Jammu and Kashmir government today rolled back the 9.5 per cent hike in the levies on mobile phones, readymade garments and hosiery items following criticism from opposition members and trade bodies.
“Given the demands of the House, the VAT on readymade garments, hosiery and cell phones, which was increased from 5 percent to 14.5 percent, will be rolled back,” Finance Minister Haseeb Drabu said while replying to discussion on Budget in Legislative Assembly here.
The hike in levies, besides some other budget proposals, had attracted the ire of trade bodies in Kashmir and Jammu regions and they had called for a strike on June 4 to protest against these. Drabu also announced that helicopter services in the state would be exempt from 5 per cent hike in the levy on Aviation Turbine Fuel (ATF).
He said the tax on ATF was reduced last year from the national average of 25 percent to 20 percent. “We had hoped it will have a positive impact on tourism because of cheaper fuel. But it didn’t happen. However, given the demands of the members of this House, I am rolling back the proposal of 5 percent hike in tax on ATF for helicopters,” the Finance Minister said. The tax on fuel for helicopters engaged in pilgrim tourism will be kept at the previous 20 percent, he added.
Minister of Finance, Dr Haseeb A Drabu, today said the path-breaking initiatives announced in the Budget 2016-17 are aimed at overhauling system of governance and restoring accountability of institutions, which have been systematically eroded over a period of time.
“The core of the Budget 2016-17 is building systems, instituting accountability and making budget the most important tool of governance,” Dr Drabu said in a spirited response to the two-day discussion on the budget in the Legislative Assembly today.
Responding to the views expressed by the legislators, both from treasury and opposition benches, during the debate on the budget, Dr Drabu said unfortunately the past governments have destroyed the State’s institutions and systems, especially the financial system with impunity.
“Over the past 30 years all the systems and institutions in the State have not worked the way they were meant for,” Dr Drabu said while launching a scathing attack on the way the state finances have been managed in the past. “Our Government will work with fresh resolve to build the systems and restore the institutions of governance. We want J&K to be a state where systems function independently without anyone’s personal or political interests driving it,” he said.
The Finance Minister said the budget presented by him in the Legislature on Monday has set out to change not only the accounting system, but also the wage payment system, the procurement policy, the tendering policy and the borrowing policy. “All this adds up to having new system of public expenditure management and monitoring,” he said.
Dr Drabu said through this budget he has launched a systemic war on corruption and until the menace is rooted out, it will be impossible to ensure development on the ground despite spending thousands of crores like we have done in the past. “In the past we have heard only platitudes, now we have started creating a mechanism to address the menace of corruption,” he said.
He also said that it is for the first time in the history of the State budget that subsidies are being targeted to those who need it the most like the proposed power tariff subsidy for the BPL (Below Poverty Line) consumers. “Streamlining systems doesn’t require budgetary allocation. It requires political will and efficiency in the systems. The new procurement policy for R&B and CA&PD Departments proposed in the Budget will bring transparency in our institutions,” Dr Drabu added.
He said no budget will carry any meaning unless there is transparency and accountability of the systems. “Systems should be independent of individuals. Our government’s strategy is to evolve a fiscal policy whose driving force will be public investment. We will spend more to generate more employment,” he said. On the strategy underlying the budget, the Finance Minister said there is no option but to follow an expansionary policy where public investment is high and drives the economic growth in the state. “This is shown by the fact that the investment this year is the highest ever at Rs 20,000 crore – three times more than what it was in 2014-15,”he said.
Rubbishing the claims that agriculture, horticulture and irrigation and has been ignored, Dr Drabu reeled out the facts that the investment in agriculture has been increased by 87 percent, in horticulture by nearly 60 percent and irrigation by 33 percent.
He said the District Development Board (DDB) meetings were held ahead of the Budget session for the first time in the history of Jammu and Kashmir and the systems of governance and democracy are being strengthened under the leadership of Chief Minister, Ms Mehbooba Mufti.
“For the first time, we have made it mandatory that unless the MLAs sign the proposals of DDB meetings, it will not be cleared. It is not a one sided affair. The MLAs must realize what they say in this House. They are accountable to people, because what they say can have grave ramifications on the state,” he said.
The Finance Minister said rate of J&K’s growth has been projected from nearly 13 percent last fiscal to about 14 percent in the Budget 2016-17. He said the systems of governance can’t change overnight and the government is modifying institutional structures to restore efficiency and transparency.
Justifying most of the tax proposals, Dr Drabu, however, said given the demands of the House, the VAT on readymade garments, hosiery and cellphones, which was increased from 5 percent to 14.5 percent, will be rolled back. He also clarified that most of the demands made by legislators and business associations regarding exemptions and tax concessions and amnesties have already been announced and requested the legislators to go through the budget proposals thoroughly.
On the issue of fiscal deficit of about Rs 3000 crore in the Budget 2016-17, the Finance Minister said at the state level the fiscal deficit isn’t monetized and hence its adverse impact is marginal. “The issue was raised by the Government of India also but I told them that the fiscal deficit in any budget is never monetized, so we decided to keep it. We inherited liabilities in power, provident funds, etc,” he said.
Reacting to the uproar over non-tabling of the Economic Survey in the House, Dr Drabu said the government had decided in December last year that the Budget session will be held in January and the Economic Survey will be presented in August.
“Due to untimely demise of Mufti (Mohammad Sayeed) Sahab, it couldn’t happen. The Economic Survey was presented in the history of the House first during 2005-2006 when I was the Economic Advisor and Karra Sahab was the Finance Minister. We have nothing to hide,” he said. Finance Minister urged the opposition to engage in meaningful debate which can resolve the problems faced by people of Jammu and Kashmir.
“Budget speech is a tradition, not a requirement. If we collect the budgets of last 60 years, they are nothing more than jugglery of figures. For meaningful debate, you could have gone through the ‘Budget at a Glance’ which contains the most relevant data,” he said. Finance Minister said provisions have been kept in the Budget to spend more on capital expenditure to generate employment. “We have revenue surplus of Rs 6000 crore which we can invest. Revenue deficit is zero. While the previous government used to go to New Delhi for funds by fudging the figures, we have made our accounts clean. What is within our rights, we have asked for it, and we have got it,” he said.
Dr Drabu said Jammu and Kashmir has got PM’s economic packages from the Centre on only two occasions in the last 60 years. “On both occasions, Mufti Sahab was the Chief Minister. Our focus on both occasions has been to improve the absorption capacity. We will make the system accountable for each penny. There is a big difference between taking loan for paying rents and building roads. With the Prime Minister’s Development Package of RS 80000 crore, J&K will usher in a new era of peace and prosperity,” he said.
The Finance Minister said there is no shortage of funds with the state government but the different departments must justify their expenditures. “The point is whether you are going to use fund for development or using the authority of possessing the cash for other interests. Different departments, including education and social welfare, have contradictory lists on BPL families. They are running their own empires. Within six months, there will be a single list of BPL families,” he maintained.
Dr Drabu said the Uday Bonds were issued by the Centre after he made a proposal for the same during his previous Budget speech to clear liabilities in the power sector. “Work on many power projects stopped and contractors left midway due to faulty DPRs. With the works that we have undertaken, T&D losses will be down to 20 percent by 2019-20,” he said.
“For the first time, we have estimated that there is deficiency of Rs 2000 crores and subsidy of Rs 1000 crore. This subsidy will be given to poor in the form of free power, not to the influential and the affluent who benefitted at the cost of ordinary people under previous regimes,” he said, amid thumping of desks by the legislators.
The Finance Minister said Jammu and Kashmir has been projected to grow at almost 14 percent this fiscal which will be propelled by the GDP rate of 8.9 percent. Rebutting the charges of ignoring some sectors crucial for the state’s economy, Dr Drabu said the Opposition should read the Budget before raising issues in the House.
“In agriculture sector, allocations have been hiked by 87 percent. The allocation for horticulture sector, which was barely recognized by previous governments, has increased by 58 percent. I am not counting the provisions kept in PM’s Development Package. In three years, the landscape of horticulture will be different in Jammu and Kashmir. For Irrigation and Flood Control Department, allocation has been hiked by 30 percent. For power sector, which will be a driving force of J&K’s economy in coming years, there has been 181 percent increase in allocations. No sector has been ignored,” he said.
Dr Drabu said the tax on Aviation Turbine Fuel (ATF) was reduced last year from the national average of 25 percent to 20 percent. “We had hoped it will have a positive impact on tourism because of cheaper fuel. But it didn’t happen. However, given the demands of the members of this house, I am rolling back the proposal of 25 percent tax on ATF in case of helicopters. The tax on fuel for helicopters engaged in tourism will be kept at the previous 20 percent,” he said.
Negating the charges of the Opposition, the Finance Minister said no business establishment in any part of the world has ever been happy with the tax regimes of governments. “The famed handicrafts of J&K have been exempted, except walnut furniture. Fair amount of relief has been provided for artisans. Flood relief has been disbursed. Power waiver has been announced for sick industries along with the waiver of penalty on traders and transporters,” he said.
On the demand of legislators that their salaries and Constituency Development Funds be raised, Dr Drabu said a committee will sit at the end of the Budget session to decide on the issue. “I think CD Fund is a convenience, not a plan to run the system. A committee should sit by the end of this session and a decision will be announced after consultations with the members of this House. I am committing that I will not see it as a huge financial burden,” he said.
After his 70-minute extempore and evocative reply, legislators from all sides were seen complementing the Finance Minister for his meaningful and incisive reply. Chief Minister, Ms Mehbooba Mufti also complimented the Finance Minister for his exhaustive reply.