By Sumarbin Umdor
“If one looks at the present financial position of the state with a revenue deficit of about 815 crore in 2020-21, it is highly improbable for any incoming government to be in a position to raise the resources needed to fulfil these commitments including Rs. 2500 crore towards capital expenditure.”
Unlike past elections, this time it’s raining promises of freebies and cash transfers in Meghalaya and all major political parties are in the game. Continuing my assessment of these poll promises (See ST dated 7/2/2023), this column examines the Congress and BJP poll manifestos for Meghalaya.
A few days back, India’s grand old party presented its 14 commitments to the state electorate which include cash and in-kind transfers (Rs. 3000 to single mothers and roofing materials to BPL families), subsidies (LPG gas cylinder quarterly and 400 units of free power to BPL households), free health care, job creation initiatives, and a guaranteed minimum support price (MSP) for agriculture products. Having governed the state for around 30 years since 1972, the Congress Party cannot escape its share of responsibility for the development gaps and challenges facing the state today. Therefore, the party’s commitment to turn Meghalaya in the next five years to Five Star state is a bit farfetched and akin to wishing for the moon.
At present, there are about 4 lakh households in the state that are beneficiaries of NFSA/intended coverage and they stand to benefit from the pre-poll promises of cash and in-kind transfers to BPL households made by the Congress party if it comes to power. The promise of cash transfers to single mothers is a fairly decent amount that will immensely benefit many deserving households as about 14 per cent of mothers in the state are single parents compared to 4.5 per cent for the country. While some of the promises like income support to single mothers, free roofing materials and LPG gas cylinders will not entail too much of a financial burden on the state exchequer, others like free power and MSP will be hard to fulfil without putting enormous strain to the financial health of the state and the state-owned power distribution company (Discom/MePDCL).
In 2020-21 state governments in India collectively expended an amount of Rs. 132400 crore to subsidise power consumers. In Meghalaya, the power subsidy paid for by the state government in the same year was only Rs. 18 crore that went for rural electrification. This amount is just under two per cent of the total revenue of MePDCL. In comparison, Punjab spent Rs. 9657 crore in power subsidy in the same year accounting for one-third of the total revenue earned by the state Discom. The Congress party’s promise of free power of 400 units to BPL households in Meghalaya will involve a maximum subsidy bill of Rs. 65 crore (for about 2.8 lakh consumers in this category at the current tariff for DLT consumers). While this may not be such a huge amount for the current year, in the long run, the idea of power subsidy may prove a costlier affair for the state’s financial health and that of the Discom.
Firstly, the power subsidy will inflate significantly in the coming years as the number of BPL consumers increases and the tariff rates are revised. Already many state governments are not able to fully pay up or they delay in reimbursing the subsidy bill to Discoms contributing to the financial distress facing these companies. The state Discom (MePDCL) is already in financial distress with losses more than doubling in the last 5 years touching a staggering Rs. 425 crore at the end of the financial year 2021. The state government is also struggling to bail out MePDCL of the dues it owes to central Discoms. Adding power subsidy will only aggravate the financial burden of the state government and that of the Discom. Secondly, once power subsidy is introduced in Meghalaya it will be very difficult for any government to withdraw it in the future. In fact, competitive politics may drive parties to extend power subsidies to other categories of consumers which will be disastrous for the state.
An interesting promise made by the Congress party as part of its manifesto is the MSP for main crops grown by farmers of Meghalaya. The MSP implemented by the government of India (GoI) for 22 crops does not cover horticulture crops and other produce grown by farmers of the state for which there is another price support mechanism in the form of the Market Intervention Scheme (MIS). The MIS is an adhoc scheme of the Department of Agriculture & Cooperation, GoI implemented on the request of state governments for procurement of perishable agricultural and horticultural commodities to protect the income of farmers and prevent distress sales. The scheme requires that state governments share the loss with the government of India on a 50:50 basis (75:25 in the case of northeastern states). Under the MIS, a predetermined quantity at the fixed market intervention price is procured by the procurement agencies designated by the state government for a fixed period or till the prices are stabilized above the market intervention price whichever is earlier. States like Himachal Pradesh, Nagaland, Mizoram and Arunachal Pradesh, among others, have been very proactive in implementing the MIS for commodities such as grapes, ginger, apples, chillies, potatoes, squash, grapes and pineapples. Meghalaya, however, has not been implementing this scheme for many years now. While farmers of the state will gladly welcome the implementation of MSP for their produce, it will be helpful if the in-coming state government starts implementing the already available MIS for major crops of the state where such need arises.
The BJP is the last of the major political parties to announce its manifesto containing loads of freebies, welfare schemes, cash transfers and new policy initiatives. The promises of cash and in-kind transfers made by the party targeted at women and girls, BPL households, farmers, unemployed graduates and state government employees will surely appeal to even those voters who are otherwise allergic to the party. The promise to implement the 7th pay commission will benefit around one lakh state government employees and pensioners, but it will also lead to a similar demand from employees of state PSUs as well as government supported educational institutions. This single-poll promise will have a huge impact on the committed expenditure of the state and will put severe pressure on the revenue accounts in the coming years. If one looks at the present financial position of the state with a revenue deficit of about 815 crore in 2020-21, it is highly improbable for any incoming government to be in a position to raise the resources needed to fulfil these commitments including Rs. 2500 crore towards capital expenditure. But then these promises are coming from a party holding power in the centre with the ability to loosen the central purse string to accommodate these expenditures.
As said in the beginning, this election is different from what we have witnessed in the past as all major contenders are going all out to woo the electorate with policy vision and initiatives topped with freebies and cash transfers. These poll promises involve considerable financial outflows with the risk of financial crisis in the long run. Further, it is also evident that many of the poll promises are borrowed from other states with some of them not properly thought through. For example, take the Rs. 5 meal promise by the BJP. In a high-cost city like Shillong this scheme will not only end up burning a big hole in the state exchequer but will unintentionally add to the unemployment situation in the state as it will lead to the closing down of many small privately operated canteens as they will not be able to compete with heavily subsidized government canteens. Further, the Rs 5 meal may not even reach the deserving segment of population but will most likely be enjoyed by the already pampered salaried class. The same also applies to promises made by other political parties.