Budgeting Next Fiscal

J&K’s yearly requirement for funds are increasing with every passing year. But the interesting part is that while the devolution from the central tax poll are marginally down, J&K’s own tax base is improving gradually – thanks to increased consumerism and dependence and an efficient collection mechanism, a Kashmir Life report.

Notwithstanding the incoherence’s that the opposition has detected in the state budget proposals for 2013-14, the larger reality is that it is going to be a consistent feature especially in the states which have more fund requirement and less resources of their own. In that situation they will have to rely on central funds which usually come for specific purposes. State finance ministers lack any flexibility in spending the money they get from centre especially if they are tied grants or for the centrally sponsored schemes.

Even in taxing, it is almost the same situation. Under the VAT regime, they do not have much flexibility because uneven tariffs impact trade relations between two neighbouring states. If J&K adds a few cents more to the liquor in the state, it is Punjab that will make the best of it by keeping the tariffs slightly lesser. It works otherwise also. This situation and centralization of the public finances has reduced the state budgets to a statement offering income and expenditure of a state in a particular year. But if there are radical interventions strictly based on resource availability, the budgets could become very interesting because keys shall remain with the state finance ministers.

The fifth consecutive budget that Abdul Rahim Rather, who is in assembly for sixth consecutive term, cannot be understood if it is taken out of this paradigm shift that public finance in Indian states have resorted to. Barring changing the tax tariffs on certain items and taking some to the zero-tax regime, and a few low-cost initiatives, the budget is what it was supposed to be – a balance sheet of the state’s requirements.

For the current fiscal 2012-13 that would conclude by March, J&K government would end up receiving Rs 34,311 crore. Since Rather has followed the zero-deficit budgeting that Dr Haseeb Drabu had introduced, the state will consume it entirely. Better receipts were possible because state’s tax revenue increased to Rs 5975 crore – VAT collections jumped to Rs 4219 crore, stamp duty to Rs 271 crore, excise duty to Rs 413 crore, goods and passenger tax reached Rs 474 crore and electricity duty to Rs 423 crore. Even the non tax revenue improved to Rs 2819 crore. This helped state manage itself better even though the central tax devolution fell by Rs 160 crore.

For the new financial year (2013-14) starting April 1, the state would require Rs 38068 crore. It will be funded from different sources including central tax devolutions of Rs 4485 crore, state’s tax revenue of Rs 6700 crore and non-tax revenue of Rs 3033 crore. Besides, the government has targets of collecting Rs 95 crore from banks, Rs 68 crore from Forestry and Wildlife, Rs 60 crore from mining, , Rs 44 crore from irrigation and Rs 38 crore from water supply departments.

On the expenditure front, the biggest chunk of Rs 17,002 crore would go as salaries and pension to the employees that government has on its rolls. It includes Rs 700 crore of two fresh installments of DA. A sum of Rs 783 crore that was set-aside for PSUs is primarily aimed at meeting their salary expenses, the budget says. Managing energy requirements of the state is another major head that would require Rs 3,579 crore in next fiscal. Another Rs 3,300 crore would go for interest repayment on loans.

The yearly plan that takes care of the developmental activities of the state is yet to be approved by the planning commission of India. Rather has proposed a Rs 8,000 crore plan plus spending of Rs 600 crore under PMRP, a fully funded government of India reconstruction scheme. The plan outlay includes Rs 1000 crore as state’s share to access central sponsored schemes worth Rs 3500 crore. Interestingly, even plan has a provision of Rs 1564 crore that would go as salary and wages.

The government finally decided to make Panchs and Sarpanchs salaried. They would get Rs 2000 a month plus Rs 300 per sitting, twice a month. While the state had Rs 195 crore for spending through Panchayat’s in 2012-13, it will be up to Rs 231 crore in 2013-14. Rather hopes Panchayat’s would get Rs 1300 crore for spending under MG-NREGA alone. Even the lawmakers will get a cumulative Rs 194 crore under Constituency Development Fund.

It is actually the percentage basis that works in mobilization of the resources and the expenditure that offers an interesting analysis. For the new fiscal, on the income front, J&K would get 51% of its resources through central grants, 18% is its own tax revenue, 12% is the share from central tax pool, 8% is state’s own non tax collections and 11% is the borrowings. On the expenditure front, 46% would go to salaries and pensions, 9% each to power, and interest payments, 11% to other expenditures and balance 25% to the developmental activities.

Rather announced in his budget speech that the government will appoint 80,000 youth in next two years. This is in addition to about 50,000 youth already employed in last four years.

Electrifying Offices

All government offices to be metered and they will shift to CFL attracting now only 5% VAT and not 13.5%.

 

For Handicrafts

10,000 of the proposed 11000 Artisan Credit Cards issued already. For the balance 1000, the government would offer 10% interest rebate to the tune of one lakh rupees of credit.

 

Mobile Schools

The government proposes to add 100 more to the 98 mobile schools already functioning for the Gujjars and Bakerwals.

 

Social Welfare

69000 left out cases of physically challenged, destitute women and old age persons being brought under Integrated Social Security Scheme for which Rs 21 crore was set aside.

 

BPL Marriages

Rs 30,000 assistance for marrying every orphaned girl of marriageable age if she is a BPL matriculate.

 

Acid Victims

Rs 50 lakh set aside for helping acid victims on the apex court’s directions.

 

Tripling Ex-gratia

For any cop who dies in action, the government will pay Rs 7 lakh and not Rs 2 lakh from April 1, 2013

 

For PSUs

Rs 95 crore to PSUs for managing their CPF contribution and gratuity requirements of their retired employees in next two years. A Rs 50 crore grant will be released this year.

 

Tax Rebate

Cooked food, saffron, durries, quilt & blanket covers, table cloth & table covers, mufflers, bed spreads, pillow case & pillow slips will now be charged only 5% VAT and not 13.5%.

 

Honey, It Is Free

Honey is now in zero tax regime so are bags, purses, tea cozies in which crewel cloth and embroidered or chain stitch fabrics are used as primary raw material. So is Pashmina wool now. Jute fabric will not involve any toll tax because it is used by certain NGOs which produce bags for yatris. Small tractors, power tillers and other agricultural implements and attachments will levy no VAT.

 

Banned Finally

Chewable tobacco and products like pan masala, gutka, khaini are banned. VAT on cigarettes increased to 40%.

 

Chickens

Toll rate on import of table birds up from Rs 6 per kg to Rs 8. Poultry imports to reach five crore birds by March end.

 

Wages Up

Minimum wages increased from Rs 125 per day to Rs 150 per day.

 

Advertizing Expensive

It would cost government 50% more to advertize in newsprint from April 1. Government will help create a participatory insurance cover to journalists in J&K.

 

 

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