New Delhi, March 16: Bengal is wolfing down borrowed cash, not just for the politically correct reason of funding development but to live from one day to another.

The state plans to borrow as much as Rs 16,096 crore, including over Rs 9,800 crore from the market, in the coming financial year, according to documents submitted to the Planning Commission.

The huge borrowing programme comes on top of its accumulated debt mountain of over Rs 120,000 crore, which amounts to about 40 per cent of the state’s GDP.

“The worst part of it is that Bengal’s balance from current revenues (the difference between revenue income and revenue expenditure) is a negative Rs 4,227 crore. Which means the loans are being taken not only to pay for development work but also to fund part of its normal revenue expenditure such as paying salaries or interest on its past loans,” a plan panel adviser said.

Agreed M. Govinda Rao, a member of the Prime Minister’s Economic Advisory Council: “The state’s fiscal situation is not healthy.”

During 2007-08, too, the state had the ignominy of reporting the highest revenue deficit of Rs 7,168 crore among all states. Kerala had the second largest revenue deficit at Rs 5,251 crore. During this year, Bengal paid Rs 11,028 crore as net interest on past loans — a little less than the topper, Maharashtra, which spent Rs 11,087 crore.

“Bengal has been falling into a debt trap for quite some time... the central loan write-offs in favour of state governments effected by the Finance Commission under Rangarajan helped bail out many states. But states must now guard against fiscal profligacy,” cautioned S.P. Gupta, a former member of the Planning Commission.

Most states, barring a few like Bengal, have enacted fiscal responsibility laws that force governments to cut deficits. In 2007-08, as many as 16 states had revenue surpluses after putting in place programmes aimed at cutting down wasteful expenditure and increasing revenues.

A Bengal government source said: “We have not come up with a fiscal responsibility act as this would curtail the welfare role of the government.”

The borrowing programme approved by the plan panel and central assistance of Rs 2,641 crore are the sole sources of the state’s resources for funding its development plan of Rs 11,602 crore. The state is also paying back some Rs 3,865 crore, most of it to the central government and to the market as repayment of past loans.

Plan panel officials said the borrowing plan could be termed large, especially if seen against the state’s total tax revenue estimates of Rs 24,321 crore during 2007-08.

During 2007-08, non-development revenue expenditure as a percentage of revenue receipts was budgeted at 61.5 per cent. This is the highest for all states in the country. “Even a state like Bihar, which many used to consider a basket case earlier, spent only 37.5 per cent on non-development revenue expenditure as a percentage of its revenues,” a official pointed out.

The interest payout as a percentage of revenue expenditure at 30.4 per cent for Bengal is also the highest among all states. “The interest payment is so high that it seems the state does not have enough to spend on infrastructure and development. This could be a problem in the long run,” Rao said.

Similar figures on interest as a percentage of revenue expenditure for states like Bihar and Jharkhand were 16.3 and 14.9 per cent, respectively. The average for all states was just 17.7 per cent.

“All this suggests that Bengal’s debt servicing as a ratio of its revenue is far higher than what we can consider sustainable. The state will have to find ways of increasing its revenues,” an official said.