As mining income dries up, State may tap other sources

With the State’s revenue taking a beating due to the blanket ban on iron ore mining, the Finance Department (FD) has decided to make good the shortage by enhancing the rates of other non-tax revenue sources, including user charges on various services being provided by the State government.

In a recent circular issued by the FD, heads of all departments have been directed to initiate steps to revise the rates of user charges and conduct a thorough review of all non-tax revenue sources. Besides, the FD has asked the department heads to launch a vigorous drive to collect arrears.

With the FD’s decision, the user charges of 45 different services provided by the government departments will go up sooner or later. Some of these include tuition and other fees of technical education, fees collected for issuing various revenue records, mutation fee, KPSC examination fees, fines for traffic offences, toll on roads and urban health services.

The Supreme Court had, in August last year, imposed a ban on mining in the State to check illegal mining. As a result, the government’s plan to mobilise Rs 3,674 crore non-tax revenue in the 2011-12 fiscal has gone haywire.

The FD has estimated the revenue shortage due to non-realisation of mining royalty at Rs 400 crore in the current fiscal. Normally, royalty from mining fetches about Rs 858 crore per year to the government. Over and above, the government is estimated to lose Rs 200 crore in the form of sales tax due to reduction in consumption of diesel by mining lorries, official sources said.

The FD has, in its three-page circular, also taken serious note of the stagnation in the growth of non-tax revenue over the years. Non-tax revenue as a percentage of total revenue receipts has nosedived from 13 per cent in 2006-07 to six per cent in 2010-11 (in the region of Rs 3,500 crore). This is mainly due to low cost recoveries, poor performance of public enterprises and non-revision of user charges.

Among the different non-tax revenue sources (interest, dividends, royalties, fines, penalties, rents, fees, agency charges), user charges (fines, penalties, fees and agency charges) form just about nine per cent (about Rs 300 crore) of total non-tax receipts of the government. But, due to the declining cost recoveries and the poor performance of public enterprises, the FD was left with no other option but to enhance the rate of user charges to mobilise revenue as projected in the current year’s budget. Moreover, this non-tax revenue source had remained untapped for a long time, sources said.

Top secret

The FD has asked the department heads to examine and indicate to the government the possibilities of raising additional resources either from existing revenue sources or from fresh sources under tax revenue in the 2012-13 fiscal and promised to treat such proposals as ‘top secret.’

Non-tax revenue

Year                        Collection
*  2007-08              3,358
*  2008-09              3,159
*  2009-10              3,334
*  2010-11              3,519
*  2011-12              3,674 (BE)

(Note: All figures in Rs crores; BE – Budget Estimate)