India: Punjab Development Finance Program

Sovereign Project | 45288-001

Summary

The proposed program seeks to facilitate implementation of a comprehensive fiscal consolidation program in Punjab. This will generate fiscal savings and thereby assist Punjab to augment and sustain growth enhancing development financing.

Punjab is primarily an agrarian economy with a population of 28 million. Punjab has always been instrumental in ensuring national food security since 1960s. The Government of Punjab (GOP) traditionally provides various subsidies, including free power to farmers, to promote agriculture in the state. Despite these schemes, Punjab agriculture is currently constrained by declining productivity, soil degradation, and water depletion.

Latest Project Documents


Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Project Name Punjab Development Finance Program
Project Number 45288-001
Country India
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8232-IND: Punjab Development Finance Program
Technical Assistance Special Fund US$ 290,000.00
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Governance and capacity development
Sector / Subsector Public sector management - Public expenditure and fiscal management
Gender Equity and Mainstreaming No gender elements
Description
Project Rationale and Linkage to Country/Regional Strategy

The proposed program seeks to facilitate implementation of a comprehensive fiscal consolidation program in Punjab. This will generate fiscal savings and thereby assist Punjab to augment and sustain growth enhancing development financing.

Punjab is primarily an agrarian economy with a population of 28 million. Punjab has always been instrumental in ensuring national food security since 1960s. The Government of Punjab (GOP) traditionally provides various subsidies, including free power to farmers, to promote agriculture in the state. Despite these schemes, Punjab agriculture is currently constrained by declining productivity, soil degradation, and water depletion.

Despite relatively robust own-tax effort in Punjab with an own-tax to gross state domestic product (GSDP) ratio of 8.2%, Punjab's extremely fragile fiscal situation could primarily be attributed to ad hoc expenditure planning and management with untargeted transfer payment and subsidy schemes. The deteriorating fiscal situation in Punjab has placed added pressures on public resources constraining development financing (investment), leading to poor delivery of public goods and services in the state. The committed expenditures of the state government (those on salaries, pensions, interest payments, and subsidies alone) have almost exhausted the total revenue receipts of the state in recent years, requiring the state to undertake even larger borrowings to finance these expenditures, thereby trapping the state in a vicious cycle of mounting current account (revenue) and fiscal deficits. The committed liabilities, including subsidies, were almost 100% of revenue receipts during the 11th plan period (2007-2012). The weak financial performance of the public sector enterprises (PSEs) including newly created Punjab State Power Corporation Limited (PSPCL) and Punjab State Transmission Corporation Limited (PSTCL) has further exacerbated the growing fiscal imbalances and mounting public debt.

A major contributory factor to fiscal distress is the state's poor expenditure planning and management tradition. GOP does not follow the system of project appraisal before approving a project. Moreover, the lack of evaluation and monitoring system causes inordinate delays in project execution, leading to escalation in costs and the projects, quite often, fail to deliver the desired outcomes. More importantly, untargeted power subsidy, triggered by populist policies, has brought both the state exchequer and the power sector on the brink of financial collapse. This has many implications. First, PSPCL is unable to modernize the power infrastructure due to lack of borrowing opportunities from the banks and financial institutions. Second, the deteriorating fiscal situation of GOP has had negative consequences for GOP's development agenda. In particular, the increase in nondiscretionary committed expenditure has reduced fiscal space limiting the ability of GOP to make effective use of public spending to meet its policy priorities. More directly, this has resulted in a large opportunity cost as the disproportionate share of the fiscal adjustment fell on capital spending.

Impact
Project Outcome
Description of Outcome
Progress Toward Outcome
Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design The potential stakeholder groups include central policymakers at the Department of Economic Affairs, Department of Expenditure, Government of India; Government of Punjab officials based in various departments; nongovernmental organizations; and academicians in Punjab.
During Project Implementation
Responsible ADB Officer Hiranya Mukhopadhyay
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Finance Department, Government of PunjabPunjab Government Secretariat,Chandigarh
Punjab, India
Timetable
Concept Clearance -
Fact Finding -
MRM -
Approval 22 Nov 2012
Last Review Mission -
Last PDS Update 22 May 2013

TA 8232-IND

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
22 Nov 2012 31 Jan 2013 31 Jan 2013 30 Sep 2013 15 Oct 2013 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
290,000.00 0.00 0.00 0.00 0.00 0.00 290,000.00 22 Nov 2012 252,671.00

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation

No documents found.


The Public Communications Policy (PCP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.