017, a day before the assembly election results, to settle the unresolved amount by paying ₹3,240 crore a year for the next 20 years.

‘LESS FISCAL SPACE FOR MORE BORROWING’

On being asked about farm loan waiver announced by the Punjab government despite fiscal stress, the commission chairman said given its current debt situation and fiscal deficit above 3%, the state did not have fiscal space to contract additional borrowing.

Meanwhile, the Congress said the government’s farm loanwaiver was not a populist move and has helped to remonetise banks. In his presentation, Punjab Congress chief Sunil Jakhar urged the panel to declare Punjab or some parts of it as a special economic zone (SEZ) to address the problem of unemployment.