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dam-l LS: SSP Finances and Impact on Gujarat: Times of India
Times of India, July 7, 1999
SSP cost escalation to have fallout on state finances
By Rajiv Shah
GANDHINAGAR: The top three-volume policy document 'Gujarat infrastructure
agenda: 'Vision 2010' has predicted a sharp deterioration in the state's
financial position due to a steep rise in the government's capital
expenditure on the Sardar Sarovar Project over the next three years.
Stressing on the need for sharp "corrective action on expenditures," the
document underlines, "to meet the large revenue deficit and high capital
outlays (mainly due to SSP), the outstanding borrowings of the government
of Gujarat are projected to increase from Rs 14,731 crore in as at March
31, 1998 to Rs 35,419 crore as at March 21, 2002."
Pointing out that the revenue deficit is expected to rise from Rs 638
crore to Rs 2,721 crore in the same period, the document, released
recently by Union finance minister Yashwant Sinha, says the deterioration
could be partially neutralised if the rising energy subsidy, at the
compound annual growth rate of nearly 20 per cent, is arrested. However,
as for the SSP, the document stresses, its capital expenditure is
"committed," necessary to push the state's stagnant agriculture out of the
vulnerable position of over-dependence on erratic rainfall.
"Under such a scenario, the performance of the government of Gujarat on
various deficit management parameters is expected to deteriorate. The
fiscal deficit as a percentage of net state domestic product (NSDP) is
projected to increase from the level of 3.9 per cent in 1997-98 to 5.7 per
cent in 2001-02," the document says. Significantly, the Asian Development
Bank, one of the main international financiers of the state, has been
insisting that the fiscal deficit, 4.2 per cent in 1999, reach two per
cent by 2000.
The document recommends three steps to safeguard its finances in this
context:
"Power sector reforms to reduce power subsidy,"
"Generate additional resource measures like disinvestment of profitable
government owned companies and closure of lossmaking units,"
"Exploring the options of raising cheaper long-term debt funds and
reducing the interest cost."
Otherwise, it warns, "Large investments required for the SSP might lead to
crowding out of investments in other infrastructure/ developmental
projects."
Pointing that the borrowings of the SSP are "guaranteed by the government
of Gujarat under a tripartite agreement, making it a quasi-debt of the
state government," the documents says, the required borrowings for the SSP
in the ninth five year plan are Rs 9,876 crore (taking into account debt
obligations), as against the projected Rs 5,596 crore. The SSP's interest
on expenditure is projected to increase from Rs 229 crore in 1997-98 to Rs
1,294 crore in 2001-02. And, the SSP's outstanding debt is projected to
increase from around Rs 2,000 crore as on March 31, 1998 to Rs 10,496
crore as on March 21, 2002.
In fact, the budgetary allocation on irrigation, particularly SSP, is
already so high that, in the document's view, if it is excluded from the
capital expenditure then the state would actually show a "negative growth
in capital outlay in nominal terms for the remaining sectors." The overall
capital expenditure in the state has grown at an annual rate of 4.8 per
cent over the last five years. Recommending, therefore, to implement the
SSP "expeditiously," it says, "for this, the state needs significant
additional resources," as the current ones would be grossly insufficient.