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A much lower collection of taxes and revenues coupled with higher expenditure commitments have left the West Bengal Government facing a possible liquidity crisis in February and March.
The situation has become particularly critical as the State has exhausted its enhanced borrowing window of Rs 21,000 crore for the fiscal in January.
Revenue shortfall
While the State officials are tight-lipped, available estimates suggest that the total State collections have moved up by 16-17 per cent as against a projected 30 per cent or Rs 6,390 crore growth in own-tax revenues during 2011-12. The collections from excise, one of the major contributors to kitty, have moved up by 21 per cent.
Meanwhile, a lower tax collection by the Union Government when compared with the Budget estimates should also bring down the Central devolution in the last two months of the fiscal. As a norm, the Centre calibrates States' share of taxes in the last two months of the fiscal, based on the actual inflow.
The revenue side is further impacted as the State has already sacrificed nearly Rs 500 crore annual revenue towards electricity duty and others, in order to offer a 24 paise subsidy per unit of electricity consumed by nearly one crore consumers in West Bengal.
Expenditure push
Considering that Ms Mamata Banerjee's Government inherited a large revenue account deficit in May 2011; the crisis was further fuelled by her decision to increase Plan expenditures.
As the State treasury started releasing funds towards a slew of projects rolled out by her eight-month-old Government, the gaping hole in finances became apparent.
As against an average monthly outgo of Rs 4,700 crore from the State treasury in the same period last year, the current outgo is nearly Rs 6,000 crore a month.
The pressure on finances is set to increase next year both on account of a nearly Rs 350-400 crore estimated monthly increase in salary and pension bill, from the current level of Rs 3,300 crore a month.
The increase will be attributed to increments in payments towards existing manpower as well as an estimated 70,000 fresh recruitments by Ms Banerjee's Government.
Last resort
As things stand today the Government may have to look forward to release of nearly Rs 2,700 crore by the Centre as advance or first instalment against the Union Government sponsored approximately Rs 8,700-crore grant for “backward region development” to bridge over the Rs 2,500-crore revenue account shortfall.
“The situation is precarious, if fresh funds are not available it would be difficult to fulfil the committed expenditure (including salary etc) for February-March,” a source close to the development told Business Line .
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