The Hindu Business Line : KPTCL gets Rs 413 crore to offset overdues

FACED with the inability to recover power sector over dues in an election year, the State Government is now preparing to release more subsidies to the State-owned utility.

Sources said here that the State Government has released Rs 413 crore to Karnataka Power Transmission Corporation Ltd. The release of these funds was in lieu of overdue payments from the urban local bodies. In fact urban local bodies and State Government departments / State public sector undertakings are among the worst defaulters to the power utilities.

In addition, the sources said, the State Government has also agreed to release another Rs 900 crore towards power subsidies for the current fiscal year. This release would imply that the actual subsidies to the power sector would be about Rs 2,600 crore.

The immediate impact of the releases, the sources said, was that the revenue expenditure for the current financial would be well in excess of the revised estimates for the current fiscal. The revised revenue expenditure shown by the State Government for the current year was Rs 2,6875.55 crore. After the new additions, the actual revenue expenditure would escalate by another Rs 1,000 crore. On the other hand, the total receipts for this year were estimated at Rs 21,731 crore. This would mean that the fiscal deficit for the current year would be in the region of about Rs 6,200 crore. This figure is a deviation of at least Rs 200 crore over the projections made in the medium term fiscal plan prepared by the World Bank.

However, the sources said that fiscal situation was tenuous. Revenue receipts for the first 10 months were barely 10 per cent of the revised estimates. The more serious shortfall was in internal tax collections of the State Government. Tax collections this year are estimated to fall short by at least Rs 2,000 crore. This was particularly on account of the drought, power shortfalls and loss of farm output.

Contributing to the fiscal burden was also the debt service payments on off budget borrowings. Off budget borrowings are those supported State Government guaranteed bonds and raised by State-owned entities. Prudential norms imposed by the Reserve Bank of India and the Securities and Exchange Board of India now mean that none of the borrowers were in a position to refinance any of the maturing payments with fresh bond issues as in the past. This would in turn imply that the payment obligations were likely to devolve on to the State Government. Principal payments falling due on this account was estimated at Rs 850 crore.

The sources said that the deviations in the revenue expenditure and the inability to mop up additional revenues implied that the fiscal deficit for the year 2003-04 was likely to fall in the 5.5 - 6 per cent range, assuming that the State domestic product for the current fiscal was about Rs 1,28,000 crore. Such a situation clearly conveyed that the fiscal correction in the State had already gone haywire.