JK in fiscal fix
Govt Coffers Run Dry, Liabilities Mount As RBI Tightens Noose
Jammu, Oct 19: Having piled up huge fiscal liabilities, the Jammu and Kashmir government is confronted with unprecedented financial crunch, particularly in the backdrop of the Rs 1,500 crore cap imposed by Reserve Bank of India (RBI) on overdraft facility.
Sources said with its coffers almost running dry, the state government is unable to deal with immediate cash liabilities of around Rs 100 crore, besides meeting the expenditure on account of annual Durbar move and festival season of Diwali and Eid as it has been strictly barred from taking recourse to liberal overdraft facility, especially after the shifting of OD arrangement from JK Bank to RBI, sources in the government said.
Pertinently, Chief Minister Omar Abdullah and Finance Minister Abdul Rahim Rather were the biggest proponents of the state’s new financial arrangement with RBI.
“As RBI has taken over from JK Bank granting of OD facility after the agreement signed last year, the state government is caught in catch -22 situation—the biggest problem being the failure to meet the financial liabilities, which have crossed Rs 100 crore” said a highly placed source in the finance department. Under the agreement RBI was allowed to carry on the general banking business of the Jammu and Kashmir and is acting as the sole agent for investment of government’s funds.
If sources are to be believed, the treasuries across the state are empty with bills worth crores of rupees pending for last many months. Even the contractors who have completed various development projects are not able to get their bills cleared. Officials said that liability of Rs 100 crore has become a great burden on the government as out of which 75 percent bills belong to the contractors, who had recently threatened agitation.
“Even the employees are not able to get their GPF from the treasures as they have been asked to wait till funds are released by the government”, said a source. The biggest problem for the government is that Durbar is shifting from Srinagar to Jammu and salaries of move employees have to be cleared by October 22 alongwith move allowance”, sources said.
Officials said that earlier state government would immediately take OD from J&K Bank in such pressing circumstances, but the RBI has strict with OD facility and seeks even minutest details before release of funds.
“There is a severe financial crisis. The treasuries are out of money, while government is unable to utilize OD option as everything is now under the control of RBI and its approval is necessary”, sources said.
Important to note that shifting of OD facility to RBI had political storm in the state with the main opposition Peoples Democratic Party terming it a fiscal sell-out.
Though the state’s Finance Minister had later cleared that it will not have any affect on JK’s control over the J&K bank, but in recent past, RBI has become more strict against the unending financial mess in the state.
However, a senior government functionary, on the condition of anonymity said that RBI is doing debt management in J&K from 1972 and there is nothing new in the present crisis.
“It is short term crisis and liabilities will be cleared soon. This is not for the first time that such things have happened. We had pleaded with the 13th Finance Commission to grant us one time financial assistance of Rs 2300 crores to remove the structural deficit and that is being pumped slowly in the financial system”, he claimed.
Lastupdate on : Wed, 19 Oct 2011 21:30:00 Makkah time
Lastupdate on : Wed, 19 Oct 2011 18:30:00 GMT
Lastupdate on : Thu, 20 Oct 2011 00:00:00 IST
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