J & K Budget 2010-11: 'Fancy Rhetoric'
By Bilal Hussain
15 April, 2010
Countercurrents.org
The budget 2010-11 is an attempt to appease all. But unfortunately it couldn’t gather decent points on public scoreboard as this time expectation were too high. The denizens of Jammu and Kashmir were made to believe that the budget would address the hardcore issues like burgeoning unemployment, shortfall in power, price rise and like.
This is the second consecutive budget that the Finance Minister, Abdul Rahim Rather, presented in the house but, once again the budget seems more of a constitutional requirement than a financial plan for future. Like rest of the annual budgets of J&K it is another public document, which ignores the long-term perspectives.
As per preliminary estimates, the primary sector has contributed 24.60 per cent to the Gross State Domestic Product (GSDP). Secondary sector has contributed 29.60 per cent and the share of the tertiary sector has been 45.80 per cent. The contribution of the primary sector comprising of agricultural and allied sectors has slipped down from 25.82 per cent contribution registered last year. The secondary sector comprising of industry and manufacturing activities has improved from the last year’s figure of 28.29 per cent. There is a marginal lowering of contribution from the tertiary sector comprising of services from its last year’s share of 45.89 per cent. “I may point out here that during the last 20 years counted from 1980-81, the share of primary sector has come down from the level of 47.40 per cent. The secondary sector has substantially gained from 12.90 per cent and the tertiary sector improved from 39.70 per cent. While the shares of the secondary and tertiary sectors have improved because of growing number of manufacturing and service units, there is stagnancy in primary sector. This stagnancy calls for our fullest attention for possible interventions and corrections,” Finance Minister, Rather mentioned in his budget speech.
Tax exemptions with regard to the agriculture would not do the job. The need is to ensure hassle free credit to farmers? Stress banks to increase their portfolio in agricultural lending, which would mean more investments and hence increased production.
The state government has urged the 13th Finance Commission to provide a grant of Rs 1000 crore for settling the state government’s over draft with the J&K Bank. At present the state government on an average has an over draft of over Rs 2150 crore. In longer run it is neither good for the government nor for the J&K bank’s health as well.
The government has recently decided to explore Public Private Partnership (PPP) possibilities for execution of Rs 400 crore tunnel between Vailoo and Singhpora to provide all weather connectivity between the Kishtwar in Jammu Region and the Kashmir valley. The project report for its implementation in PPP mode has been prepared. Report preparation is fine but the state government needs to be careful enough while dealing with the private entities as their main motive most of the times is to mint money.
The urban transport system for Srinagar and Jammu cities requires special focus. The government intends to engage M/S RITES to prepare reports for creating Metro systems for both these cities on the pattern of Delhi. Is it really needed? Does the state have enough of resources to create Metro systems in the state? The state is yet have smooth roads, to think of metro would be simple fancy rhetoric.
As per revised estimates, the current year’s receipts total to Rs 22,885 crore in comparison to Rs 22,739 crore adopted in the budget estimates, up by Rs 146 crore. The tax receipts are estimated at Rs 3,075 crore in comparison to budget estimates of Rs 3,011 crore showing a further improvement of Rs 64 crore. The non-tax revenue figures proposed in the RE are Rs 1,294 crore in comparison to budget estimates of Rs 1,219 crore indicating an improvement of Rs 75 crore. The fiscal deficit has been reworked at Rs 2,090 crore in comparison to the figure of Rs 2,081 crore in budget estimates indicating a very small variation of Rs 9 crore. Time and again, mentions have been made about the vicious circle the state is being trapped on account of fiscal deficit. The state, however, seems to be unmoved. The present financial plan doesn’t make any mention of reducing this fiscal deficit.
The total salary expenditure is estimated at Rs 6,629 crore as per revised estimates. The expenditure on pension payment is now estimated at Rs 1,495 crore in the revised estimates. Looking at the increasing salary bill of the state the government recruitments should have been put on halt till the state would have enough resources to sustain its employees. You can’t please people by employing and then at the same time cry for the lack of funds to meet salary bill. But at the same time, the government needs to come-up with a concrete policy on the unemployment in the state.
The total budgetary receipts have been kept at Rs 25,984 crore. Out of this, an amount of Rs 22,849 crore is expected as revenue receipts and Rs 3,135 crore as capital receipt. Out of the total expenditure, also estimated at Rs 25,984 crore, the revenue expenditure will be Rs 17,698 crore both on account of plan and non-plan. The total capital expenditure is estimated at Rs 8,286 crore both on account of plan and non-plan. The State’s own revenue comprising of tax revenue, non-tax revenue and share of central taxes totals to Rs 7,873 crore and represents over 30 per cent of the total receipts. Exclusive of state’s share of central taxes, the state’s own tax & non-tax revenue comes to Rs 4,962 crore which is about 19 per cent of the total budgetary receipts. What is needed is to look for all options whereby the state can increase the revenue.
The next year’s estimates of tax revenue are Rs 3,655 crore indicating an increase of about 19 per cent. The next year’s estimates of VAT receipts are being placed at Rs 2,611 crore indicating increase of Rs 545 crore over the current year’s budget estimates of Rs 2,066 crore. Excise revenue target for the next year is Rs 280 crore. The target of collection of taxes on goods & passengers has been kept at Rs 384 crore. Duties on electricity are likely to yield Rs 206 crore. Taxes on vehicles and stamps duties are expected to yield Rs 101 crore and Rs 67 crore respectively. The next year’s budget estimates for non-tax revenue have been kept at Rs 1,307 crore indicating a negligible growth. The main item is power receipt for which next year’s target has been kept at Rs 1,055 crore. Receipts from mining, forestry, water supply and health sectors have been kept at Rs 30 crore, Rs 38 crore, Rs 27 crore and Rs 15 crore respectively. In accordance to the revenue managed by the different sectors, why can’t state make allocations on the same basis? This would make others to perform and show fiscal prudence.
The total expenditure of Rs 25,984 crore is divided between plan Rs 6,000 crore, PMRP Rs 1,206 crore, centrally sponsored schemes Rs 850 crore and non plan expenditure of Rs 17,928 crore. In revenue & capital terms, the break up is Rs 17,698 crore on revenue account and Rs 8,286 crore on capital account. Out of the total revenue expenditure, about Rs 8,200 crore is estimated to be spent on pay and allowances of the government employees including Rs 725 crore on two new installments of DA and Rs 129 crore on migrant salaries. A provision of Rs 482 crore has been kept as grant-in-aid, mostly for government aided institutions which use it mainly for salary payments. Rs 1,800 crore have been kept for pensions and retirement benefits. Rs 2,251 crore is earmarked for payment of interest. Expenditure on power purchase is another major item and the next year’s provision on this account is Rs 2,051 crore. As far as capital expenditure is concerned, Rs 959 crore are estimated to be spent on repayment of loans and Rs 7,327 crore on various capital formation schemes including capital component of the plan. The amount of Rs 959 crore for repayment of loans amply shows how deep the state is in debt trap. It is high time for the policy makers to take initiates to take state out of this burgeoning debt.
The present restricted peak power demand is estimated at 1450 MW where-as the total availability from state’s sources comes to about 945.70 MW. The total availability of power comprises of State’s own installed capacity of 758.70 MW and 12 per cent free power available from the central projects located within the State equivalent to 187 MW. The gap between demand and supply becomes precarious during winter months when the generation from the local hydel stations, owned by State as well as the Centre, is reduced to almost one third of the installed capacity and the power demand goes up primarily because of heating needs. The 450 MW Baghlihar HEP-II is estimated to cost Rs 2800 cr and the work on execution of this project is already in progress. The next year’s power purchase budget has been kept at Rs 2050 crore. Against this figure, the revenue realization target is only Rs 1055 crore. This means a loss of Rs 1000 crore. How long will this continue? Can’t the state administration think louder and start taking steps in fortifying the JKPDC?
Disinvestment in the public sector is an area which has not been attended to so far. The government intends to make a beginning in this direction in near future. How much more time will the state need for such a step?
When the government talked about the registration of educated unemployed youth, they came forward in large numbers to get themselves registered in the District Employment and Counseling Centres. As per the latest available figures, the number of youth registered in these centres is 5.84 lakh, comprising of 3.08 lakh in Kashmir and 2.76 Lakh in Jammu division. These figures in no way will provide a fair picture of the size and nature of the problem the state is embraced with as there are lots of flaws in the registration process itself.
The government has started a process of creating mass awareness amongst the youth about the bright prospects in self-employment programme to be undertaken under the seed capital scheme of the J&K Entrepreneurship Development Institute. A sum of Rs 50 crores has been provided as Entrepreneurship Development Fund to be operationalised through J&K Entrepreneurship Development Institute (JK EDI) for this purpose. Here the question is not only about the quantum of amount allocated to JKEDI but also about the performance of this institution. Till date, JKEDI has not been able to deliver on what they are supposed to.
The bottom line is that the present budget is nothing more than fancy rhetoric, which will put the state’s fiscal health in serious condition.
[Bilal Hussain is a journalist, and writer. In 2009 he attended the McGraw-Hill Personal Finance Reporting Program Courses, supported by The International Center for Journalists. He is associated with the premier English Daily, Kashmir Times. His principal interests are capital markets, developmental sector and ecological economics. He can be reached at [email protected]]
