Punjab Chief Minister Parkash Singh Badal in a meeting with 14th Finance Commission in Chandigarh on Saturday.
Chandigarh, September 7, 2013: Dr. Y V Reddy, Chairman, Prof. Abhijit Sen, Sushama Nath, Dr. M Govinda Rao and Dr. Sudipto Mundle, Members of the Fourteenth Finance Commission, and A N Jha, Secretary visited Punjab from September 6 to 7 to hold consultations with the State Government and key stake holders.
The commission met with the Chief Minister, Punjab Parkash Singh Badal his cabinet colleagues and senior officers of the State Government, for discussions.
The Chief Minister Punjab invited the attention of the Commission towards the Agriculture and Allied Sector, Health & Family Welfare and Grants for Border, Kandi areas, need for debt relief and on the need to tackle the water logging problem being faced by the State. A comprehensive picture of economic and fiscal profile of the State as well as observation regarding vertical and horizontal criteria and the proposal for grants for meeting post devolution revenue deficit was presented before the Commission. Apart from this the specific needs were projected regarding debt sustainability, sharing of subsidies, financing of relief expenditure. The Chief Minister raised his concern regarding decline in the share of State in Central Taxes and urged the Commission to ensure vertical fiscal balance between the Union and the State Government and horizontal balance amongst various States. He urged the commission to set realistic Fiscal consolidation targets for the State. He added that the State required special dispensation for diversification of agriculture, debt relief grant to take care of the outstanding loans and suitable compensation on account of power subsidy.
The Finance Minister presented and overview of the finances of the state and also highlighted that the state needed debt relief as the historic burden of debt was high and also expressed concern on the adverse impact of tax concessions given for the neighbouring states.
The state government submitted their memorandum and maid a detailed presentation on the finances of the state government, its projections for the award period and gave their views on some of the terms of reference of the commission. The commission also interacted with representatives of political parties, Panchayati Raj Institutions, Urban Local Bodies and the trade and industry associations.
The commission places on record its appreciation to the Chief Minister and state government for the cooperation and support extended to the commission and assures that the issues raised will receive due attention in the deliberation of the commission. The commission also looks forward to continuing interaction with the state government.
The commission will finalise its recommendations by October 2014 after completing its discussions with all the state governments, the Government of India and relevant stake holders.
MEANWHILE, another report from Chandigarh said-
To enable the state to overcome financial challenges and ensure a stable growth, the Punjab Chief Minister Parkash Singh Badal today urged the 14th Finance Commission to recommend State Specific Grants of Rs 9639 crore besides fully funding the Agricultural Diversification Plan worth Rs. 8775 crores and a Debt Relief Grant to the tune of Rs 24, 813 crore for the state.
Making a forceful presentation, after submission of memorandum, before the 14th Finance Commission led by its Chairman YV Reddy here at Punjab Bhawan this morning, the Chief Minister apprised the Commission that the Centre had referred the issue of debt stressed states of Kerala, Punjab and West Bengal to the 14th Finance Commission and thus demanded Rs 24, 813 crore as Debt Relief Grant towards outstanding Small Savings and Government of India (GoI) loans. He mentioned that the then Prime Minister IK Gujral had waived the entire special term loan raised during the militancy in Punjab. However Badal lamented that when it came to implementation, only the outstanding balance on that date was waived therefore he impressed upon the Commission to grant a ‘Special Term’ loan and interest already paid by the state amounting to Rs 2694 crore at current prices.
The Chief Minister gave a brief account of how the state had been meted out a step motherly treatment by the Centre despite being the ‘Sword Arm’ and ‘Granary’ of the nation. Likewise, the state also faced the brunt of partition besides our people paid huge price during Indo-Pak wars. Subsequently we faced long years of Militancy and Punjab remained under long spells of President rule thus no additional sources were raised and substantial resources were diverted towards fighting the militancy pushing the revenue surplus state into vicious debt trap. Badal reiterated that Punjab fought the nations’ war and thus sought the restructuring of the balance outstanding debt and a moratorium on the payment of interest, considering the strong financial position of the state prior to militancy.
Pleading to recast the Federal Structure in true sense which was gradually shedding its character to pave way for a unitary form of Government, the Chief Minister urged the Commission to make comprehensive recommendations for decentralization of planning process besides evolving fair and justifiable formula for sharing of resources. He said that the States should be allowed to decide their own plan priorities as per their local needs adding that funds should be given in an “untied” manner. Thus Badal underlined the need to recommend all grants including Plan grants be distributed only on the basis of Finance Commission recommendations.
The Chief Minister bemoaned that by and large the states' expenditure in development has been rising while their share in revenue was readily declining whereas the scenario in Center situation was absolutely opposite as it was accumulating far more revenue than actually incurring expenditure on development. Therefore he requested the Commission to fix the share of states in central taxes at 50% and also to bring cess, surcharge and royalties to the shareable pool. To substantiate his claim, Badal cited that since the Fifth Finance Commission, state’s share in central taxes has been reduced from 2.450% to just 1.389% now.
Ridiculing Centre’s discriminatory approach for devolution of funds amongst the states, the Chief Minister said that over the years such formulas had been against the Fiscal interests of the progressive and better performing states like Punjab. Due weightage should be given to the Gross State Domestic Product (GSDP) and to the proportion of SC/ST population, which was the highest amongst the states in the country.
Referring to the Industrial Tax concessions given to neighboring states by Central Government, the Chief Minister said that this discriminatory policy has dealt a severe blow to state’s economy resulting in stoppage of fresh investment and flight of capital from the state. He asked the GoI to grant tax concessions to Punjab, at par with those granted to the neighbouring States, to compensate the state for the losses suffered by the flight of industry. Badal also sought Rs 3000 crore for promoting industry in Punjab by creating new and upgrading the existing infrastructure in the form of Industrial Focal points, Integrated Textile Parks, Food Parks, SEZs etc. In addition to this, we need Rs. 500 crore to build and strengthen infrastructure in the border areas to make use of the increased trade with Pakistan.
Outlining the state’s Agricultural Diversification Plan of Rs. 8775 crores, the Chief Minister said that it was all the more important now with the Centre Government mulling to do away with the MSP regime. Therefore he said that the state was left with no other alternative but to go for diversification of Agriculture through promoting its allied sector likedairy farming, piggery, fisheries, bee-keeping etc besides motivating the farmers to cultivate less water intensive and highly remunerative crops. Badal informed the Commission that to bail out the farmers in this hour of crisis and to save agriculture, the State government was investing nearly Rs. 6000 crore per year for providing electricity to the agriculture sector. Terming this initiative as a step towards the National Food Security he urged that GoI should share atleast 50% of the investment.
The Chief Minister attributed the population as a correct reflection of contribution of taxes, therefore he requested to accord weightage of at least 35% to population. To further give due importance to the component of SC/ST population, he suggested the Commission for introducing the element of equity, an additional weightage of 15% should be given to the states as they undertake substantial expenditure for the upliftment and welfare of these sections of society. Likewise Mr. Badal also said that the weightage of the areas must be increased from existing 10% to 15% in the devolution criteria to meet the higher administrative costs to deliver similar level of public service across the country.
The Chief Minister also said that in order to enable the urban and Rural local bodies to perform their functions efficiently the general basic grant and performance grants should be merged into a single general grant for local bodies, which must be equal to three percent of divisible pool of central taxes. He also said that this grant must be given on lump sum basis adding that during each year of the 14th Finance Commission 20% of the Local Bodies must be covered thereby covering all the local bodies in five years.
Earlier the Finance Minister Parminder Singh Dhindsa in his speech said that the state government enacted Fiscal Responsibility and Budget Management act in the year 2003 and subsequently amended it to make consistent with the Fiscal consolidation path recommended by the 13th Finance Commission adding he said that the state has been able to meet the Financial consolidation path targets except for Revenue Deficit. The state government was conscious of the need to contain Revenue Deficit of the state and has made significant effort to increase its own tax revenues and compress non-plan revenue expenditure. As a result of the efforts of the state government, the average tax revenue have increased from Rs 5711 crore in 2002-03 to Rs 22, 588 crore in 2012-13.
Summing up the marathon deliberations, the Chairman of Commission YV Reddy said that he was highly impressed by the meticulous presentation of the Fiscal scenario in the state presented by the government. He assured the Chief Minister that the Commission would thoroughly examine all the aspects of Fiscal consolidation in a holistic manner.
The Chief Minister was accompanied by Cabinet Minister Chunni Lal Bhagat, Financial Commissioner Revenue NS Kang, Financial Commissioner Development Suresh Kumar, Principal Secretary Finance DP Reddy, Principal Secretary Higher Education Ravneet Kaur, Principal Secretary Irrigation Sarvesh Kaushal, Principal Secretary Health Vinnie Mahajan, Principal Secretary Education Anjali Bhawra, Principal Secretary to Chief Minister SK Sandhu, Financial Commissioner Animal Husbandry G Vajralingam, Secretary Expenditure Jaspal Singh, Secretary Power Anirudh Tiwari, Secretary Agriculture Kahan Singh Pannu and Director Local Bodies Priyank Bharti.
The Commission was represented by Members of the Commission Prof. Abhijit Sen, Sushma Nath, Dr. M Govinda Rao and Dr. Sudipto Mundle besides Secretary to Commission Ajay Narayan Jha.