State remains entangled in debt

Arteev Sharma

Tribune News Service

Jammu, March 22

The financial health of Jammu and Kashmir appears to be ailing as the state’s liabilities have grown from Rs 16,790 crore to Rs 44,646 crore during the past nine years, pushing Jammu and Kashmir into a “debt trap.”

The failure of successive governments to chalk out a long term policy to boost financial resources and ensure fiscal discipline is seen as one of the reasons for Jammu and Kashmir’s rising fiscal burden.

The internal debt has grown by about four times from Rs 7,502 crore in 2005-06 to Rs 24,715 crore in 2013-14.

“The liabilities have grown from Rs 16,790 crore in 2005-06 to Rs 44,646 crore in 2013-14. The percentage of total liabilities to the Gross State Domestic Product has been worked out to be 51.13 per cent in 2013-14,” the government stated in its Budget related documents.

The total public debt has grown from Rs 11,010 crore to Rs 26,490 crore during the past nine years.

Similarly, a steep rise in liabilities vis-à-vis provident funds has been witnessed during the period as it grew from Rs 3,307 crore in 2005-06 to Rs 11,893 crore in 2013-14. However, the liabilities in the form of loans and advances from the Central government has dwindled significantly over the years. It was Rs 1,775 crore in 2013-14, showing a steep decline from Rs 3,508 crore in 2005-06.

Sources said liabilities, including debt has grown as a major resource problem and the government has no short term solution for it.

“There is an immediate need to set as top priority the debt and liability management in overall fiscal management. The government has to go for public expenditure compression as a prerequisite for consolidation,” a source said.

Without a briefcase, FM sheds tradition

Jammu: While presenting the Budget, Finance Minister Dr Haseeb Drabu entered the House without the ceremonial briefcase, a norm followed by his predecessors. Wearing a long white kurta with a matching Nehru jacket and accompanied by the MoS (Finance), Pawan Gupta, Drabu carried his Budget speech in an envelope.

Though it was his first Budget speech as the Finance Minister of the state, Dr Drabu had played an important role in the formulation of economic policies during the previous regime. In 2002, when the PDP-Congress government was formed in the state, he was appointed as the economic adviser to the government. During his stint as an economic adviser, he planned major tax reforms and policies to curtail the expenditure. Later, Drabu served as the chairman of Jammu & Kashmir Bank. He resigned from the post in 2010.

Budget at a glance

Plan outlay

Total expenditure Rs 46,473 crore 

Total receipts Rs 42,137 crore.

Revenue receipts Rs 37,814 crore

Capital receipts Rs 4,323 crore

Own tax revenue estimated at Rs 8,006 crore

Share of Central taxes up at Rs 8,088 crore against Rs 4,477 crore in revised estimates 2014-15

Revenue deficit grants of Rs 9,892 crore against Rs 2,096 crore in 2014-15

Revenue expenditure, including security-related expenditure, to touch Rs 35,227 crore

Capital expenditure accounts for Rs 11,246 crore

Rs 499 crore to be devolved to the panchayats and the urban local bodies under the 14th Finance Commission grants

Earmarked provision of Rs 2,200 crore for dearness allowance to employees and pensioners

Rs 154 crore provision in 2015-16 for 10% employers’ share under the new pension scheme introduced from Jan 2010.

A provision of  Rs 25 crore for meeting cost of voluntary retirement scheme/golden handshake scheme in public-sector undertakings

Rs 1, 017 crore allocation for district sector capital expenditure

Vision for fiscal year 

Enlarge constituency of peace in the state. Sharing dividends of peace with the people of the state.

Sustainable growth and balanced development.

Self-reliance and fiscal autonomy

  Elimination of corruption 

  Rehabilitation and reconstruction of the state in distress and the economy.

Economic policy

  Build credibility and confidence of the government and its financial management. 

  The Budget is not only about government finances, but also about private businesses. In other words, the Budget is aimed at formulating economic policy not only for the government but also for private businesses and enterprises. 

  The fiscal strategy and stance of this Budget is expansionary. 

Structural reforms

  Change in the structure of state Budget. The new structure organises the Budget under two main components, revenue and capital.

  Plan and non-plan classifications discarded.

  Separate power Budget from the next fiscal.

  Use of borrowings for creation of capital assets.

Tax waiver

  Waiving off demand charges on electricity for seven months from September 2014 to March 2015.

  Passenger tax exemption on vehicles which remained off road due to the floods from September to December 2014.

  Remission of stamp duty chargeable in case of instruments/documents executed between borrowers and the lending financial institutions to be extended up to March 31, 2016.

  VAT exemption on paddy, rice, wheat, pulses, flour, atta, maida, suji and besan to continue up to March 2016.

  Exemption of toll on export of fresh vegetables.

  VAT remission for local industry to continue for another year.

  Tax on aluminium foil packaging reduced from 13.5% to 5%.

  “Tree Spray Oil” placed as an agriculture product at zero per cent tax rate.

  Baby diapers, adult diapers and sanitary napkins exempted from VAT. 

  Almonds and its kernels in zero per cent tax rate.

  “Aabiyana” (irrigation tax) abolished. 

  Introduction of loss of revenue insurance cover.

  Existing rate of sales tax in lieu of services enhanced by 2%.

  A modest increase of five paisa per kg in the existing rates of toll.

Focus on regulation, reconstruction

  Setting up an Alternative Dispute Resolutions Tribunal which will be empowered to fast-track cases.

  Business process re-engineering, financial restructuring and administrative reorganisation of the ailing public-sector enterprises.

  Setting up of an asset reconstruction company in partnership with J&K Bank 

  To float a Dal Development Bond for restoration of the Dal lake.

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Breather for hoteliers

Exemption under the GST in respect of lodging services provided by hotels, lodges and guest houses to be extended up to end March 2016.

Exemption to all hoteliers from payment of entry tax on furniture/office equipment/kitchen equipment/other goods imported into the state for replacement and refurbishment till June 2015.

Waiving off 50 per cent of the Kisan Credit Cards loans for the smallest and most vulnerable farmers who have an outstanding balance of less than Rs1 lakh.

Introduction of gold, silver and bronze cards for some categories of registered dealers.

Contemplation of amnesty under Good and Services Tax (GST) Act 1962 for waiving of interest and penalty.

For girl child, widows

Contribution of Rs 1,000 per month for every newborn girl child for the next 14 years. To receive Rs 6.5 lakh on reaching 21 years.  New scheme “Aasra” for widows or destitute women with no source of income. A zero balance saving account, life insurance of Rs 25,000, an accident cover of Rs 25,000, sickness and disease cover of Rs 5,000 and maturity/survival benefits of Rs 25,000 after five years. 

A scheme to provide succour to 50,000 widows and destitute women of the state and to provide Rs100 crore for this purpose in the form of an insurance-cum-saving scheme.

J&K State Family Benefit Scheme, wherein families whose income doesn’t exceed Rs 75,000 per annum and who lost their breadwinner and are not covered under any other benefits will get a one-time financial assistance of Rs 40,000.

Welfare initiatives for employees

Dearness pending March 31, 2015, shall be credited into the general providence fund account of the employees while the DA will be paid in cash from April onwards. All employees covered under the new pension scheme and pensioners will, however, receive the arrears in cash. 

Women employees of the state should be treated on a par with Central government employees with regard to admissibility of child care leave.

The government will announce a High Power Committee of Ministers and some external experts to confront with a gigantic problem of regularisation of more than 61,000 workers engaged on a casual basis.

Rs 2 crore for enhancement of retainership of various classes of Law Officers.

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The Budget can be described in two words as a damp squib. There is nothing substantial, nothing new. Let alone Ladakh, I am afraid even Jammu and Kashmir got nothing out of this Budget. — Nawang Rigzin Jora, Congress legislature party leader

The government has to be seen as an enabler to foster growth. We need to formulate a comprehensive policy framework for giving incentives which would be primarily directed towards the local industry. — Haseeb Drabu, Finance Minister

This Budget has nothing significant to offer and it is devoid of any relief for the common man. It reflects rosy figures and has disappointed different sections of society. — Mohammad Yousuf Tarigami, state secretary, CPM

The state Budget presented by the Finance Minister is industry-friendly. There are a lot of positives for the industry in the budgetary proposals. — Annil Suri, president, Bari Brahmana Industries Association

The government has failed to come up with a concrete mechanism to rehabilitate the flood victims. It is good that they have acknowledged the magnitude of the floods but there was nothing concrete in it. — Sheikh Ashiq, president of Kashmir Chamber of Commerce and Industries

By changing the classification of several things, the government tried to bring change. There was nothing new in the state Budget speech. It was a routine affair. — Mohammad Shafi Uri, Former Finance Minister