M A I N   N E W S

No new taxes proposed in Punjab Budget
Deficit pegged at Rs 262.25 crore
PPS Gill
Tribune News Service

Chandigarh, March 19
The Punjab Finance Minister, Capt Kanwaljit Singh, has not proposed any new taxes in the Budget for 2001-02 presented to the Vidhan Sabha here today. It is deficit Budget. The small negative closing balance of Rs 262.25 crore that has been left uncovered is expected to be taken care of by buoyancy in receipts and economy in expenditure.

Capt Kanwaljit Singh took pride in the fact that he was presenting his fifth consecutive Budget, which is quite an achievement for the Akali Dal itself. Though the Opposition was missing, having been suspended for the remaining part of the Budget session concluding on March 27, the Finance Minister was watched by his family from the Governor’s box. He spoke for a little over 90 minutes.

Why is the Punjab Budget, the last of the present SAD-BJP government, “tax free”? It does not sound populist. It is because the government has been encouraged by a healthy growth in revenue receipts and compression of non-Plan, non-productive expenditure to give a policy of medium-term stability to the tax rate structure.

Rather than tinkering with the tax rate every other year, as was usually done in any given Budget, Capt Kanwaljit Singh has followed a policy to keep it stable and generate additional revenue by widening the tax net and through better compliance. An innovation at that.

Fiscal stability

The relative fiscal stability is also evident from the reduction in revenue deficit as a percentage of revenue receipts. This revenue deficit was as high as 45 per cent in 1998-99. It showed a significant decline in subsequent years. It was 36 per cent in 1999-2000, and as per the Budget estimates of the current financial year, it is expected to be 25 per cent and further reduce to 23.5 per cent at the end of 2001-02.

But lest this should give an impression that all is well with Punjab finances and its financial health has been completely restored, the Finance Minister added a note of warning. He said the overall financial situation still remained “grim” and to sustain the same in the medium and long term efforts at improvements that had taken place would require to be redoubled. In fact, he was suggesting exercising a strong “political will” and “bureaucratic cooperation”.

Pointers to the future

Capt Kanwaljit Singh’s speech, divided as it was into two parts, mentioned certain pointers on the continuing of economic planning and fiscal management in future, too. These pointers include the setting up of a public expenditure reforms commission for close scrutiny of government functioning and putting new methodologies, technologies and institutional reforms in place. There has also to be a public sector dis-investment commission because unless the role of these undertakings is restructured radically and redefined, the purpose will be defeated. Another pointer is to “right-sizing” of the government. For this there is a voluntary retirement scheme in place for which a provision of Rs 50 crore has been made for next year. Pension reforms is another area which needs close monitoring. This has to be done keeping in view the advent of well-regulated private pension funds, provident funds and insurance funds on the Indian economic scene. Public debt is yet another pointer. Punjab has to ensure that the drying up of revenue surpluses due to the cumulative effect of certain historical factors impacting the fiscal dependence on debt for development would not increase yet again. Obviously, the reference was to the decade of militancy that has derailed Punjab’s economic development resulting in stagnated growth and the debt burden. The Finance Minister has put the blame on the policies of New Delhi and gave a political punch as well when he said the cause was the lack of financial autonomy to the states, as demanded by the Akali Dal all these years.

High-growth path strategy

While making proposals for the future, Capt Kanwaljit Singh unfolded a “new high-growth path strategy”. There, however, was no proposal to levy any new taxes or to increase the rates of the existing taxes during 2001-02. Instead, the objective was to provide stability to the tax structure and place greater emphasis on agriculture, irrigation and power generation.

Agriculture and WTO

In the context of agriculture, a major part of the two-part Budget speech was devoted to agriculture in relation to the World Trade Organisation (WTO) that becomes effective on April 1 next when Quantitative Restrictions (QR) are removed. Without mincing words, the Finance Minister drew a bleak picture of Punjab agriculture when seen in the context of the WTO and the Agreement on Agriculture (AoA). The anticipated gains expected from the AoA have proved only “illusionary”. With QRs gone on the import of various agri-products, the agricultural economy of Punjab was likely to suffer if an effective safety mechanism was not put into operation.

He strongly recommended to the Centre to re-negotiate on the WTO and consult the states. The speech gives preliminary recommendations made by the Dr Y. K. Alag Committee on the subject. The provisions of the WTO that were biased against developing countries and aimed at legitimising large subsidies that developed countries gave to the dairy and agriculture sectors have to be challenged. Indian farmers in general and Punjab farmers in particular could not overnight switch over to cropping patterns that have developed in response to the national mandate of providing food security. There has to be a new thrust and a new beginning. For this, the Centre must provide Rs 550 crore, spread over three years, by setting up what Capt Kanwaljit Singh said was an Agricultural Adjustment Fund to accomplish the “green box” strategy as an answer to the WTO and the AoA.

For all this to happen new technology, higher investments and the desired infrastructure had to be built. The Finance Minister went on to tell the House what Punjab would do on its part to help the farmers sustain their farming, particularly the small kisans.

Key provisions for economic planning

Therefore, both bio-technology and information technology will become an integral part of financial management and economic planning for equitable social benefits and justice.

Besides a provision of Rs 20 crore for the Institution of information technology, a massive infrastructure development programme at a cost of Rs 2,235 crore has been launched covering roads, rail and river bridges, augmentation of the irrigation facilities, urban development, agriculture, research and development initiative and flood protection. To strengthen and deepen the programme of agriculture, agri-marketing and export promotion and processing will get a push with a proposed fund of Rs 50 crore. For agricultural research and development, an initial contribution of Rs 15 crore is provided for in next year’s Budget besides a provision of Rs 50 crore for compensating farmers who had resorted to the distress sale of paddy in the last procurement season. It was also proposed to give an ex-gratia grant of Rs 2.5 lakh to the families of such farmers who had committed suicide due to economic distress. An autonomous marketing information centre is also proposed.

Social security

Capt Kanwaljit Singh did not forget the social security aspect, particularly the Scheduled Castes and the backward classes who had been ignored all these years. This sector was the worst sufferer, though important, even politically. The remedies suggested are higher allocation under the special component Plan, raising it from Rs 16 crore in 1999-2000 to Rs 312 crore in the current year and to Rs 472 crore in 2001-02. A social security fund also exists for the payment of pensions to widows, the disabled and senior citizens. The number of pensioners has increased from 3,08,000 in 1996-97 to 707,000 at present, involving a total pension payment of Rs 150 crore per annum.

Annual Plan

Turning to the Annual Plan (2001-02), Capt Kanwaljit Singh said its size had been enlarged from Rs 2,700 crore at present to Rs 3,357 crore for the next year, an increase of 24.33 per cent. An important point to be noted in this year’s Budget is that though one does not find any mention of resource mobilisation, as to how the Plan will be funded, there is an inbuilt mechanism involved. It was the Principal Secretary, Finance, Mr K. R. Lakhanpal, who told TNS later that henceforth “dedicated funds” would will be available for certain priority sectors, urban infrastructure development, rural development, education, health etc. The Plan is not merely an aggregate of small schemes. But it is a definite switch towards programmes relevant for stepping up economic growth. That means that money for the Plan is provided for in the Budget. For 15 years due to the financial crunch certain areas were neglected. The dedicated funds scheme will take care of this now. Notwithstanding the vagaries of finances, the Plan will get funded on the following pattern: (figures in crores) state Budget, 1,877; state electricity board 554; Punjab Infrastructure Development Fund 556; Rural Development Fund 200; education cess 20; and social security cess 150.

Kanwaljit on the Union Budget

Capt Kanwaljit Singh devoted a part of his speech to comment on the Union Budget and its likely impact on Punjab with particular reference to the agricultural sector. This description runs quite contrary to what the Punjab Chief Minister, Mr Parkash Singh Badal, had said when he rushed to the Press to welcome the Union Budget.

The Finance Minister did welcome some of the provisions in the Union Budget but came down heavily on other aspects. He said the states strongly apprehended that in the name of giving an enlarged role to the states in the procurement and distribution of foodgrains in their respective states, the Centre might wash its hands of the price support being currently provided in the form of the minimum support price. Such a step would spell disaster for the farmers and make the marketing of paddy and wheat impossible. Mr Badal had requested the Prime Minister to intervene and continue the present system till a better alternative was worked out in consultation with the states. “We will feel that the Union Budget has not adequately responded to the challenges the agricultural sector will face on the removal of the Quantitative Restrictions and coming into force of the WTO regime”.

There will now be sales tax on stone crushers on a lump-sum basis rather than ad valorem, effective April 1 next. It will be Rs 75,000 for crushers with 400 cubic ft capacity and Rs 1.50 lakh for 700 cubic ft capacity.