Reduction of revenue expenditure is crucial

COMING BUDGET & FISCAL PROFLIGACY

Udayan Hazarika

(The writer can be reached at udayanhazarika@hotmail.com)

More than a month has elapsed since the new Assam ministry took over the charges but most unfortunate is the fact that the government is yet to have a proper budget to run the regular show. The House was fully constituted in May and even after that, it took the Government to decide the date for the budget session. The last Government, in March last, had taken a vote on account for six months i.e. up to September 2021. A newly elected government should not extensively utilize the funds earmarked in the vote on account. This is because the vote on account is not a budget in the true sense of the term and a regular government is supposed to spend its expenditure from the budget only. Vote on the account is taken to meet the emergency needs such as salary, pension and wages, etc. The convention is that unless a situation of crucial nature emerges no amount should be spent from the vote on account for the implementation of regular schemes- simply because the scheme-wise amount is not shown in the Vote of Account. Vote on account when placed before the House, the receipt budget does not accompany it as required under Article 202 of the Constitution. This Article provides that the annual financial statement which we call budget should be placed before the House in three parts i). Receipt budget showing the estimates of the incoming amount to the State exchequer depending on which ii) the budget estimate for the forthcoming year is prepared. Both these estimates are done concerning the iii) statement of expenditure made in the current year. The House passes the vote on the account without going into the details of it and without debate on the proposed appropriations as is done in case of budget. The present government has already spent a huge amount from the vote on the account including the Rs 500 crore for acquiring the 3.2 per cent share of Numaligarh refinery, and amounts for meeting the expenditure for implementation of Orunodoy scheme etc. Such expenditure could have been avoided.

Now that the date for the budget session has been fixed in mid-July, one would only hope that the financial things will set in the right order without spending further amounts on schemes. Usually, not many changes are made in the expenditure budget especially when the same party comes to power. However, this year three important entries are to be incorporated into the budget which would drastically change the volume of the amount in the expenditure budget. These are i) the additional amount required in the form of salaries and allowances for employing one lakh unemployed, ii) amounts required for waiving the microfinance loans of the women entrepreneurs and iii) the additional amounts required for enhancing the Orunodoy beneficiaries.

In the last year, an estimated Rs 1.19 lakh crore was proposed to be collected as revenue from all sources. As against this, the total collection of revenue till December 2020 was only Rs 47.27 thousand crore – i.e. not even 50 per cent. Undoubtedly, the Covid situation had come on the way of the collection as a result of which only 39.67 per cent of the estimated total could be collected. As per the report, although the fourth quarter collection was encouraging, yet together with the rest of the quarters, the collection could cover only around 60 per cent of the target. In the meantime, the extent of revenue expenditure crossed the 44 per cent mark while capital expenditure has always remained low (25%). Thus initially although the budget deficit was estimated at Rs 3028.13 crore this time it will exceed and will be not less than Rs 4000-4500 crore.

Last year the central transfer of fund was smooth as it was an election year. The State received Rs 24,553 crore as a share of central taxes along with the transfer of Rs 7579 crore in respect of revenue deficits grants and Rs 772 crore for SDRF. The Fifteenth Finance Commission had recommended as a whole 41 per cent of the total central collections for devolution to the States. But the Centre has made only 30 per cent of the estimated collections for devolution to the States as budget provision for the current year. Thus, if the further appropriation is not made to the account in the form of supplementary demands, in the latter part of the year, then this year surely the States will not get adequate fund as per the recommendation of the 15th FC. This is more so because the Centre itself has fixed 36 per cent of its estimated resources to come from borrowing which is equivalent to Rs 18.49 lakh crore and Rs 1.75 lakh crore from disinvestment as against the last year's realization of only and Rs 32,835 crore against the original target of Rs 2.10 lakh crore.

Let us now discuss the election promises of the Chief Minister. Providing one lakh employment in the current year is not an easy task. Initially, it was thought that vacant government posts will be filled up to fulfil this promise. But on a rough calculation, the vacant posts come to be much less than one lakh. Presently there are around 5.5 lakh government employees on the payroll. Total salary bill along with pension and wages come to around Rs 32,000 crore in a year. An additional burden of one lakh employees will cost the state exchequer an additional Rs 3,000 crore in a year and this will add up every year. Our total income from States owns sources come to around Rs 27,000 crore which fall short by about Rs 5,000 crore to pay the salaries etc of the employees. So the government with its income cannot even pay the salaries of the employees. This amount will be doubled after the engagement of one more lakh employees. The government cannot solve the unemployment of the State which is of the volume of 19 lakhs by simply filling up the vacant government posts. Government must look at the employment generating sectors like MSMEs. With proper planning and investment, the government can create more employment in the sector side by side with the growth of the manufacturing sector. This will on one hand add up to GSDP and GVA together. A recently published RBI report (June 2020) shows that Assam has less than one per cent of the total labourers engaged in the MSME sector while in the developed States like Maharashtra it is 23 per cent, in Tamil Nadu, it is 13 per cent, in Gujarat, it is 9-10 per cent and so on. These states also provide not only capital subsidies but also subsidies in case of electricity, purchasing generators employment, etc.

The situation that the State is facing today is the result of excessive revenue expenditure generated by the populist schemes. The government must attempt to stop draining out of resources that do not add in any way to GSDP. Usually, the schemes concerning giving financial assistance to the beneficiaries should always be in exchange for man-hours of works offered by the beneficiary to the Government. Financial assistance provided without offering services creates a negative impact and incidence on the economy. This on one hand creates a class of persons who have become habituated to getting money without any effort -just sitting idle. Others who earn money offering hard labour becomes demoralised looking at them and lose aptitude to work. On the other hand, money earned without using man-hour enters directly to the market through the beneficiaries which destabilize the economic variables leading to a sudden increase in demands without a consequent increase in supply. This is a situation that finally leads to inflation. The consequences of such schemes are similar to that of entering black money on large scale in the economy. The Government may review such schemes and link them up as state's initiatives in MNREGA.

Apart from Orlando, a similar scheme is Swami Vivekananda Assam Youth Empowerment (SVAYEM) Yojana. In this scheme, a huge fund (Rs 2000 crore) is proposed to be given to the beneficiaries without obtaining a mortgage or collateral security. Before implementing the scheme, the government must examine the utilization of the earlier amounts sanctioned. In the year 2018-19, as many as 5,299 beneficiaries were given sanction. Similarly, last year 1.43 lakh beneficiaries were provided with Rs 433 crore (although the website declares the total application received was 62,295). The Government must be very careful in spending hard-earned public money. Records show that i) there are rare occasions when joint ventures or partnership business have become successful and survived in Assam, ii)

There are thousands of examples when money borrowed providing a mortgage or collateral security were to be realized by selling out the mortgaged security property. State Government knows very well the mechanism of halting the galloping revenue expenditure which is exercise during 1998-2005.