M A I N   N E W S

Punjab begins fiscal consolidation, but debt set to cross Rs 1 lakh crore
Increased VAT on soft drinks, cigarettes to yield Rs 180 crore more
Ruchika M Khanna/TNS

Chandigarh, March 20
Punjab has started taking baby steps to consolidate its fiscal position, with Finance Minister Parminder Singh Dhindsa announcing an increase in value added tax (VAT) rates on cigarettes and soft drinks to mop up additional Rs 180 crore in taxes, while presenting the Budget proposals for 2013-14. However, the Finance Minister has failed to come up with a definite plan to resurrect the sagging economy of the state, whose debt burden is set to cross Rs 1 lakh crore by the end of 2013-14.

The hike in VAT rates announced by the Finance Minister will do little to get the state’s economy back on the rails. The initiatives of increasing VAT on soft drinks from 13 to 20.5 per cent and on cigarettes from 20.5 per cent to 50 per cent; and the announcement of a voluntary compliance scheme for VAT and excise duty seem unlikely to help the state bring down its revenue deficit by Rs 3,011 crore in a year, as has been projected by the Finance Minister. Like in the past, the state will continue to rely mostly on better tax compliance, realisation or bringing in austerity measures to curtail its deficit, it seems.

Presenting the Budget proposals, Dhindsa said the emphasis was on fiscal consolidation of the state’s economy. With Punjab now falling in line with the road map laid for it by the 13th Finance Commission with regards to fiscal deficit and outstanding debt to GSDP (gross state domestic product) ratio, the emphasis during the next financial year (2013-14) would be on reining in the huge revenue deficit.

The projections made in the Budget show that the fiscal deficit is expected to come down from Rs 9,395 crore this year to Rs 9,258 crore in 2013-14 (3% of the GSDP).The minor fiscal correction will rest on the hope of higher VAT collections and a slight reduction in the revenue expenditure. The ratio of outstanding debt to the GSDP will, however, increase from 31.35 per cent of the GSDP (Rs 92,804 crore) to 33.13 per cent of the GSDP (Rs 1,02,282 crore), though it is well within the limit of 39.8 per cent of the GSDP for 2013-14, as prescribed by the Finance Commission.

Though the Finance Minister has failed to give a definite road map for mopping up additional revenue, he said he was hopeful of bringing down the revenue deficit from Rs 4,758 crore (1.61 per cent of the GSDP) during this year, to Rs 1,747 crore (0.57 per cent of the GSDP) in the coming financial year.

“We will increase our revenue collections by almost Rs 6,600 crore in the coming fiscal, mainly through a jump in VAT, excise collections, stamp duty collections, imposing licensing fees and through change in land use charges. This will help Punjab reduce its revenue deficit substantially, and we will be a revenue-surplus state in the next three years,” he said.

The Budget size has increased to Rs 56,051.78 crore from Rs 50,648 crore last year. The Finance Minister has managed to maintain a balance between the fiscal consolidation of economy, while doling out incentives to the social sector, in line with his party’s commitment towards social security reforms.

As a result, several new schemes for the marginalised sections have been announced in the budget proposals. These include the CM Awas Yojana, a free-housing scheme for the economically weaker sections; the health insurance scheme for BPL families where state government will pay the premium; scholarships for brilliant students and for girls belonging to BPL families; establishing 1,000 model schools in public-private partnership; a fund of Rs 300 crore for establishing cancer-treatment facilities at Amritsar, Patiala and Faridkot and providing treatment to the poor; free education for girls in Industrial Training Institutes; a cashless health insurance scheme for government employees; restoring leave travel allowance of government employees; and cash subsidy to women willing to start a dairy farm or poultry farm, amongst other schemes.

Infrastructure has also got a major thrust with road transport, power and irrigation getting sizeable budgetary allocations. While Rs 5,963 crore has been allocated for social services, Rs 3,224 crore has been allocated for the energy sector (power and renewable energy). The transport sector has got a whopping Rs 2165 crore, to be used mainly for improving road infrastructure. Rural development has got Rs 1,920 crore; Rs 1,104 crore has been allocated for irrigation and flood control; Rs 708 crore for agriculture and allied services; Rs 319 crore for general economic services; Rs 285 crore for Industries and Minerals; Rs 144 crore for science, technology and environment; and Rs 291 crore for general services.

Dhindsa said 12 per cent of the Budget (Rs 9,641 crore) would be spent on school education while Rs 3,443 crore had been earmarked for the health sector.

He also announced that the government would fulfil its poll promises of giving employability allowance of Rs 1,000 per month to educated unemployed youth; distributing low-cost tablets to 1.5 lakh class XI students; and distributing Rs 66 crore as aid (Rs 2 lakh per family) to the dependents of farmers who committed suicide because of indebtedness.

Punjab has also announced abolition of VAT on a number of items like school bags, stationery, water bottles, feeding bottles, hearing aids, intraocular lenses, walking sticks, lemon squeezers, roller and rolling pins, mats, brooms and certain hair accessories, amongst others.

WHO GETS WHAT Farmers: Rs 3,000 per acre compensation for border area farmers; `66 crore for relief to families of farmers who committed suicide Students: Scholarships for bright students and girls of BPL families; 1.5 lakh class XI students to get computer tablets Ex-servicemen: Financial assistance to ex-servicemen and widows of World War II to be doubled to Rs 2,000 a month Health care: Rs 300 crore fund for cancer treatment Youth: Educated unemployed youth to get employability allowance of Rs 1000 per month Housing: Construction of 1 lakh houses in two years under the Mukh Mantri Awas Yojana for those having annual income of less than Rs 30,000 per annum. Dairy farming: Cash subsidy for women dairy farmers Sports: Centre for Excellence of Sports to come up in Mohali Punjab FM Parminder Dhindsa at the Assembly on Wednesday. Tribune Photo: Manoj Mahajan

Productive debt It is a productive debt and different from non-productive debt where you make salary payments out of borrowings... We have to make infrastructure and our debt-to-GSDP ratio has come down drastically. — Sukhbir Badal, Punjab Deputy CM anti-people, anti-poor The Budget is directionless, unimaginative, anti-people and anti-poor with no specific growth-oriented agenda. The proposals are based on unrealistic assumptions with no fiscal management measures. The state has failed in fiscal consolidation. — Partap Singh Bajwa, PCC president

Annual Plan Punjab's annual plan has been increased by 15 per cent this year. As against an annual plan of Rs 14,000 crore for year 2012-13, the annual plan for 2013-14 has been increased to Rs 16,123 crore. Finance Minister Parminder Singh Dhindsa said during this year, the state would be able to utilise most of its annual plan because of higher revenue generation. He said that during the current fiscal, too, the state would be able to utilise 70 per cent of its annual plan. Power subsidy Power subsidy bill for 2013-14 is expected to be Rs 5,785 crore, the same as it was in the current fiscal. The Deputy CM, however, defended the huge power subsidy bill, claiming that it was high only because they were calculating the rate of power at Rs 4 per unit, which is the domestic tariff rate. He said per unit rate for power for agriculture sector was calculated between RS 1-1.50 in different states. If we adopt a similar method, the subsidy bill would come down to Rs 1,500 crore.