Punjab Chief Minister Captain Amarinder Singh on Tuesday suggested to the Centre a 3-pronged strategy to bail out the states from the COVID crisis, including a 3-month special financial package and extension to the 15th Finance Commission till October 2021 for submission of its final report.Citing the collapse in revenues as a result of the lockdown of business and industry, as well as the increased essential health and relief expenditure, the Chief Minister, in a letter to Prime Minister Narendra Modi, urged him to ask the Fifteenth Finance Commission to review its interim report for 2020-21 in the context of the much lower revenue share for the states compared with what was expected from the earlier projections which assumed 7 percent growth of GDP. Noting that a zero growth scenario in GDP for India was not unlikely, he said that some analysts were projecting even negative growth. Given the likelihood of very low growth, which was expected to cause the revenue shortfall to last for the whole year, Captain Amarinder requested the Prime Minister to direct the Fifteenth Finance Commission to defer the submission of its full report to October, 2021, when they will be better able to make a realistic assessment of the likely growth of the economy over the next five years. “Nothing would be worse than getting committed to a five year revenue sharing projection based on unrealistically high growth projections,” he warned, suggesting that the Finance Commission could make another Interim report for 2021-22,
Observing that the 40-day national lockdown till May 3, 2020 was perhaps necessary to curb the spread of COVID-19, Captain Amarinder said, however, that it has resulted in massive economic disruption, which in turn had created very serious fiscal difficulties for all states. Punjab was facing a huge stress on the State exchequer, he said, adding that the near complete shutdown of trade, business and industry had led to a collapse in revenues, and this had happened at a time when essential health and relief expenditures needed to be massively scaled up. “With the states continuing to shoulder their committed liabilities and facing new demands on relief, health infrastructure expenditure etc, it is only fair and just that the Fifteenth Finance Commission should be requested to recommend a Special Covid-19 Revenue Grant for the year 2020-21,” Captain Amarinder further said.In his letter, the Chief Minister sought an immediate 3-month special financial assistance package to enables states to handle the additional health related expenditure and basic relief expenditure, and suggested that the package should give the states maximum flexibility to design, implement and execute it in a manner that is customised to local problems and needs. The immediate 3-month package may be adjusted against the Special Covid-19 Revenue Grant, as proposed, he said.The Finance Commission could continue the COVID grant for the next year with some modification depending on what the situation looks like at the end of the current year, and then submit its five year projection by October 2022, he proposed.Further noting that this grant would increase the fiscal deficit of the Central Government, the Chief Minister suggested that the same should be financed through a special borrowing programme outside the ambit of the FRBM provisions. As the third pillar of second pillar of the 3-pronged strategy, he also proposed increasing the deficit to make up the revenue shortfall, as was being done by other nations.Assuring him of the State’s full support in the efforts of Government of India to manage and contain the threat posed by COVID-19, Captain Amarinder requested the Prime Minister to take a decision on the proposed course of action expeditiously.