Slowdown in economy cripples State finances

Slowdown in economy cripples State finances

Slowdown in economy cripples State finances

Slowdown in the economy among other reasons has begun taking its toll on the State finances: The State government is expecting a revenue shortfall of Rs 670 crore in the current financial year, mainly on account of poor collection of motor vehicle taxes and mining royalty.

In its Mid Year Review of State Finance report tabled in the Assembly, the government has admitted that it is in the grip of economic slowdown and that there is no sign of its early recovery.

Against the full year target of Rs 4,120 crore under motor vehicle taxes, the government has been able to mobilise only Rs 1,794 crore, up to September (44 per cent).

It is estimated that there will be a shortfall of about Rs 320 crore from this source of revenue by the end of the year.

Similarly, restriction on iron ore mining has hit the State’s resources. The expected shortfall from mining (mainly royalty) by the end of the year is Rs 350 crore. Based on current trends, it is expected that the devolution from the Centre will be lower.

However, the government has expressed hope that it will be able to reach the year’s target in all other major revenue sources -- commercial taxes, excise, stamps and registration and other non-tax sources. The total revenue receipts target is Rs 97,986 crore, and the government has been able to mobilise Rs 40,017 crore till September.

“The State would need to be cautious while expanding its expenditure in the backdrop of slower growth of national and State economies and high inflation. All these factors would have long term impact on the State’s own revenue mobilisation efforts and devolution,” the report stated.

To make good the loss, the government has stated that it has urged the Centre to release its share of Central Sales Tax compensation of Rs 965 crore, pertaining to the year 2010-11. The Centre is expected to release it soon.

This apart, the government has sought the Centre’s permission to borrow Rs 16,551 crore from the open market in the current fiscal. The Centre has given its consent to borrow Rs 4,000 crore and the State has so far borrowed Rs 3,602 crore, the report stated.

The Fiscal Management Review Committee (FMRC) headed by the chief secretary, which monitors fiscal condition of the State, has recommended that the government should moderate its existing expenditure and limit approvals in supplementary estimates in view of the tight fiscal position.

Supplementary estimates

Despite shrinking resources, the government has sought to incur additional expenditure of Rs 7,743.64 crore in the current financial year, including increasing vehicle allowance to legislators from Rs 10 lakh to Rs 15 each, taking up road development works to the tune of Rs 500 crore and enhancing the allocation for cost-sharing railway projects.

In the supplementary estimate (first instalment) for 2013-14 tabled in the Assembly, the government has also sought to earmark Rs 100 crore for the Hyderabad Karnataka Development Board, Rs 100 crore for land acquisition to undertake railway projects, Rs 500 crore for clearing pending bills towards road works and Rs 500 crore for the purpose of loan waiver scheme. The additional estimates are over and above the Rs 1,21,611 crore expenditure approved as the revised budget by the State legislature.

The government has sought to make a provision of about Rs 170 crore for establishing six new medical colleges in Chamarajanagar, Karwar, Koppal, Kodagu, Gadag and Gulbarga. About Rs 45 crore is sought to be spent on reimbursement of fees to SC/ST students who were admitted under the government quota for engineering colleges.

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