Ways and Means Advances (WMA) are borrowings from the Reserve Bank of India (RBI) that are meant to help governments tide over temporary mismatches in their receipts and payments. They are repayable in three months. Some States operate the ‘temporary’ facility rather too often.
According to the RBI annual report, the Punjab Government has used the WMA facility on 232 days last fiscal.
That is practically two thirds of the year. It also availed of a special WMA on 233 days in the year.
This special facility comes against the pledge of government securities. This was the highest utilisation by any State. The interest on both types of WMA is linked to the repo rate of the RBI.
Overdrafts come at an additional 2 percentage points (currently at 9.25 per cent).
Punjab had also taken an overdraft (OD) on 139 days in that year. For a State government to remain that long in overdraft mode is indicative of some structural problems.
Going by the details given in the report, it is clearly the worst managed in terms of finances. The financial management (the working capital part of it) of the State has deteriorated, going by the steadily increasing recourse to WMA/overdrafts over the past few years (see table).
The performance in the current fiscal (2013-14), too, is not encouraging. The State Government has taken overdraft on 37 days already. As per existing rules, no State government is allowed to run an overdraft for more than 10 continuous days. If that happens, the RBI stops payments on behalf of such States. Among the other states that resorted to overdrafts last fiscal were Nagaland (34 days), Manipur (30 days), West Bengal (13 days) and Jammu and Kashmir (11 days).
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