Punjab Governor sends another letter to CM Mann, expresses concerns over AAP govt's capital expenditure

PTC Web Desk: Punjab Governor Banwarilal Purohit, in another letter to Chief Minister Bhagwant Mann, expressed concerns about the Aam Aadmi Party (AAP) government's performance in the state, particularly regarding effective governance and fiscal prudence.

In a letter dated Tuesday,  Punjab Governor Banwarilal Purohit accused the AAP-led Punjab Government of diverting capital receipts for unspecified purposes and requested clarification. The Governor sought an explanation for the state government's additional borrowing, which exceeded the approved amount in the state Assembly's Budget, and has not been utilised for creating capital assets.

The Punjab Governor emphasised the importance of transparent financial management and advised that all public borrowings should be carefully managed to prevent the burden of unsustainable debt on the youth of Punjab. Borrowings should ideally be directed towards creating capital assets rather than implementing populist measures, he noted.

This letter is the second in a series from the Punjab Governor addressing the state's fiscal health. In a previous letter, Purohit asked the state government to clarify the substantial debt increase of Rs 50,000 crore in the past 18 months. The Chief Minister responded, explaining that much of the borrowed funds were used to repay loans from previous governments.

In the latest letter, Purohit highlighted that "the state government appears to be managing its fiscal resources inefficiently". He pointed out that the state government borrowed Rs 33,886 crore in the fiscal year 2022-23, exceeding the initially approved amount of Rs 23,835 crore. "This additional borrowing does not seem to have been used for creating capital assets, as evidenced by a drop in effective capital expenditure". The Governor referenced data from the Comptroller and Auditor General (CAG) of India, indicating disparities between the Chief Minister's figures and the CAG's report.

“As per the information available, the state government is not managing its fiscal resources in an effective and efficient manner. For instance, in 2022-23, the state government has borrowed Rs 33,886 crore, as against the approved amount of Rs 23,835 crore, which is over Rs 10,000 crores above the amount approved originally by the State Assembly in the Budget. This additional borrowing needs to be explained as, apparently, it has not been utilised for creation of capital assets. This is evident from the fact that the effective capital expenditure dropped by over Rs 1,500 crore – from a projected Rs 11,375.59 crore to Rs 9,691.53 crore. Further, the additional borrowing was not even used to discharge legacy interest obligations, as per the figures projected in the revised estimates in this regard. These, in fact, demonstrate that the total payments defrayed on this account during the year finally stood at Rs 19,905 crore, as against a projection of Rs. 20,100 crore in the budgetary estimates for 2022-23,”reads the letter.

Purohit stressed that while welfare measures are essential, they should be accompanied by fiscal discipline, resource mobilisation, cost-cutting, and an avoidance of fiscal extravagance to maintain financial prudence.