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Thursday, September 1, 2011

13TH FINANCE COMMISSION FISCALLY STARVES TRIPURA

Haripada Das

TO tame a state defying the anti-people liberalisation policies dictated by the centre, the UPA-2 government has adopted a policy not to beat but to weaken it by fiscal starvation through downgrading award of 13th Finance Commission, said Badal Chowdhury, finance minister, government of Tripura on August 16, 2011. Chowdhury was addressing the media while releasing a white paper, ‘13th Finance Commission Report – A Review’ which contains elaborate item-wise statistical data that vindicates gross deprivation of the state of Tripura, compared to the other states including those having rich resources. This deprivation caused an unmanageable financial crunch for the government to pay salaries to its employees, pension to the retired employees and release of DA and DR at par with central rate, Badal Chowdhury informed.

In the preface, the document reads “The 13th finance commission award has significantly underestimated the state’s financial requirements and failed in appreciating circumstances specific to Tripura”.

Explaining the specific circumstances, the document stated that the 13th FC regrettably failed to realise the ground reality behind the higher government employment in the state among the NE states. The state had to be lacerated for decades due to extremist onslaught and necessitated to raise as many as 13 TSR battalions (Indian Reserve Battalions) who successfully helped in containing violence and restoration of peace and tranquility in the state. Also the 13th FC did not consider the limited presence of private sector as well as public sector in the state thereby limiting the scope of employment of the innumerable unemployed youths. Even after exercising all avenues for government employment, there is a huge brigade of unemployed in the state.

Honouring the electoral pledges made by Left Front, the state government did not accept some of the recommendations of the 12th FC in line with liberalisation policies. Those are: adoption of New Pension Scheme, closure of all loss making PSUs instead of providing them financial assistance for making them self-reliant, abolition of vacant posts, ban on new recruits etc. If the prescription of the centre was complied with, the Left Front government would have had to retrench no less than 30,000 employees in various sectors.

Regarding item-wise award of the 13th FC, Badal Chowdhury informed that against the state’s demand of Rs 13,924.43 crores for salary expenditure, the 13th FC awarded Rs 7727.90 cr, leaving the deficit of Rs 6,196.53 cr. For pension expenditure, the 13th FC awarded Rs 2,779.09 cr against the state’s demand of Rs 3,944.80 cr creating a deficit of Rs 1,165.71 cr. The 13th FC also made a wide gap in non-plan revenue expenditure by sanctioning Rs 3,192.26 cr against the state’s requirement of Rs 4,234.61 cr leaving a shortfall of Rs 1,039.35 cr. In non-plan gap grant the commission granted Rs 4453.00 cr. which is even far less than Rs 5494.20 cr awarded by the12th FC (See Table 3 & 5). In total, the 13 FC alloted only Rs 16,349.13 cr against the state requirement of Rs 26,848.76 cr leaving a shortfall of Rs 10,499.63 cr. (See Table 1 & 4)

In contrast to all other previous finance commissions which took the last year of the tenure of former commission as the base year for estimation of the committed expenditure in the successive years, the 13th finance commission adopted a normative formula that had taken salary expenditure in 2005-06, ie, the first year of the tenure of 12th finance commission and pension expenditure in 2007-08 as the base years for estimating the expenditure on salary and pension during the tenure of the13th FC. By adopting this policy, the 13th FC quietly ignored the enhanced liabilities on salary and pension due to revision of pay, regularisation of DRW/contingent workers/fixed pay employees in the year 2009-10 apart from the new recruitments that were made after 2005-06. Though most of the states more or less suffered with this normative formula, the states having wider resources would be able to manage this loss. But Tripura with its limited resources was hit hardest with this new policy.

The 13th FC recommended year to year decrease of growth of expenditure on salary from 1.54 per cent in years 2011-12 to 0.89 per cent in 2014-15. While most of the states were awarded with static or rising yearly growth rate of 5 per cent to 6 per cent in average, Tripura had been awarded with diminishing growth rate and that too lowest among all states. Any layman can appreciate that, not to speak of releasing of DA, even paying of normal annual increment of 3 per cent would be impossible with such declining growth of allocations. (See Table -2)

The deprivation of the 13th FC to the state was brought to the notice of the union finance minister Pranab Mukharjee several times in writing. But no remedial step was ever taken. When the state finance minister met Mukharjee, he summarily turned down the state’s demand for providing special assistance to overcome the present fiscal impasse. Expressing annoyance for non-compliance of the new economic reforms, he informed that he is binding with the 13th finance commission and unable to extend any help beyond the commission’s award, Badal Chowdhury informed. But recently the centre has assured financial incentive of an extent of more than Rs 21,000 cr to Mamata Banarjee government in West Bengal and this was made in addition to the 13th FC award. Though we have nothing to object in extending financial boost to West Bengal, which is now ruled by an alliance led by Trinamul Congress, the second biggest alliance partner of UPA, rigid approach to a more backward resource-crunch states like Tripura which is ruled by the Left Front opposed to ruling alliance at the centre, would signal a wrong message to the centre-state relations which is unwanted in a federal democratic system like in India, Badal Chowdhury asserted.

The way for getting rid of this fiscal impasse, lies on the central government. As the state’s own resources are very limited, the fiscal crisis created because of the 13th FC award can be resolved through sincere initiatives by the planning commission, the finance ministry and other ministries of government of India. The planning commission must come forward to sanction the state a special plan assistance of at least Rs 1500 cr to fill up the gap of negative balance from current revenue(BCR). As the BCR is likely to widen negatively in the successive years of the 13th FC, special plan assistance should be increased by Rs 500 cr every year. In addition, the government of India should extend interest free loan and advance SPA of Rs 1000 cr every year in the remaining years of FC to resolve the problem under Art 293 of the constitution, Badal Chowdhury demanded. The government of India can also reimburse the recurring expenditure on security including that of TSR/IR battalions which had to be raised to combat extremist outfits for maintenance and restoration of peace and tranquility in the state.

Table 1

Item wise short-fall shown in the following table

(Rs in Crores)

SL

Item

State’s Assessment

13th FC’s Award

Shortfall

1

Salary

13924.43

7727.90

6196.53

2

Arrear salary

2200.00

0.00

2200.00

3

Interest payment

2544.93

2649.88

-104.95

4

Pension

3944.79

2779.09

1165.70

5

Others

4234.61

3192.26

1042.35

Total

26848.76

16349.13

10499.63

Table 2

Award of the 13th FC on Salary Expenditure with year-wise growth rate

(Rs in Crores)

SL

States

Total Salary

Expenditure

Year to year Growth Rate

2010-15

2011-12

2012-13

2013-14

2014-15

1

AP

83638.63

5.95

5.95

5.95

5.95

2

Arunachal P

4438.27

6.00

6.00

6.00

6.00

3

Assam

35760.19

2.75

2.65

2.54

2.42

4

Bihar

51584.79

5.92

5.92

5.92

5.92

5

Chhattisgarh

21180.44

8.71

8.87

9.03

9.17

6

Goa

3764.89

6.00

6.00

6.00

6.00

7

Gujarat

28762.64

4.48

4.43

4.37

4.32

8

Haryana

36387.99

5.99

5.99

5.99

5.99

9

Himachal P

20024.90

2.27

2.13

1.99

1.83

10

J & K

28691.10

3.42

3.35

3.29

3.22

11

Jharkhand

27232.66

8.61

8.75

8.88

9.01

12

Karnataka

29874.95

4014

4.07

4.00

3.92

13

Kerala

31679.80

5.97

5.97

5.97

5.97

14

MP

57609.69

6.00

6.00

6.00

6.00

15

Maharashtra

76498.80

5.23

5.21

5.19

5.17

16

Manipur

6671.89

3.62

3.56

3.50

3.44

17

Meghalaya

5190.80

6.00

6.00

6.00

6.00

18

Mizoram

4381.41

5.55

5.55

5.55

5.54

19

Nagaland

7536.91

2.42

2.29

2.16

2.01

20

Orissa

36688.62

5.96

5.96

5.96

5.96

21

Punjab

48940.52

5.24

5.23

5.22

5.22

22

Rajasthan

58811.27

4.15

4.12

4.08

4.04

23

Sikkim

3192.19

6.00

6.00

6.00

6.00

24

Tamilnadu

43207.39

5.96

5.95

5.95

5.95

25

Tripura

7727.90

1.54

1.34

1.12

0.89

26

UP

89043.78

6.00

6.00

6.00

6.00

27

Uttarakhand

15225.45

8.33

8.52

8.69

8.86

28

West Bengal

44521.82

5.98

5.98

5.98

5.98

Table -3

The Non-Plan gap grant recommended by the 13th FC is far less than even the 12th FC as shown below:

(Rs in Crores)

Year

1st Year

2nd Yr

3rd Yr

4th Yr

5th Yr

Total

12th FC

1041.91

1064.30

1122.91

1131.90

1133.18

5494.20

13th FC

1054.00

934.00

1030.00

835.00

600.00

4453.00

Difference

12.09

-130.30

-92.91

-296.90

-533.18

-1041.20

Table 4

State wise comparison of awards of 12th FC and 13th FC on Share of Central Taxes + Non Plan Gap Grant + others

(Rs in Crores)

SL

States

Award of 12th FC

Award of 13th FC

% of increase

1

AP

50353.26

114148.20

126.69

2

Arunachal P

3525.56

9103.60

158.22

3

Assam

24329.40

57832.70

137.71

4

Bihar

75646.83

172944.10

128.62

5

Chhattisgarh

18273.70

42000.70

129.84

6

Goa

1724.53

4374.00

153.63

7

Gujarat

25608.75

53789.40

110.04

8

Haryana

8042.44

19470.30

142.09

9

Himachal P

14450.36

21661.70

50.11

10

J & K

20879.98

40438.60

93.67

11

Jharkhand

23657.02

47878.60

102.39

12

Karnataka

31416.28

74376.40

136.74

13

Kerala

19607.72

40325.80

105.66

14

MP

46321.96

116593.50

151.70

15

Maharashtra

36194.25

91709.80

153.38

16

Manipur

6870.20

13567.50

97.48

17

Meghalaya

4367.77

9842.50

125.34

18

Mizoram

4660.91

8805.30

88.92

19

Nagaland

7453.41

13744.20

84.40

20

Orissa

36942.77

78974.90

113.78

21

Punjab

12884.59

25686.60

99.36

22

Rajasthan

39062.47

97842.00

150.48

23

Sikkim

1829.14

4525.60

147.42

24

Tamilnadu

36688.13

83437.20

127.42

25

Tripura

8417.00

13127.50

55.96

26

UP

133471.45

312140.00

133.86

27

Uttarakhand

12194.32

20308.10

66.54

28

West Bengal

50877.28

117997.30

131.93

Tripura has second lowest increase in award amount over 12th FC after Himachal Pradesh.

Table 5

Comparative statement of Gap Grant awarded to the Special category states by the 12th FC and 13th FC

(Rs in Crores)

SL.

Name of the states

Award by

12th FC

Award

by 13th FC

% of increase/ decrease

1

Arunachal Pradesh

1357.88

2516.20

85.30

2

Himachal Pradesh

10202.38

7888.80

-22.68

3

Jammu & Kashmir

12353.46

15936.30

29.00

4

Manipur

4391.98

6056.60

37.90

5

Meghalaya

1796.86

2810.90

56.43

6

Mizoram

2977.79

3991.40

34.04

7

Nagaland

5536.50

8146.10

47.13

8

Tripura

5494.20

4453.30

-18.95

Courtesy: People’s Democracy