Of empty coffers

Of empty coffers

What led to the financial crisis in J&K

Jammu and Kashmir is facing financial crisis and the government is reported to be raising market borrowing of Rs 300 crore as an interim measure to tide over this problem.

Mushtaq Siddiqui in his article" JK financial crisis – what really ails the state finance" (Greater Kashmir 30th Jan 2015) has insinuated that it is the past Governments in JK state that did not allow the JK Bank to work within the set parameters of institutions and systems. These Governments politicized them as a result of which the JK Bank lost its autonomous character. Hence the financial crisis of JK state.

I hope Mr. Siddiqi knows that the systems and institutions in the legislation of such important pieces have always got the inbuilt mechanisms to plug the loopholes so as to disallow the Government and others to fiddle with these bulwarks. There is always scope to improve upon such legislations from time to time by way of amendments etc.

There is no doubt that the JK Bank has come into existence as a result of central legislation as the subject falls under the Central list but such a bank enjoyed special status as compared to other banks in other states as a result of Special Status of JK state given to it by Indian Constitution in Article 370 and as such would have been conceded the special  terms and conditions  to operate its systems and institutions so that it enjoyed the privilege of functional autonomy in terms of, among other things, granting overdrafts beyond the limit of Rs. 1500 crores for meeting its unprecedented emergency needs. I understand that the loose kind of financial arrangement between the Bank and the State Government was therefore deliberate as a part of the piece of Central legislation exclusively for JK state.

As part of the systematic erosion of the Article 370 thereby eroding the autonomous role of JK Bank also, it seems that the Central Government of UPA headed by the Congress deprived the Bank of the financial autonomy with the tacit understanding of previous JK state Government led by National Conference for ulterior motives. Thus the JK State was deprived of the financial leeway to meet its emergent day to day requirements. 

The interest outgo of as high as Rs 500 crores as pointed out in the article was saved in the first two years of this arrangement of shifting. It cannot make any difference in saving the interest of JK State when the State Government is free to raise market borrowings which again is fraught with the risk of even higher interest as the scope of competitiveness between the lenders dwindled unlike the earlier arrangement between JK Bank and the State Govt.

The rationale behind RBI regulation on the face of it was therefore that Bank’s autonomy was curtailed so that the State is disempowered financially to this extent also. There is no question of whipping up the public sentiments. Instead the public, traders federation, civil society and other stakeholders itself push the political leaders like Mr. Karra, the former finance Minister for reversal of this draconian and uncalled for arrangement by using their good offices. They can convince Central Government and the RBI with their arguments so that immediate financial relief comes as a succor.

The upcoming Government has therefore got the challenge to revise the draconian decision of the previous Central UPA Government led by Congress. 

(Wali Mohammad Sheikh is Rtd. Administrative officer JKIMPA)