The thumb rule in J&K is that intervention in the policy framework triggers pressures from vested interests within and outside the government. Sometimes, they yield better results. That is what exactly happened in last few months that made a shallow resource state richer by nearly Rs 1000 crores, reports R S Gull.

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Finance ministers, especially at the end of March, in any Indian state look visibly upset. The J&K state, that has more per capita expenditure than its neighboring states, has a bit more problems. But Abdul Rahim Rather would smile as he was asked about the additional money that was generated the past year.

“It is really great,” Rather said. “From the NHPC money, we may have to return part of it because NHPC will increase the tariffs but still it is major development.” After he presented the budget last month, Rather bluntly told reporters that the water usage charges that NHPC is reported to have paid was not reflected in his budget because nothing has come to him. In the next budget, he would not say anything like that because the court has granted the money that NHPC had deposited to the state government.

The state’s resources are expected to jump by Rs 939 crores this year (2012-13) as it has started asserting on key issues. While the power generating agencies will fetch it around Rs 800 crores, the cell phone operators will add up another Rs 50 crores as entry taxes for their massive equipment imports into the state.

Congress man Taj Mohi-ud-Din

In 2009, the state government passed a new law to set up J&K State Water Resources Regulatory Authority (SWRRA) as the ultimate godfather of state’s water resources. Apart from registering afresh, all water users (read power producers) are supposed to pay water usage charges (Rs 0.25 per cubic meter) to the Authority. Bills were sent to the state Power Development Corporation (PDC) and the NHPC, the major user of water in J&K. The PDC paid but NHPC waited to calculate only to find that it will upset the tariffs across the northern region. It was permitted by the Central Electricity Regulatory Commission (CERC) on October 21, 2011 to pay the cess and claim it from the beneficiary states using NHPC power that it generates from its four operational projects in J&K.

Finally, it petitioned the High Court. NHPC was directed that it should pay the bill and the amount would be kept in a separate account till the final outcome of the petition. Against the bills worth Rs 547.76 crores that SWRRA issued to the NHPC, the power corporation had deposited Rs 480.61 crores till December 2011. The state government recently got an order from the court that they can utilize these funds for welfare schemes in the state. However, it has a rider that if the state government lost the case in the court, it will have to “deposit back the entire amount in the said separate account along with interest as would accrue on it.”

Sources in the NHPC said plans are afoot to go to a superior court against the high court decision. The thinking within India’s hydropower giant is that even if the NPHC wins the battle in the court, it will still have to tackle allied problems in the long run. A cabinet sub committee that Omar Abdullah set up last year to understand the relationship between the state government and the NHPC suggested that the power corporation has overcharged the state government to the tune of Rs 2350 crores in 27 years for the energy it supplied to the state. The proposal of seeking this amount back is being studied by the state law ministry.

The court order vindicates Irrigation Minister Taj Mohi-ud-Din that state can earn. Sources close to him said the minister was demoralized after the court kept the money in its vault. “Now he is happy as he was the only person who was asserting that the money will come,” an official close to the minister said.

But this is just a part of the story. Earlier, the state government became richer by a whopping Rs 459 crores. This is the entry tax that the cell phone operators had been evading for the last five years.

As the mobile operators started importing equipment, the state government sought entry tax. Initially they paid. Later, however, the operators went to the court challenging the state government’s constitutional right to issue such an order. They termed the order a violation of Article 301 of the Constitution of India. After around four years of battling it out, they lost the case when the High Court directed all the seven mobile companies operating in the state to pay a fine of Rs 10 lakh each to the state government besides the entry tax as per rules.

The court ruled that while the penalty amount will be spent on orphans in the state, the entry tax collections would go to the public exchequer. The operators are thinking of going to the superior court against the single-bench order. “So far they have not gone,” Rather told Kashmir Life. “But if they choose to go, we will contest because we believe that mobile telephony is a purely commercial exercise.”

J&K is one of the few states that have a narrow resource base. For the fiscal 2012-13, the state government expects to net tax revenue of Rs 5419 crores as Rs 2118 will come from various non-tax sources like power tariff, forest produce sales and other things. An addition of Rs 939 crores is a substantial increase in the state’s resources. Now it will keep on coming, quarter after quarter.


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