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 13^th 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 13^th 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 13^th 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 13^th 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 12^th 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 13^th FC, Badal Chowdhury informed that against the state’s demand of Rs 13,924.43 crores for salary expenditure, the 13^th FC awarded Rs 7727.90 cr, leaving the deficit of Rs 6,196.53 cr. For pension expenditure, the 13^th 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 13^th 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 the12^th 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 13^th finance commission adopted a normative formula that had taken salary expenditure in 2005-06, ie, the first year of the tenure of 12^th finance commission and pension expenditure in 2007-08 as the base years for estimating the expenditure on salary and pension during the tenure of the13^th FC. By adopting this policy, the 13^th 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 13^th 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 13^th 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 13^th 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 13^th 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 13^th 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 13^th 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 13^th 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 13^th FC is far less than even the 12^th 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 12^th FC and 13^th 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 12^th FC after Himachal Pradesh.

Table 5

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