Drabu’s budget for 2016-17; Mufti model of governance

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Fee waiver for school girls; hike in VAT

Online purchases taxed

30 units free power to BPL families

Fixed charges waived off

6 percent DA for employees

Fee waived for girls students

 

In an effort to restore the administrative will and institutional mechanisms for plugging loopholes in enforcing regulations in Jammu and Kashmir, Minister for Finance, Dr. Haseeb Drabu Monday presented the Annual Budget 2016-17 in the state assembly.

Terming annual financial statements relating to the receipts and expenditure as “Mufti Model of Governance”, Dr. Drabu said an effort has been made to put in place systems and processes which will eventually eliminate corruption in the system. He said that budget will promote inclusivity across all sections and segments of society, especially the marginalized and vulnerable, build a safety net and give a human face to Government without becoming a subsidy State.

Finance Minister said the Annual Budget draws inspiration from personal integrity of late Chief Minister Mufti Mohammad Sayeed, his political inclusivity and governance legitimacy to make it most important tool for and of governance. Dr. Drabu said the annual budget contains total receipts of Rs 61681 crore with Revenue Receipts Rs 51460 crore of which ‘Own Tax Revenue’ is estimated at Rs 9220 crore.

The share of Central Taxes is up at Rs 9500 crore as against figure of Rs 8088 crore in Revised Estimates 2015-16. Annual Budget 2016-17 contains Revenue Deficit Grants of Rs 10831 crore as against Rs 9892 crore in 2015-16 with Capital Receipts of Rs 10221 crore. Finance Minister said with the abolishing of the plan and the non-plan bifurcations, the state accounts will now be a more accurate reflection of the reality in terms of developmental and non-developmental expenditures.

Doing away with the budgetary treatment of General Provident Fund which has been in place since 1984, the Finance Minister said the amount deducted from state employees should have been earmarked and invested in long term financial instruments. Finance Minister said the State Government will overhaul the PF accounting system, make provisions and address this issue at the RE stage. “It needs a major; painstaking and a creative clean up. If need be, we will put in place a line of credit to pay what is due to our employees. Let there not be any panic,” he said.

Dr. Drabu said the Budget has kept provisions for streamlining the system payment of salaries to DRWs, casual, seasonal, need based and other categories of workers. “First, the wages are paid irregularly which is completely unethical. Second, is that it conceals the amount Government spends on wages. Third, it leaves no money for maintenance of our capital assets. We have now changed this system by insisting on paying wages from the head of accounts where it is to be paid from,” he said.

The Finance Minister said the provision will increase the State’s total revenue expenditure and more increase is expected as departments make the transition from concealing to revealing fully the wages that they actually pay. “The result of this accounting irregularity has been that no one has been able to keep track of the adhoc and casual recruitment in the Government till it has reached unmanageable proportions,” he said.

“This is how the government has approached, and declared its intent to find a solution to the issue of estimated 61,000 people engaged in various ways, in different forms and at different times. I am confident that with the guidance and support of the Chief Minister, we will be able to address it with empathy and understanding,” he added.

Referring to the “incestuous relation” of PSUs with the State Government which results in poor contracting, inefficient pricing or plain corruption, the Finance Minister said the sub-contracting breeds and perpetuates inefficiencies and transactional corruption in the system.

“The procurement systems need to be made not only transparent but also market friendly. For instance, by permitting R&B contractors to source their own key materials; be it bitumen, cement or steel. Also, for all such departments, the civil accounting system has to be instituted,” he said.

“I am happy to provide budgetary support to corporations wherever needed to cover their extra employment burden on the condition that they will compete for business, including Government business, in the open market. I assure the house that the efficiency gains of this will be much higher and will be shared across the system,” he added.

Regretting the lack of standard specifications for infrastructure projects in the State, the Finance Minister said some institutional arrangements have been made to address this issue.

“To lay down norms and guidelines for creation of public infrastructure and assets, the recently restructured Planning, Development and Monitoring Department shall review the system of preparation of cost-estimates through standardization of designs and other building specifications to bring about cost savings and efficiencies.  This will be the start of normative public expenditure planning and will ensure the much needed administrative, financial and technical discipline,” Dr Drabu said.

Dr Drabu said while systems are being tightened, it is also important that institutions are financially empowered. “Towards this end, a significant decision aimed at granting financial autonomy to the State’s Universities to ensure efficient utilization of resources has been taken. Not only do the Universities now decide about the amount of tuition fees, they retain all internally generated resources. The Universities have also been given the freedom to generate and retain funding from sources other than the Government and to allocate it independently. The same principle of authority with accountability shall be followed with other autonomous bodies and institutions,” he said.

Dr Drabu revealed that different departments of J&K government have opened 2.31 lakh accounts in J&K Bank alone, apart from other banks, “Amidst serious and severe shortage of liquidity, these accounts have been having a two-year average balance of around Rs. 3,000 crore to Rs. 4,000 crore. This idle parking of funds shows lax control as these monies ought to have been transferred to the Government account as required under norms,” he said.

The Finance Minister said a system of leveraging financial resources is being put in place which will help the Government in improving the financial discipline as well as ensure better liquidity management. Dr Drabu said the system of police stations needs to be improved with specific financial resources to meet the routine expenditure such as the cost of investigation of crimes.

“I propose to do so by allocating Rs. 1 lakh each in favor of all the 193 Police Stations of the State as ‘Cost of Investigation’.  Having the legitimate financial resource will certainly uplift the image of police stations in the minds of common masses,” he said.

The Finance Minister said the State Government will follow global trends of alternate systems of delivery of developmental programs and public services for a more effective delivery of public services.

“The State Government needs to lay stress on Public Private Partnerships. In our case, apart from improving the delivery of services, it will also help the nascent local private sector in its otherwise stunted growth. In key sectors with lumpy frontloaded investments, the Government will consider providing Viability Gap Funding so as to make it remunerative for the private partner,” he said.

The Finance Minister said the State Government will go all out to attract investments in industrial estates or elsewhere in the states by providing an enabling environment and incentives to ensure that these are governed by and are in compliance of our existing administrative practices, regulatory norms and the Constitution of J&K.

“The industrial estates in the State, will be reorganized to function as a corporate entity within the aegis of SIDCO/SICOP. The idea is to make each one of them a profit centre. These estates shall become SPVs of the corporations or operating companies be it SIDCO or SICOP,” he said.

Dr Drabu said Information Technology is an important sunrise industry in the State and the Government shall offer Joint Venture opportunity to State’s Top 10 IT companies in terms of audited top line.

“To facilitate growth of this sector and to help the local IT companies reach certain economies of scale, the State Government will invest through J&K E-Governance Agency (JAKEGA) or an SPV created for this purpose. The proposed initiative shall also help speed up e-governance projects in the State. For capitalization of the Joint Venture (JV), I have earmarked Rs. 10 crore,” he said.

The Finance Minister the State Government will set up Business Incubators for sunrise industries in the capital cities of Srinagar and Jammu. “Business Incubators will provide finances, branding and marketing support to the entrepreneurs. To begin with, I propose a start-up fund of Rs. 5 crore,” he said.

The Finance Minister has also kept a provision of Rs 40 crores for enabling the Industries & Commerce Department to create a Land Bank across the State for acquisition and development of the new Industrial Estates besides specific relief to sick industries, incentives for local IT start-ups and one-time provision of Rs. 26 crore for artisans under an interest subvention scheme of the Government of India.

“In 2004, the Government of India had announced a debt waiver scheme for houseboat owners. The Union Government released the required amount but it was diverted for other expenditures by the State Government. I propose to do a one-time settlement with J&K Bank and the State Bank of India for the total outstanding balance of Rs. 49.78 crore. This will give a major financial and emotional relief to all the houseboat owners and taxi drivers who have become defaulters with the Banks,” he said.

For the Healthcare sector, the Budget has also kept provisions for implementation of ‘Free Drug Policy’ in Jammu and Kashmir, “At present the State does not have either a standard food testing laboratory or a drug testing laboratory. To set up one each at Srinagar and Jammu and to provide mobile testing facility for interior parts of the State, I am making an initial provision of Rs. 12 crore,” Dr. Drabu said.

To manage the State’s rich water resources which are presently being managed by various departments, Dr. Drabu said the Water Resources Department will be created which will be responsible for planning and management of all the water resources, including lakes and rivers, of the State for which an amount of Rs. 2 crore has been earmarked.

Making the social welfare of the State Government as the top priority, the Finance Minister said the budgetary provision for the State Rehabilitation Council has been doubled and BPL families will get 30 units of free power and waiver of fixed charges. “However this subsidy (in power) will be made available from 1st January, 2017 by which time State Government would have consolidated, verified and authenticated the Aadhaar linked list of BPL consumers in the State,” Dr Drabu said.

“For last 26 years, journalists working in strife torn State of Jammu and Kashmir are facing hardship as there is no welfare scheme for scribes. I propose to set up a Journalist Welfare Fund with initial corpus money of Rs. 2 crore for the welfare of working and accredited journalists of the State. In the event of untimely death of a working or accredited journalist or in case a journalist is rendered incapacitated, his wife or legal heir or dependents will get assistance from this Fund. It would be ideal if the journalists of the State get together and set up a society, frame the rules and guidelines for administering this fund,” he said.

Keeping the welfare of the State Government employees in mind, the Finance Minister announced the release of six percent Dearness Allowance from January 1, 2016. “Within a day of the Government being formed, a number of employee welfare measures were announced including release of pending DA installment of 6 per cent from July 2015, enhancement in the rates of Durbar Move and Temporary Move Allowances and increase in pensionery benefit for those who had crossed the age of 80 years. In the same spirit, I announce the release of pending DA installment of 6 per cent in favor of Government employees from 1st January 2016,” he said.

With a view to mobilize additional resources, the Finance Minister said the tax proposals have been divided into five parts to cover existing exemptions that have been given to industry, trade, tourism and commerce for a further period of one year, a few new tax exemptions for those industries/sectors that are in the throes of a crisis including carpets and agriculture, new exemptions for promoting overall well being – health, entertainment, environment – of J&K, category of tax changes proposed for simplification, administrative convenience or those sought by the local industry and trade bodies, and some increase in tax rates, particularly VAT which has not been revisited as has been done by a large number of States.

The Finance Minister said in deference to J&K’s first woman Chief Minister, some gender specific budgeting initiatives have been proposed in the Budget, “The Government will waive off the fee of all girl students in the State Government run Educational Institutions up to the higher secondary level, 10 per cent area in all industrial estates of the State be reserved for women entrepreneurs, setting up two Entrepreneur Development Centers at Srinagar and Jammu to help, guide, and train aspiring women entrepreneurs and four more women police stations in Pulwama, Kupwara, Kathua and Udhampur districts,” he said.

“I am earmarking an additional amount of Rs. 5 crore for a dedicated city bus service for women in Srinagar and Jammu cities and a provision to provide exclusive women toilets in the entire state, district and sub district hospitals,” he said.

The Budget was also presented by Minister of State for Finance, Mr. Ajay Kumar Nanda in the Upper House of the State Legislature.

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