New Delhi, Feb. 28: If there is one figure repeated in every budget since the first one in 1948, it is an unpaid debt of Rs 300 crore that Pakistan owes to India.

In 1948, finance minister R.K. Shanmukhan Chetty had included the sum in the budget document and since then, the amount has been carried forward year after year as a liability of the government and will find a mention this year, too.

The amount is neither written off nor padded up with the interest due.

Old timers in North Block admit that India is unlikely to recover the amount but it will not be written off because this can give Pakistan an unfair advantage during any "future financial settlement". Islamabad, too, shows a sum Rs 580 crore that Government of India owes to it.

This little quirk in the history of India's budget-making process is a relic of a pact that the country signed with Pakistan in December 1947. Chetty, an economist-turned politician who had served as the Diwan of Cochin, signed the deal on behalf of India, while lawyer-turned civil servant Malik Ghulam Mohammed signed it for Pakistan.

Undivided India as on August 14, 1947, had more liabilities than assets. So the two sides decided they would divide the liabilities along with the assets and agreed to pay each other the difference between the two.

A complex calculation figured out that all outstanding debt and obligations, including post office deposits, National Savings Certificates and provident fund, amounted to Rs 3,300 crore.

The assets of the government of undivided India, on the other hand, amounted to Rs 2,800 crore. It included the railways and the posts and telegraph, mint, the central government's irrigation works, the Port of Vizagapatam and Lutyen's New Delhi; besides buildings, stores and equipment of the defence services as well as the cash balance of the RBI and subscriptions to the IMF and World Bank.

After much haggling, the two sides agreed that Pakistan's share of the debt would be Rs 300 crore payable to India. Chetty in his 1948 budget speech said, "On a very rough estimate this debt is likely to be of the order of Rs 300 crore and the rate of interest may be near about 3 per cent. Pakistan's total debt is to be repaid in Indian rupees in fifty annual equated instalments for principal and interest. As a measure of assistance to the new Dominion in its earlier years it has been agreed that the first repayment should commence only in 1952."