The people of Punjab are vibrant, upbeat and flamboyant. This is not without the existence of actual, hidden or declared wealth to support such tendencies. Nowhere in this world, such a show of wealth can go on without the backing of actual resources. The state government is surprisingly reeling under a colossal debt of at least 58,000 crore. The successive governments, instead of worrying about the symptoms of a grim fiscal crisis and trying to reverse this suicidal trend, have acted like spectators completely unperturbed and naïve to the aggravating economic crisis.

As a year or two-year event, small budgetary deficits can be understandable, but persisting with a heavy debt year after year amounts to an unacceptable fiscal behaviour. As far as the people of Punjab are concerned, they on an average spend more money on consumer items than their counterparts in the rest of India. Whereas an average household in the rest of India spends between 50 and 55 per cent of its monthly income on consumer items, in Punjab people spend in excess of 60 per cent.  

The Central government is tough in collecting its dues and the Punjab government, unfortunately, is not. If the Punjab government earns less money, or it does not have the will to collect more revenue, in such a case it should be prepared to slash its expenditure too. That is what the successive elected governments have been unprepared to do. Everyday new development schemes are launched without having a look at the availability of funds. Some of the works don’t proceed beyond the stage of laying the foundation stone, others are stopped at the foundation level. Some other works remain half built. Abandoning unfinished projects has the worst effect on the economy of the state. Such unfinished projects are neither useful to the public nor they generate any revenue for the expending authority. 

Punjab suffers from the absence of a well-meaning tax policy. We hardly have a significant house tax or property tax. The tax collection regime is quite bad in the urban areas, but in the rural areas no one pays any tax at all to the state government. Water supply charges are much less than the cost of providing potable water to the people in rural and urban Punjab alike. Very few people pay sewer tax in Punjab. Sewerage is the most expensive civic amenity to build in older built-up areas, but there is hardly any realisation of tax revenue from the already laid sewerage lines.

Octroi, first introduced by the British, has been one of the oldest civic body taxes in urban Punjab. For more than half a century this tax has been a major source of revenue for Punjab’s municipal governments. But a few years ago, with one stroke of pen, the Punjab government abolished it. Again this big step was taken without making any arrangement to compensate the municipal bodies for their loss. After coming to power in 2007, the present government abolished the stamp duty on the transfer of land within family members.

This move may have become very popular with the landed aristocracy, but it resulted in an annual revenue loss worth crores of rupees. The auction of liquor vends is one of the biggest sources of Punjab’s income. Since the consumption of liquor is increasing every year, there should be a proportionate increase in the liquor revenue. But the government has adopted a policy of allotting liquor vends by a draw of lots rather than by conducting nationally advertised open auctions.

This policy of allotting the liquor vends after a draw of lots has resulted in a loss of revenue worth hundreds of crores. The cinema industry in Punjab was experiencing financial strain and it wanted some kind of tax relief. Instead of reducing the entertainment tax gradually, the Punjab government abolished it totally. We all know that more money is required each year to maintain the canal system, but the Punjab government, in order to please the landlord lobby, abolished the irrigation charges altogether. Often the present leadership of Punjab pleads for transferring its powers of taxation to the states.

A state which has given up its own legitimate sources of revenue by offering freebies to its population on the eve of every election may also squander away the newly transferred taxes. As long as the Centre collects the taxes, Punjab gets its share based on the formula of sharing of federally collected taxes. The situation would be a lot worse if the present leadership or a similar one in future collects the centrally collected taxes. Punjab Roadways and the Pepsu Road Transport Corporation are losing money. The government should have taken cost-cutting and corruption-reducing steps to make them profitable. But it has taken steps to increase the losses. A lot of air-conditioned buses have been inducted into the fleet of both these undertakings, but the fare has been fixed only 10 per cent higher than the economy class fare.

Punjab lets its canals run dry 

Sarbjit Dhaliwal

 For decades, Punjab has been fighting battles with its neighboring states over river waters. However, what has gone wrong with its own canal irrigation network over the years, its political masters have failed to address. The capacity to irrigate the area through canal network in the state came down to just about 28 per cent by 2006-07 whereas it was more than 42 per cent in 1990-91. It has happened mostly because of neglect of canal network over the years. Interestingly, irrigation through tube well network has gone up from 57 per cent in 1990-91 to 71 per cent by the 2006-07. In 1990-91 the total irrigated area in Punjab was 39,09,000 hectares.