Budget 2019-20: Running J&K Costs Rs 243.5 Cr Daily

By Masood Hussain

SRINAGAR: Jammu and Kashmir would be spending a whopping Rs 88911 crore in the next fiscal starting April 1, 2019, and two-thirds of it would be spent on implementing developmental activities valuing slightly less than one-third of the total budget. Technically, most of the revenue will come the central government by way of share of taxes, grants and the centrally sponsored schemes, the budget documents approved by the Governor Satya Pal Malik’s State Administrative Council (SAC) on Saturday suggest.

Navin Choudhary (IAS) presenting the J&K Budget 2019-20 to governor Satya Pal Malik in a SAC meeting at Jammu on December 15, 2018. DIPR

Where From The Money Will Come?

There are three sources for the state’s income: the state government, the central government and the borrowings. Within the state, the income comes from the taxes and services. From the central government, the income is from the share of taxes and the grants. On the borrowings front, the state government considers the Provident Fund of its employees as a loan and then goes on borrowings from the open market or even from the central government institutions.

For the next financial year, the state’s total revenue receipts are anticipated at Rs 71193 crore. The capital receipts are Rs 13378 crore.

From its own resources, the state government will generate a tax revenue of Rs 12932 crore as its non-tax revenue will be Rs 6066 crore. On taxes front, Rs 8050 crore will come from GST, Rs 1400 crore from sales tax, Rs 2450 crore from excise and toll and Rs 1032 crore from other taxes. Most of the non-tax revenue will come from power tariff collection – Rs 5343 crore. Cumulatively the state’s own revenue resources are at Rs 18998 crore. This excludes Rs 50 crore that the state government is keen to raise through additional resource mobilization.

The overall resource availability from the central government is anticipated to be Rs 52145 crore. In the 12 months, starting April 2019, the state government will receive Rs 15000 crore as its share from the central tax pool. Besides, the state will receive Rs 14142 crore as revenue deficit grants from the central government; Rs 279 crore under SDRF/NDRF; Rs 1775 crore as Security Related Expenditure; and Rs 238 crore under other central schemes.

Since the state has now elected Panchayat system and the urban local body set up, the state will get a Finance Commission grant of Rs 1422 crore for Panchayat and Rs 566 crore for ULB set-up. The budget estimates suggest that since all Panchayats’ will get anything between Rs 20 lakh to Rs one crore as the grant, they would require professionals to manage the money. So the government has announced creating 2000 posts of Accounts Assistants to help Panchayati Raj Institutions.

In addition to all this, the state government would receive Rs 8383 crore from Prime Minister’s Development Programme that the state government named as TAMEIR. The Central Sponsored Schemes are anticipated to get Rs 10340 crore, in the next fiscal.

Besides, the state government is anticipating Rs 13378 crore of capital receipts, which are debt-creating resources. These include Rs 9100 crore of borrowings; Rs 2056 crore of PF of its own employees, Rs 67 crore on non-debt creating resource and Rs 2155 crore, which the state government is anticipating to recover from the loans and advances it has extended in past, during the financial year.

On basis of these income details, it is quite obvious that 59 per cent of the total resource will come from the central government. In fact, 43 per cent of the income is a central grant and 16 per cent is the central tax share. State’s own resources are only 21 per cent: 14 per cent comes from tax and seven per cent is non-tax.

This leaves 20 per cent of the budget that will come from the borrowings, both debts creating and non-debt creating.

Where This Money Will Be Spent?

The state government anticipates spending Rs 88911 crore in fiscal 2019-20.

The overall Capex – the capital expenditure, the money that will get into some sort of developmental activities has been capped at Rs 30469 crore. The budget statement suggests that the state finance department has set aside Rs 7340 crore as the state’s share in various Central Sponsored Schemes (CSS). The total amount that will go into the developmental activities under state and the district plan and under PMDP has been put at Rs 14073 crore. These two are the major developmental areas which are budgeted.

The rest of the money that is part of the capital expenditure may not necessarily get into the developmental activities. These include Rs 72 crore slated for loans and advances; Rs 2106 crore of debt repayment which is due during the year; Rs 4056 crore as payment as equity and investment plus Rs 2822 crore that fall under “other” category of the capital expenditure.

This all means that actual expenditure on developmental activities would hardly cross Rs 22-25000 crore.

The rest of the overall yearly spend of the state government will go to the revenue side – the committed expenditure. This is the main expenditure: Rs 58442 crore. The main expenditure on the revenue side is the salaries of the employees which are anticipated at Rs 26000 crore, a Rs 6380 crore of pension as Rs 19121 crore will fall under other expenditure in the primary revenue expenditure.

Interest payment (not the loan payment) is part of the revenue expenditure. The state government will spend Rs 6941 crore as an interest payment. Besides, it will book an expenditure of Rs 7700 crore on power purchase; Rs 764 crore as maintenance and repairs of the assets it has created; Rs 3722 crore as the grant in aid and additional Rs 3000 crore as part of its commitments towards the CSS.

A quick analysis of the state’s expenditure set-up suggests that developmental activities would take almost 26 per cent of the total spend. In fact, 27 per cent of the total expenditure will be used as salaries and pensions of the state employees; six per cent each will as an interest payment and managing the power supply to the state. The balance 35 per cent goes to the “other” category that is vast and huge in quantum and scope.

How Much J&K Spends Daily And Where?

Jammu and Kashmir government will be spending Rs 243.59 daily which is whopping expenditure for a population of slightly more than 1.25 crore people living across 22 districts of the state.

Though the exact details on daily basis may not be possible broadly it will look like this: Rs 95.03 crore will go as salaries and pensions to 525863 employees of the state government on daily basis. The state government will spend Rs 21.09 crore on power purchase on a daily basis as Rs 24.78 crore will go as repayment of loans and interests on a daily basis. The developmental activities will cost the government almost Rs 60 crore on daily basis. More than Rs 2 crore is the daily expenditure for the state government to manage the assets it has created. Though the central government will provide the state government with an amount of Rs 4.86 crore on daily basis under SRE, the state will be spending much more to the security-related issue on daily basis.

How Is The Public Finance Behaving?

There might be specific grants for special schemes in the budget but the larger thing is that this is the first budget of the state government since 1995 that was literally and practically drafted by the state Finance Department, this time led by Finance Secretary Naveen Choudhary. He has been holding the finance department since 2015 and has been part of the gradual makeover of the department.

By and large, the fundamentals of the public finances have remained intact. There are certain observations which are important to mention.

The data that is part of the budget 2019-20 suggests that the percentage of state’s own resources to the overall state GDP is getting slightly compromised in the next fiscal. The revised estimates of the current fiscal suggest that the state’s own resources were making 10.88 per cent of the GSDP of the state and they will have a marginal fall to 10.72 per cent in the next fiscal. However, the percentage of the state’s tax revenue to the GSDP is marginal improving from 7.27 per cent to 7.29 per cent.

The Jammu and Kashmir state continues to be revenue surplus. While the revenue receipts are improving from Rs 66180 crore in current fiscal to Rs 71193 crore in the next fiscal, the revenue expenditure is getting down: from Rs 59042 crore to Rs 58442 crore. This flexibility in better revenue availability is helping the state deploy more funds on the capital side. In the current fiscal, a surplus revenue of Rs 7138 crore was deployed to the capital side and in the next fiscal, the budget documents suggest the state will have Rs 12751 crore available in the revenue kitty for deploying in the CapEx side.

The data also suggests that the gap between the capital receipts and the expenditure continues to follow the trajectory that was set in 2015-16 – the capital receipts (debts), as part of the overall income, must go down and capital expenditure as part of overall expenditure must improve. The capital receipts have gone marginally down from Rs 13411 crore in current fiscal to Rs 13378 crore in the next fiscal. The capital expenditure has appreciated from Rs 30425 crore to Rs 30469 crore.

Interestingly, the state government has not shown the costs for its major scheme to complete the languishing projects. It is making an investment of Rs 3631 crore on 1643 languishing projects this year. Though this amount is a loan, it is being taken by a wholly owned company of the state government but not the government.

The same trend is being exhibited by the per unit revenue cost on spending a unit on capital expenditure, a trend that actually took off in 2016-17. J&K would book and expenditure of Rs 5.62 for implementing a project of one rupee in 2014-15. Between 2017-18 and 2018-19, it fell from Rs 4.8 to Rs 3.2 and finally has reached Rs 1.9 in the current fiscal. This parameter remains unchanged.

The state’s own revenues continue to grow. They had witnessed a fall in wake of 2014 floods that devastated Kashmir. But they continue to grow – from Rs 16955 crore in the current fiscal to Rs 18998 crore in the next fiscal.

Budget proposals for fiscal 2019-20 suggest that it has an overall step-up of 10.07 per cent and in fact 14.2 per cent on the revenue side and 4.6 per cent on the capital side. While revising teh budget estimates, the documents suggest that state has added to the budget excess of funds in the year. The excess funds were supposed to be only Rs 1911 crore but the public kitty ended up having an overall funds excess of Rs 1891 crore. However, it spent more money in the current fiscal than it was supposed to: in fact Rs 9154 crore more than the budgeted Rs 80313 crore. This was partly because of Rs 7857 crore requirement for the seventh pay commission.

Is There Something New?

There are various initiatives in the budget which will helpful in managing certain key sector. In post-harvest, the government announced that it will fund half of the costs that will go into the making of new controlled atmosphere stores in the state.  Besides, it will give half of the costs for creating refrigerated van transportation of perishable vegetables and fruits. Besides, it will provide Rs 9.18 crore to meet freight subsidy for transportation of cut-flowers to promote commercial flower cultivation

Schools will get Rs 100 crore for benches and desks for students in primary and middle schools. An additional Rs 45 crore will come for providing assured electricity, drinking water supply.

There are various other measures within various sectors which have been announced by the governor. These include Rs 1000 crore for adjustment of temporary teachers which is a major initiative.


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