Dhumal hints at fresh taxes
Tribune News Service

SHIMLA, Dec 17 — The imposition of fresh taxes and user charges for services being provided by the government was indicated today by the Chief Minister, Mr P.K. Dhumal, as a three-pronged strategy to meet the current financial crisis in Himachal Pradesh.

Mr Dhumal, who was replying to the debate on the "white paper" on the finances of the state in the Vidhan Sabha, stressed that the performance of various functions by the government must be reviewed with a long-term aim of establishing a government which intervenes where necessary, delivers at lower cost, targets subsidies to intended segments and possesses an institutional structure in which beneficiaries pay for services in a transparent and accountable manner.

He said the cost with respect to governance had to be minimised and the government could not be seen as a vehicle for providing employment and government expenditure alone should no longer be seen as the only or even the best means for promoting development of the state.

Mr Dhumal underlined the possible path which might have to be adopted to restore fiscal stability in the state.

Mr Dhumal indicated that certain hard decisions have to be taken to mobilise resources. The government should step out of the areas where the private sector could perform efficiently and start charging for the subsidies being utilised by the untargeted groups. He also emphasised that more powers should be passed on to the local-self governments in the decentralisation process.

The Chief Minister said the expenditure had to be compressed as a long-term strategy for the restoration of fiscal balance.

The local bodies should raise tax revenue only through property and profession taxes since levy of indirect taxes by them was against the spirit of unified value added tax structure and created barriers in the movement of goods, services and people. Other taxes such as special road tax, motor vehicles tax and registration fee must increasingly be linked to their functional origin and be perceived as a form of user charge.

He also indicated that royalty on mines and minerals might be increased as greater exploitation of these natural resources would give rise to widespread environmental degradation.

Mr Dhumal warned that raising enormous loans from the market might prove difficult in the coming years and also threaten financial stability. Such a situation would lead to deterioration in the quality of the existing services being provided by the government and its inability to finance further development.

He presented an alarming fiscal scenario which the state might face in the next five years from 2000 to 2005.

He pointed out that non-SLR borrowings to meet the deficits and debt repayment requirements would have to be of the order of Rs 1664.82 crore in 2000-2001, Rs 2358.88 crore in 2001-02, Rs 3177.44 crore in 2002-03, Rs 3545.27 crore in 2003-04 and Rs 4418.01 crore in 2004-05.

Mr Dhumal said: "We shall have to seek the involvement of the private sector in exploiting the state's comparative advantages and creating employment opportunities for the youth. This requires evolving appropriate policies to attract private sector investment in power, high value health care, leisure, higher and technical education and agriculture and allied activities suited to the agro-climatic and terrain conditions.

"The countrywide wisdom is that genuine private sector investment is attracted not by subsidies and sops but by conducive, problem-free environment, which is not bogged by bureaucratic hurdles and the availability of infrastructure primarily in the area of transport and communications. The earlier approach of sops and subsidies resulted in a deteriorating infrastructure.

The Chief Minister indicated certain reforms in functioning of the public sector undertakings and said that it would be logical to step out of the commercial activity where a competitive private sector existed.

Plans of phased merger, amalgamation, closure, disinvestment and joint venture will be drawn up in such a manner as will both relocate the staff and yield appropriate returns to the government in a transparent manner, he said.

He also indicated sweeping reforms in the functioning of the HPSEB and HRTC which are the two largest public sector undertakings.

Tracing the genesis of the financial crisis, Mr Dhumal said one of the reasons was that for the year 1989-90, the then government projected a deficit of Rs 8.79 crore against the actual deficit of Rs 171.75 crore and the Ninth Finance Commission based its recommendations on this figure. Had the actual deficit been projected during the year, the state would have got an additional financial aid of Rs 600 to 700 crore between 1990-95.

Mr Virbhadra Singh, Leader of the Opposition, pointed out that the financial position was upset because the finance commission overestimated the revenue of the state and underestimated its expenditure.