Finance Minister Dr Haseeb Drabu explains the compelling factors that led him to regularize the services of tens of thousands of daily wagers and offered a brief overview of the public spending and the possibility of changes he envisions in the budget he is presenting next week
KASHMIR LIFE (KL): Do you think, the implications of SRO-420 are serious for public kitty?
HASEEB DRABU (HD): Behind SRO-520 that will make up to 120 thousand daily-wagers as regular engagement, there was an utmost compulsion that was neither administrative nor financial. It was purely a social issue. All successive governments appointed people illegally. It was purely a human issue, involving the families directly. People working for decades were not being paid adequately and their services were hanging in the air.
When a person was engaged, he was 20 years old. He is 40 now and is married with children. Almost 60,000 such families were in distress. I always said it was a social issue and needs a solution.
No government took a decision on it ever. After many meetings and discussions, we formed a system to find out, if they are working at a single place and if at all they are reporting to their duties.
There were complaints about individuals listed in different departments. We ordered the installation of biometric tests in every department. Now, we have an estimate of 120 thousand people. They were being paid irregularly. Another issue was that in our society if you have a government job you have respect, but when you don’t have a designation there is an issue of social respectability.
We evolved a system, designated them as Government Services Assistants (GSA).
KL: But will they have a career plan?
HD: Our engineers have not been promoted for last 25 years, so people join the government as Assistant Engineers and retire as that. In case of GSA’s, the maximum I could have done was that a person whose salary was Rs 2000 to Rs 5000 is now provided with Rs 13000 to Rs 25000. Every year they will get 3% DA. We gave them a pension, medical leave, and 30 days casual leave. Their salaries will be revised through a separate pay commission.
KL: Will their regularization impact routine appointments in the government?
HD: No. They will be doing what they were already doing. The routine jobs will come up routinely.
KL: What about the public kitty?
HD: First, we consolidated them. Now, we will do the screening. Having been paid for 120 months is mandatory. How many will come out, we don’t know yet.
The impact is huge. But the way we have done financial engineering in the last three years, we have resources in this budget to absorb them. Our resource position will improve in next three years and there would not be a problem. In this budget, I have done provisioning.
Government employees were helpful. I told them I can’t give them 7th pay commission in two years, they agreed.
KL: But you created precedence now?
HD: In the budget we had created a budget head, outsourcing of maintenance: when you engage an employee you have to show the route of his salary. It was this head that was being abused. In this budget I will close this budgetary head and money will not drain into this. Therefore, departments would not be able to appoint daily-wagers anymore.
Now all of these GSAs will be brought under a new labour supply corporation, administratively. These GSAs will work with their departments for six months and for the rest they will be trained. We will use the six months to improve their skills.
Their salary will improve so will the labour market. Two years from now, these people will not appear a liability, they will be an asset.
KL: But there are many other thousands under various schemes including doctors whose services are hanging in the air?
HD: In centrally sponsored schemes, first five years are comfortable, then money is stalled, like SSA. Most wages come from the centre. Two years back, bills were cleared after 10 months delay. Today they get every month. The problem is not of doctors. The problem is how to treat these schemes. To manage these schemes, we will have to ensure that we develop reserves and avoid the liability creation.
KL: But what will your budget say when GST has devoured the surprise element?
HD: Most changes will be in the central budget. There is not much of secrecy, no earth-shaking changes. The focus will be on expenditure. Excise policy will be the same. Technically there won’t be much change because SGST remains unchanged. The budget will be public expenditure document.
Keeping aside politics, with GST, the share of the state in central taxes has increased by 30 percent and our own taxes will increase by 14 percent, maybe more in this budget.
KL: But GST has increased the rates of most common goods?
HD: It will take some time. There are some issues. One is awareness. Another: let the circle complete. We haven’t completed six months yet in this regime. Price impact will come after one or two years and you will see the cost of construction and cost of input will decrease and the rates of commodities will decrease. There will be customer empowerment.
I have told the GSTN that under GST MRP regime will not work. MRP was viable only when there was producer tax system. Now there is consumer price system. The producer would fix his margin, distributors margin and then the price would go up. Today customer cannot decide. We have to do away with the MRP system in next six months. The day that is done away with, prices will decrease.
The prices of many things have already gone down, like automobiles, but they are huge items. Small items will also come down. Food items have zero percent already.
KL: But to prove that state’s taxing powers are intact, will you impose a new tax, this fiscal?
HD: I want real estate and power should come under GST. Because the simplicity in GST is that you don’t have to pay tax on tax. No embedded tax. I have the power to bring these services into the ambit of GST. Legally, we have examined and we have the powers to tax.
KL: But you have started reducing the size of the government. Treasuries you have already closed?
HD: When I took over as finance minister, I noticed many things that shouldn’t be there like the Treasuries. The concept of treasury dates back to the time when there were no banks. Now, the institution of banking is so vast that treasuries have no work. The role of treasuries has changed. The need is to empower departments. My understanding of finance is that it should be facilitated, not controlled.
Our treasuries were at district and sub-district levels. Whatever is the expenditure in the district is dealt by one person. In contemporary times, this much competence is very difficult because you have 28 grants.
The system with which I am replacing it, the Pay Account System, is happening for the first time in India. That means that the funds of education will be dealt by the education department and health money by health. It will be very efficient system though faceless.
Second, there won’t be a delay in the payments. First, we will incorporate this in PHE, and Irrigation, the departments where there is the tremendous incidence of payments and then in R&B. Second, in this part of the world, people work without permission. You have to build a road, a budget is Rs 10 lakhs, you issue a tender of Rs 20 lakhs, thus creating a liability.
With this system, we have incorporated two more systems: Public Finance Management System and Budgetary Expenditure Allocation Management System (BEAMS). This system will not allow you to create a liability. An automatic, IT-driven cap will be used.
The whole system of finance will change. No liability, no delay, you will see a new system and it is rolling out gradually.
KL: But for the first time a Finance Minister met ministers and not bureaucrats only before the budget?
HD: Meeting administrative secretaries was the tradition. The first time, I thought that if a minister has a vision for his sector why not to get it forward. Let them say what their vision is? What do you want to do?
My most fruitful pre-budget meetings were with my colleagues. Because every minister has his style and thought the process and the budget will reflect that. Even there will be the difference in expenditure.
KL: But where is this all money going?
HD: The problem is capacity. Today you want Rs 10,000 crore, I will give you. But the problem is that we lack the capacity to work and spend. The major problem is of tenders. This time we have made efforts.
There won’t be money problem for power from February. Our liabilities are clear. And we have made a new system. There are issues in implementation due to the regular shutdowns. We could not work. Now we see CPSUs have come up and there was a long meeting about the procurement policy and capacity spend. Power generation issue is due to tendering allocation issues and not because of resources.
KL: You had a long meeting with the corporations. Is there something major happening?
HD: In the last budget, I said a lot about corporations. This past year, we worked on some of them, mostly JKSPDC benefitted. It will soon become a Rs 9000 crore entity. Secondly, in JKHPMC, all loans we had given we converted that into equity and rectified balance sheets. In next few months, you will see a difference. People on deputations will find a closed door. We are making a system of all corporations.
(Muhammad Raafi processed the interview)
