Dr. Asim Dasgupta’s statement on the recommendations of the 14th Finance Commission

Dr. Asim Dasgupta’s statement on the recommendations of the 14^th Finance Commission:

We are making our preliminary observations on the recommendations of the 14^th Finance Commission, which was set up by the UPA-2 Government. Our final observations will be made after the Union Budget is presented.

We, the left and the Left Front Government of West Bengal, have been pioneer in making demand for decentralization in Centre-States financial relations. And one of our major demands has been to raise the share of central taxes to the states to at least 50 percent. This demand we have raised from the Left Front Government, as well as from the empowered committee of state finance ministers. We, now find that 14^th Finance Commission has recommended an increase in central share taxes from previous proportion of 32 percent to 42 percent.  Although, this does not fully satisfy our demand but it is a good increase. We also note that there have been recommendations for enhancing central grants to the states.

There will be, therefore, additional resources available to the present state government of West Bengal. If these resources are properly utilized in the interest of common people, then there will be social gain. If, however, incurring the expenditure there is any deviation of financial norms, then there will be corresponding social loss.

24^th February, 2015

Kolkata        

State Finances: Misleading Statements by TMC-Congress-led Govt

By Dr. Asim K Dasgupta

MISLEADING statements are often being made by the TMC-Congress-led state government in West Bengal regarding state finances, particularly relating to (a) debt of the state government and (b) low availability of funds for Plan expenditure in the state. According to these maligning allegations, these two financial problems have arisen due to the wrong policies of the Left Front government in West Bengal. These allegations have already been refuted several times by facts and analysis, and the refutations have also been duly published in most of the local print and also in some of the national newspapers. The allegations have been rebutted through some news channels also. It may be useful to restate the correct facts with analysis. 

ON GOVT DEBT

Misleading Statement:  The Left Front government in West Bengal has left a debt of Rs 2.04 lakh crore. 

Facts:  It is well known that in terms of Constitutional provisions and existing centre-state relations, all state governments are entitled to raise revenues from certain taxes and non-tax items; get share of central taxes and central grants and they are also entitled to borrow with approval of the central government.  The total borrowed amount of the state governments usually consists of market borrowing (raised in terms of state government bonds generally subscribed by banks and insurance companies), central loans, loans imposed on the states related to small savings, General Provident Fund (GPF) of employees kept with the state governments etc. 

In terms of these Constitutional provisions, all the state governments have certain accumulated or outstanding debt, and similarly the central government also has an amount of outstanding debt. The outstanding debt of the government of West Bengal as on May 18, 2011 (the last date before the TMC-Congress-led state government assumed power) was Rs 1.91 lakh crore, and not 2.04 lakh crore as wrongly alleged.  As per the latest data on State-wise debt position (as on March 31, 2011) published by the Reserve Bank of India (State Finances, 2010-11, RBI, p. 152), the highest outstanding debt among the states is that of Maharashtra (Rs 2.36 lakh crore), followed by UP (Rs 2.35 lakh crore), then West Bengal (Rs 1.91 lakh crore as on May 18, 2011, as already mentioned), Andhra Pradesh (Rs 1.37 lakh crore), Gujarat (Rs 1.36 lakh crore), Tamilnadu (Rs 1.09 lakh crore) etc.  The debt figures of all these other states will, of course, be higher on the later date of May 18, 2011, but for that date only the figure for West Bengal is readily available as has already been presented.  The outstanding debt of the government of India is, of course, very high at Rs 39.44 lakh crore as on March 31, 2011. The debt position of the states is usually compared by the Reserve Bank of India by expressing outstanding debts of the states in terms of ratios of debts to corresponding Gross State Domestic Products (GSDP) of the states, and that of government of India as ratio of debt to the corresponding GDP.  In terms of this proper measure of comparison, the debt position of government of West Bengal has been 11th among the states with the debt-GSDP ratio at 40.8 per cent in 2010-11 (State Finances, 2010-11, RBI, p. 153).  It may further be noted that due to the policies followed by the Left Front government in West Bengal, this debt-GSDP ratio has systematically fallen from 49.9 per cent in 2005-06 to 40.8 per cent in 2010-11.  However, the debt-GDP ratio of the government of India has still remained high at 50.1 per cent in 2010-11 (Economic Survey, Government of India, 2010-11, p. 59).  It is by now well known that debt-GDP ratio of the US has recently increased to reach 100 per cent and that of the several European countries has crossed 100 per cent. 

A distinguishing feature of the debt of West Bengal is that the most significant component (nearly Rs 75,000 crore) of this total debt has been caused by small savings related debt burden imposed by the centre on the state government.  The Small Savings programme implemented primarily through post offices across the country is a good national level programme.  However, according to the unilateral decision of the government of India, if in any financial year, there is a certain amount of net small savings collection in the post offices in a state by the people of that state (i.e. after allowing for withdrawals), then 80 per cent of that amount of net small saving collection would be compulsorily imposed as debt on the state government with high rate of interest, without the state government having any say in the matter. Since people of West Bengal have over the years decided, for reasons of financial security and returns, to keep their hard-earned savings significantly in the small saving schemes, and West Bengal has occupied the first position among the states in this important national programme, the government of West Bengal has, in effect, been paradoxically penalised in terms of the most significant incidence of the small savings related debt component in the total debt of the state.  The Left Front government of West Bengal has repeatedly argued before the government of India that if net small savings collection in a state is a positive surplus, then after allowing for a deduction for interest payment, that net surplus of small savings collection should be shared between the centre and the state as grants, and that this surplus should not be unilaterally imposed only on the state as loan.  But, the government of India has not listened to this argument, presumably because of the fact that if net small savings collection is imposed as central loan to the states, that will, through loan repayment, add to extra earnings for the centre.  This unjust decision of the centre has specially increased (because of the highest position of West Bengal in small savings collection) the debt of the government of West Bengal. 

Despite this injustice, the Left Front government had succeeded, as mentioned earlier, in reducing the debt-GSDP ratio systematically in recent years.  This was made possible by higher collection of state tax revenue, and availing lesser market borrowings than even what was approved by the government of India.  In the 2010-11, the last financial year of the Left Front government, the total market borrowing approved by the government of India was Rs 15,056 crore.  But the actual borrowing taken by the Left Front government in the entire year 2010-11, was much less - only Rs 9,500 crore. In the sphere of market borrowing, the position of government ofWest Bengal was sixth among the major states.  However, after TMC-Congress-led government came to power on May 19, 2011, over a period of only nine months, this new government has already taken recourse to market borrowing of an alarming amount Rs 17,500 crore and has become the highest market borrower among all the state governments. 

ABOUT LOW AVAILABILITY OF FUNDS

Misleading Statement:  Payment of salary and pension of employees, teachers and others and payment of interest and principal of loans take away 94 per cent of total budget, and only 6 per cent is available, which is too low for Plan expenditure etc. 

Facts : The Left Front government of West Bengal has given effect to pay revision of not only state government employees, but also of teachers, employees of panchayats, municipalities, undertakings etc., and has during its tenure already borne the entire financial burden of current revision from 2009-10, and two-thirds of arrear payments. At the same time, with introduction of comprehensive Value Added Tax, and strict measures at tax compliance, there has been a significant growth of state tax revenue, of about 25 per cent in the last financial year. In consequence of these measures and other factors, the space of state budgetary resource available for Plan expenditure after payment of salary, pension and interest and principal of loan is now significantly much wider than 6 per cent. 

According to the Budget Publication No. 9 (pages 4, 5, 6, 7 and 20), presented by the TMC-Congress-led government itself in West Bengal state assembly in June, 2011, the estimated total receipts of the state government in the financial year (2011-12) is at Rs 87,643 crore.  On the other hand, the sum total of payment on account of salary, pension, interest and principal of loan is Rs 54,930 crore which is 63 per cent (and not 94 per cent as misleadingly stated), and therefore 37 per cent (and not 6 per cent) of total budgetary resource, i.e. more than Rs 32,000 crore is available for Plan expenditure and other essential expenditure. 

Both the allegations relating to the debt of the state government and availability of funds for Plan expenditure in the state have thus been once again factually refuted. 

(The writer was finance minister in the Left Front government of West Bengal) 

State has funds for development: Asim Dasgupta

TNN | Oct 28, 2011, 06.48AM IST

KOLKATA: Former finance minister Asim Dasgupta on Thursday pointed out "accounting fallacy" in his successor Amit Mitra's rejoinder to his slur against Mamata Banerjee. "In accounting propriety, revenue head shouldn't be added to capital head," said Dasgupta. He also turned down Mitra's request for a telephonic discussion on the fiscal calculations.

"Every number in this book speaks silently and I absorb every word. I stand by my own statement," Dasgupta said, holding up the "Trends of Expenditure and Growth Trajectories", tabled by the state government on August 11.

His second press conference in a week at the CPM headquarters turned out to be a classroom lecture (Dasgupta had taught economics at the ISI)to prove that Mamata had indeed talked out of her hat to claim that the Left misrule had cost the state so dear that she could only spend 6 paise for development out of every rupee earned.

Contradicting the CM's "misleading statements" at the National Development Council ( NDC) meeting in New Delhi to coax the centre for more bail-out funds, Dasgupta on Monday cited figures from the new government's financial statement to prove that the state, in fact, had 26% (not 6) funds reserved for development.

Less than 24 hours later, Amit Mitra jumped to the CM's defence to depict that a crucial category (loan repayment) had been omitted from the expenditure bracket. Resorting to the statistical legerdemain Dasgupta himself had often been associated with, Mitra said at Writers' Buildings on Tuesday: "His (Dasgupta's) presentation that the state's gross receipt is Rs 65,847 crore is true, but it boils down to Rs 59,462 crore because of the central grants that are barred from being used in the non-plan category." Mitra then invited his former Presidency college senior to telephone him for the clarifications.

On Thursday, Dasgupta said, "Quite so. These funds can't be used for paying salaries. But they can be used for development. Therefore, they must be added in the development expenditure category... If you start adding capital payment, you must also add the total capital receipt. Add Rs 21,794 crore to the revenue earning of Rs 65,848 crore and the sum soars to Rs 87,642 crore. After expending Rs 56,031 crore on salaries, pension, central loan repayment, transport subsidy etc, around Rs 33,000 crore would still be available for plan expenditure. This is no modest amount.

The low-down on the state's fiscal situation continued:

"This way, you would have spent 63% of the gross earning and are left with 37 paise from every rupee earned...You can't mix revenue and capital accounts. They (Mamata and Mitra) have combined the two in a glaring instance of accounting fallacy." These were his final words.

Defending the former Left Front government, Dasgupta said, finance minister defended the Left Front government's market borrowing spree, claiming that Rs 5,213 crore was raised in April-May alone "because tax receipt is low in the first quarter and the government had to resort to higher borrowing during this period,". He reiterated:

"The new government has borrowed Rs 10,000 crore in five months which is double of what we borrowed during the same period last year." He said he couldn't fathom why Mitra had added the Rs 3,000 "unpaid bills" in the spending bracket (it didn't figure in the financial statement tabled in the Assembly) since "payment is a continuous process and, thus, remained pending".

Shooting down Mitra's allegations that his government had left a Rs 4,800 crore DA burden on the new one, Dasgupta tom-tommed the Left Front's policy of including teachers, municipal employees and others within the purview of DA. He said, "In the last vote-on-account we had kept aside money for DA. It's for the present government to decide when it will be paid."

Finally, on Mitra's jibe that Bengal was the only state to extract coal royalty as well as cess, Dasgupta said, "Ours is the only state that has been discriminated against this revenue income. A Supreme Court ruling backs this. If Bihar and Jharkhand haven't claimed the money, it's because their Coal Cess Act was nullified."

What about coal royalty arrears? : Asim Dasgupta

The Hindu, October 25, 2011 00:00 IST

“Why no mention made of this legitimate demand by State?”

Even as Chief Minister Mamata Banerjee pressed for a special financial package for West Bengal, the former Finance Minister, Asim Dasgupta, pointed out that the State government had made no mention of coal royalty arrears to the tune of Rs. 5,000 crore payable by the Centre. “The arrears in coal royalties are a legitimate right of West Bengal.

The order given by the Supreme Court establishes this right. At least Rs. 5,000 crore is payable but we find that this demand has not been made by the State,” Dr. Dasgupta told journalists here on Monday.

“No other State can make this claim as they have already received the royalty. West Bengal is the only State that has been deprived.”

As for the demand for a special financial package, Dr. Dasgupta said, “It was never done when the Left Front was in power, but we will be pleased if the Centre provides assistance to the State.”

However, the the State government, while demanding assistance from the Centre, had made statements that were “misleading and incomplete,” he said.

The State had claimed that it was paying 94 per cent of its total revenue as salaries, pensions and interest. However, according to the books placed during the Assembly budget session, West Bengal had spent only 74 per cent of its total revenue and only 63 per cent of its total income under these heads, he said.

Also, the State borrowed heavily from the market, Rs. 10,000 crore in the five months the new government had been in power.

The market borrowings of the Left Front government during the same period last year were Rs. 5,000 crore, he said.

---

· No special package was given when Left Front was in favour

· In pressing demand, Mamata government has made ‘misleading' claims

Bengal not in a debt trap, says Asim Dasgupta

Hindu Business Line, May 20, 2011

Kolkata, May 19: Former West Bengal Finance Minister, Mr Asim Dasgupta, on Thursday denied that the State had fallen in a debt trap or that it was heading for bankruptcy, as is alleged by the Trinamool Congress.

“Following a revision of wages by the Pay Commission, there was a temporary financial stress.

“But we have been able to tide over it,” Mr Dasgupta told newsmen adding that contrary to the allegations levelled the fiscal and revenue deficits of the State had come down during the last year.

Dip in fiscal deficit

An increase in State tax revenue has resulted in a dip in fiscal deficit in 2010-11 to 3.9 per cent from the 6.2 per cent in 2009-10.

Revenue deficit too came down from 5.4 per cent in 2009-10 to 3.1 per cent to 2010-11.
The State's accumulated borrowings now stand at Rs 1.86 lakh crore.

“The State's debt to GSDP (gross State domestic product) has come down from 50 per cent to 40 per cent during the last five years,” Mr Dasgupta said adding that even the country had higher fiscal and revenue deficit ratios.

The Trinamool Congress in its election manifesto had pointed out that the State was in a debt trap and had one of the highest debt to GDP (gross domestic product) ratio in the country.

According to him, during the first two months of the current fiscal, the West Bengal government raised Rs 5,173 crore through issue of bonds to compensate a sharp fall in loans against small savings.

Small savings was affected due to hike in deposit rates by the commercial banks.

“The total borrowings during April-May 2011 are lower than the corresponding period of 2010,” Mr Dasgupta said.

Fiscal Situation in West Bengal:Canard and Facts

SECTIONS of the media and the Trinamool Congress have repeatedly asserted that the reign of the Left Front government for the last 34 years has ruined the state finances and the burden of debt on the people of West Bengal is such that the new government will be in a difficult position to pay the salaries of the state government employees. Even after assuming power, the same canard is continuing. Amit Mitra, the new finance minister of state has himself joined in the campaign. The facts however show a completely different story.

Fact 1: The total debt of West Bengal currently stands at Rs 1,98,195 crore (2010-11). The total debt of Uttar Pradesh is Rs 2,34,581 crore while that of Maharashtra is Rs 2,36,526 crore in the same year. So, it is not the case that only West Bengal has a debt problem.

Fact 2: The fact of the matter is that the debt of all the states taken together has increased significantly over the last 20 years. In 1991, the total debt of all the states was Rs 1,28,155 crore which has increased to Rs 18,20,155 crore in 2011. In other words, the overall debt of all the states increased 14 times over the last 20 years. (Source: Study of State Finances, Reserve Bank of India)

Fact 3: The Debt-GSDP ratio, which is a better measure for the debt situation, has decreased significantly in West Bengal from 47 per cent in 2005-08 to 40.8 per cent in 2010-11. This signifies that the debt situation of West Bengal is actually improving rather than worsening.

Fact 4: Out of the total debt, 41.8 per cent comes from National Small Savings Fund (NSSF), because West Bengal has the highest mobilisation of Small Savings Fund. For all the states taken together, only 29.53 per cent of the total debt comes from NSSF. Now the central government has made it mandatory for state governments to borrow from NSSF. Since West Bengal has high NSSF deposits, so it has a higher debt burden. Moreover, the interest rate charged by the central government on NSSF loans is very high. This further aggravates the debt problem of West Bengal.

Fact 5: The monthly expenditure of the state government on salaries, pensions, subsidies and interest payments is Rs 3973 crore while the revenue mobilisation per month is Rs 4412 crore. Therefore, there is no question of non-payment of salaries to the employees. Over the last 34 years, the salaries of the employees have never been stopped. In fact, immediately after the new government took over, the chief minister announced that salaries for teachers funded by state government will be given on the first day of every month. This proves that there was no issue of non-payment of salaries because of fiscal problems.

Fact 6: The loan of the state government in April-May last year was Rs 5790crore, comprising of Rs 1790 crore from NSSF and Rs 4000 crore from the market. In April-May this year the loan of the state government is Rs 5678 crore, comprising of Rs 505 crore from NSSF and Rs 5173 crore from the market. In other words, the loan taken by the state government in the last two months is less than the amount taken as loan in the same months last year. In fact, within days of assuming power, the new government has decided to take loans of Rs 500 crore from NSSF and Rs 3000 crore from market.

The basic idea behind the charge against the erstwhile Left Front government is that it took too much responsibility in providing succour to wide sections of working people. The Left Front government, apart from paying all school and college teachers directly, also provided wages for all municipal and various local government administration. It also initiated the scheme of distribution of rice at Rs 2 per kg, shared the burden of provident fund of nearly 28 lakh unorganised workers. The Left Front government was the last to accept FRBM Act, causing much heartburn for neo-liberal proponents.

WEST BENGAL BUDGET 2011-12 (VOTE-ON-ACCOUNT)

BUDGET SPPECH IN ENGLISH:

http://www.wbfin.nic.in/writereaddata/Budget_Speech/2011_English.pdf

BUDGET SPEECH IN BENGALI:

http://www.wbfin.nic.in/writereaddata/Budget_Speech/2011_Bengali.pdf

Financial Crunch of West Bengal-An Analysis

It is already declared in the West Bengal state financial budget 2010-11, that the state economy is bearing a burden of debt of Rs. 1.69 lakhs Crores. But this can never be a rationale economic parameter to identify the state as a ‘bankrupt’. If so, then the central government had to declare more than a dozen of states as bankrupt far ago. At the end of the last financial year, the amount of entire debt formulated in stae economy was 1.69lakh crores. And the amount started to consolidate since 1950’s. it is also very important to state in this juncture that, when our state economy is bearing a burden of debt of Rs. 1.69lakh crores, at the same time Indian economy is bearing a burden of debt of Rs. 35lakhs crores too (Source : Central Financial Survey, 2009-10).

According to the available data of RBI (Feb 2010) West Bengal is holding the third place in the context of debt burden out of all the states in our country. Uttarpradesh is holding the first place with Rs. 2.21lakhs crores and Maharastra is following UP by 2.08 lakhs crores. Andhra Pradesh and Gujarat are existing in the consecutive positions. But it is also pertinent to say, that as the amount of debt burden is varying among the states, the variations in income are also present within it. So the comparative study is done by debt-income ratio (GSDP). The RBI data reveals that , though West Bengal is holding the third place in the context of debt formation, but the state holds the 11^th place in the country as well as 4^th out of the large states in the country in terms of GSDP ratio.

Five years back, the GSDP ratio was 48% in the state, and, presently it decreased to 41%. But the data of GSDP ratio of Indian economy is fairly greater (56%) than our state economy in the same time frame.

It is very important to analyze the economic situation of our state economy now. The important feature of the debt formation in our state reveals that the major portion of it is generated from the micro savings schemes. Actually, the difference between the amount saved by the people of any state in post-office schemes in a specific financial year and the entire withdrawal out of it produces the debt of micro savings sector. For example, if in a a specific financial year if people save Rs 6,000 crores under micro savings scheme, and withdraw Rs.1,000 crores, then (6000crores-1000crores)= Rs. 5000crores is the net amount of debt generation under micro savings schemes. As bond papers of the micro savings schemes are provided by the central government, so essentially the burden goes to it. But according to the financial policy of our central government, the above said generation of debt is actually imposed on the corresponding state governments by the Central government. More than that, the state governments have to pay the rate of interest on this debt, which is 2% higher than that of the public rate of interest. To save the people of West Bengal from the traps of the Cheat Funds, the Left Front government started to emphasize on the micro savings schemes, and this is still going on by the declared principle of LF government in our state. Now West Bengal stands first in the country in the context of micro savings. This form of savings becomes boomerang in the form of debt to the states with more rate of interest. As the state governments do not limit on the amount of the small savings, so the amount of the debt is not also fixed by the concerned state governments. It is also seen that as Maharastra and UP is holding two highest position in the debt formation within the country, the advancement in micro savings schemes is much better in both those states.apart from micro savings the debt formation in the states depend on two more aspects- i) the state government bonds , ii) the deposits in the local funds.the states government bonds are usually purchased by the Public Sector Banks or by the Insurance companies. And the deposits in the local funds does not produce debt at all. The remitted or better to say the unspent amount of the Panchayats etc. are trated as the the debt of states by the mechanical procedure of of the central governments and the CAG. After repeated protests aginst this financial policy, the 13th Finance Commission started to impose a little lower rate of interest under micro saving schemes of the states than before.

The amount of debt of all states are fixed in the Planning Commission meeting by a uniform policy. The yardstick of measuring debt is, 3.5% of the gross revenue of corresponding state will be the amount of its debt. In this process the target is fixed 21,900 crores in this financial year. Out of which 15,500 crores can be earned by selling the bonds to the banks or insurance companies. But, West Bengal government has decided only to take Rs. 7,500crores out of the entire amount formed by selling the bonds. So at the end of this financial year, consolidation of debt may reach 10.92lakhs crores in our state. The borrowings will also decrease from this financial year too. One surprising statistics is pertinent in this context that, when GSDP ratio of our country is 56% now, the GSDP ratio is 80% for most of the advanced economies for several years.

If one feature of debt formation is due to the micro savings schemes, the important feature of state expenditure is to take the responsibility of paying salry and retirement benefit to all levels of teachers as well as the employee of the Panchayat and Municipalities. This expenditure is the part of beyond planned expenditure. Comparatively the other states do not take this responsibilities as well, even they have taken, it is purely partial.

In the current financial year the entire budgetary amount is Rs. 75,803 crores . Out of it the planned expenditure is 19,069crores. Rs. 56,744crores is the amount of beyond plan expenditure. If the expenditure in developmental activities (the total expenditure in social sector) are considered then the amount reached 42,000crores. Planned expenditure is a part of Developmental expenditure. Sometimes, the low allotment of planned expenditure of West Bengal comes into the unjustified debate of the oppositions. A comparative analysis is required to discuss upon this matter. In 1976-77 the planned expenditure of West Bengal was Rs.200crores under the Congress ruled government. In the periods of Left front Government the allotment increased in a continuous manner, in 2003-04 it reached 4,397crores, and in 2007-08 it reached up to 12,469crores, and in 2010-11 it is 19,069crores that implies , in the last 3 to 4 years it is enhanced by several times.

Most of the beyond plan expenditure is used to meet the salaries and the retirement benefits. In the time of 2^nd Left Front Government it was decided that the state will take the responsibility to pay the salaries and retirement benefits to the State Government Employees, and the teachers from primary to university level, which is not at all practiced by most of the states. The salaries and other perquisites of the teachers are far increased than earlier days. Left Front Government has also taken the responsibility of paying salary and retirement benefits to the municipal as well as the Panchayat employees too. Presently total number of state government employees and teachers in our state is 4lakhs consecutively. Except it, there exists huge number of municipal and Panchayat employees. In each 7 to 8 years interval Central government restructures the pay scale. Taking all these factors the state government is now under a situation to take more financial responsibility than before.

The revenue side of the state government is also to be discussed with immense importance. It is expected in the state budget that VAT collection will be increased by18% and other taxes like stamp duty registration fee, excise fee will also icrease 15%. But in reality the VAT revenue increased 33% and stamp duty registration fees and excise duty increased by 40% and 21% respectively. So revenue earned more than that of the anticipative earnings. Computerization of tax collection resulted in a good note. West Bengal usually earns least from the wine industry in comparison to the relevant states in this particular sector. The excise duty earned by West Bengal is only 1,800crores. By selling only foreign liquor Andhra Pradesh is earning12,000crores. The government critically wants to deal the matter of reopening the wine shops in some publicly granted areas for further excise duty earnings considering the social issues relating with it. In this particular matter all party consensus is mostly needed. Introduction of VAT reduces the impact of tax evasion in the industries closely related with employment. Though Service sector is developing in West Bengal day by day, but still it is impossible to earn tax revenue from it. On the other hand, all the agro-products are out of the VAT and Sales Tax regime by the directives of the government. The rate of VAT on essential agricultural and industrial products is just 4%. When GST will be implied, state will definitely more than now.

All the problems are created due to the policy of the central government, which is full of disparities. According to the constitution of India, article 49&50 of State list depicts that state will have the right to collect the cess and will earn the royalty on coal sector. Since 1987 the rate of royalty increased five times but state did not receive the increased royalty ever. In this context, the amount of dues regarding royalty is generated by 4,800crores excluding the interest , which is still unpaid to the state by the central government. It is also important to note that, by the directives of 13^th FC when the rate of interest on micro savings decreased by 2%, so by this way of evasion Rs. 700crores is still unpaid to the state by the central government. Regarding the imposition of GST, when it was decided that the inter state sales tax will be reduced by steps, then states will be given to power to impose some new taxes and an amout of subsidy will be given-on this very basis West Bengal is yet to receive Rs. 900crores from the central government. In the purpose of reconstruction regarding Ayla disaster Finance Commission allotted a scheme of Rs. 5,032crores, out of which Rs. 672State is still unpaid to the government for this financial year. Apart feom it central government did not disburse Rs. 776crores for drought recovery which was proposed by the National Disaster Management Commission under the recommendation of 13^th Finance Commission. Summing up all these unpaid dues, West Bengal Government is yet to receive Rs. 7000crores from the Central government.

So to carry on the post drought financial processes and all the developmental activities in condition of huge dues , a financial problem is created in our state. In this perspective government of West Bengal has decided to reduce unnecessary unplanned expenditure by 10 % and to impose a 1% increase in VAT on the luxury goods excluding agro-products and raw materials used in agriculture and industry. It is expected that reduction in expenditure will definitely produce extra 1,000crores savings and the VAT increase will produce extra 200crores revenue earnings. It is an utopia that, State government will wipe out the all problems by receiving 7,000crores from the Central Government, but it will definitely help the state government easier to tackle this financial crunch. On the issue of overdraft, one thing has to be clear that, budgetary allocation is made for the one financial year. But in practice, the accounts of revenue earnings and expenditure is accounted in daily basis. The days, when revenue is greater than that of the expenditure, the extra amount is held by the state government in the form of treasury bills by the directives of RBI. The days, when expenditure becomes greater than than the revenue earnings within a limit, government has to take overdraft from RBI. In this year the number of days, where surplus generated is nearly 5 times greater than that of the days of the deficit.

It is also pertinent to note that in the year 2008-09 the deficit came to 3.8% in respect of income, but it raise up to 4.7% after restructuring of the pay scales. In the next year it will again fall up to 3.5%. Consisting the target of 8lakhs employment per year and maintaining all the production sectors unabated, government is highly optimistic to sail the economy smoothly, which in turn will reduce GSDP ratio. On the other hand it will increase VAT earnings. Implementation of GST will further benefit the state.

http://www.cpimwb.org.in/cpim/?q=node/174

ASIM DASGUPTA TOLD 'THE TELEGRAPH' ABOUT DEBT BURDEN

Bengal’s hopes ride on a pie in the sky

DEVADEEP PUROHIT THE TELEGRAPH, Issue Date: Monday , November 15 , 2010

Calcutta, Nov. 14: Bengal finance minister Asim Dasgupta today dismissed Opposition allegations that the state was heading towards bankruptcy and claimed that a few favourable developments could “significantly” reduce the debt burden of the state, estimated at Rs 1.69 lakh crore at the end of the last fiscal year. With the ratio of debt and gross state domestic product (GSDP) — value of goods and services produced in the state in a year — at 42.9 per cent (as of March 31, 2010), the debt burden of the state is the third highest in the country after Uttar Pradesh and Maharashtra. “One cannot forget that the debt has been accumulating since the 1950s,” Dasgupta told The Telegraph this afternoon while pointing out that the same ratio for the Centre stood at 56 per cent. “Net small savings collected in Bengal is the biggest part of the debt burden…. Our government had championed the cause of small savings to save people from chit funds,” added Dasgupta, sitting in his office in the Writers’ Buildings this afternoon and criticising the Centre’s policy of treating it as part of the state’s total debt. The Trinamul Congress, the state’s main Opposition party, is crying itself hoarse over the rising debt burden of the state and has sought the governor’s intervention in Bengal’s money matters. Of its total budget of over Rs 75,000 crore, the state spends around Rs 30,000 crore — part of a bigger non-plan expenditure bill — in paying salaries and pensions. (See chart) Many believe that the high volume of salaries and wages — for over 4 lakh government employees and an equal number of teachers, from primary schools to universities — is one of the major reasons behind the fiscal mess. “The Left government has its arguments for pursuing such a policy and there can be debates on the subject, but no other Indian state takes so much liability on paying salaries and wages of teachers,” said Ratan Khasnabis, professor of economics in Calcutta University’s business management department. Amid the concerns over the sustainability of the debt burden, Dasgupta stressed that he was confident of bringing down the debt-to-GSDP ratio to around 30 per cent and ending the fiscal with lower borrowing than predicted in the budget. He did not set any timetable for reaching the target but rolled out a set of likely favourable developments that would “significantly” bring down the debt burden. Even as the Massachusetts Institute of Technology-educated finance minister contested the use of the debt-to-GSDP ratio as a measure of the state’s indebtedness — the debt figure is cumulative while the GSDP measures a year’s performance — he was hopeful of a “few percentage points’ reduction” in the ratio. “We will have a comfortable position as the debt component will continue coming down while the GSDP will keep growing at around 9 per cent,” said Dasgupta while explaining the central and state factors that would play a role in debt reduction. The finance minister’s comfort depends largely on another Bengali at the helm of affairs in Delhi, Union finance minister Pranab Mukherjee, who, unlike Trinamul leader Mamata Banerjee, has maintained silence on Bengal’s fiscal position. According to Dasgupta, a staggered repayment of the Rs 7,000-crore due from the Centre, regular interest relief due on account of the state’s adherence to fiscal discipline, a rise in the state’s earnings on excise and value added tax, and reduction in wasteful expenditure will result in improvement in the ratio. (See chart) These estimates — against the backdrop of over 33 per cent growth in VAT collections, 40 per cent growth in stamp duty mop-up and 21 per cent growth in excise earnings — will give his cabinet colleagues a chance to present a better fiscal future for the state. Economists aware of Bengal’s finances, however, want to see the improvement first. Many of them also stress that the debt-to-GSDP ratio is a standard measure of indebtedness, that cumulative debt is a problem not unique to Bengal and that the rule of including small savings as part of debt affects all the states. “One of the major components of the dues from the Centre is coal cess to the tune of Rs 4,883 crore, but the Centre has to agree to settle this claim. No other Indian state has any dispute over coal cess,” said M. Govinda Rao, director, National Institute of Public Finance and Policy. Insiders in the state government were also not hopeful of any central largesse on account of coal cess even as Dasgupta stressed that the Supreme Court had upheld the “constitutional validity of levy and collection of cess on coal-bearing land by the state government”. The finance minister’s estimates of higher collection —through excise and VAT — and significant reduction in wasteful expenditure are “unreal”, said a government official. “The target of saving Rs 1,200 crore by keeping a tab on expenses is unreal as we are less than five months from the end of this financial year. Additional earning of Rs 200 crore by increasing VAT by 1 per cent on non-essential and luxury items is not feasible as the festive season of buying is already over,” said the official. Dasgupta’s other bet —higher excise collection from the existing level of Rs 1,505.64 crore — can turn into a political hot potato in an election year as it is linked to higher sale of alcoholic beverages. The finance minister is hoping for an all-party consensus on allowing opening up of liquor shops to shore up revenues — Uttar Pradesh, Andhra Pradesh and Tamil Nadu have excise revenues in excess of Rs 9,000 crore — but that seems to be a distant dream. “This government pursued stringent policies on opening of liquor shops for over 25 years. Now it is very difficult to suddenly increase the number of liquor shops across the state,” said a senior official.

West Bengal State Budget 2009-2010

BUDGET SPEECH IN BENGALI AVAILABLE AT:

http://www.wbfin.nic.in/BudgetSpeech2009_BNG.pdf



BUDGET SPEECH IN ENGLISH AVAILABLE AT:

http://www.wbfin.nic.in/BudgetSpeech2009_ENG.pdf

SLANDEROUS LIES OF CONGRESS AGAINST LEFT FRONT GOVERNMENT AND REAL FACTS

By Dr. Asim Kumar Dasgupta

On the eve of the forthcoming parliamentary elections on 5th April, 2009 the External Affairs Minister Pranab Mukherjee on behalf of the Congress Party packaged baseless lies as a “report card” against the Left Front Government in West Bengal. On the 6th of April 2009, the State Left Front Chairman and Secretary of CPI(M) State Committee Biman Basu refuted the so called facts and canards in detail. However, I am once again putting together a comprehensive rejoinder to the numerous false charges in their write-up.

Slander 1: There has been no development in education during the tenure of the Left Front Government. The percentage of drop-outs in West Bengal is 82.7% which is way above the national average, and the quality of school education in the state is very bad, etc.

Real Fact: During the tenure of the Left Front Government special priority has been given to spread access, quality and continuity in education starting from the primary level upwards. This effort is not only limited in admitting children to schools, but emphasis is also given to involving women self-help groups in mid-day meal scheme in all schools and reduce the tendency to drop out. Simultaneously attention is given to activities of school-wise mother-teacher committees, village-based education committees and school inspectors to improve the quality of education. As a result according to the latest information from NUEPA (2007), the drop-out rate in primary schools of West Bengal has gone down to 8.56% which is in fact less than the national average of 9.36%. From the same source, we learn that at the junior high school level also this rate has gone further down to 7.34%. According to the last available state-wise information published by NCERT (2005), the students of West Bengal are at the top in the nation in overall qualitative evaluation of all the subjects after the completion of fifth standard in school.

The Congress “Report” is falsely critical of the education system under Left rule; and also in effect insults the honourable teachers and the students of West Bengal while real facts are showing diametrically opposite scenario.

Slander 2: The Left Front Government has failed to provide safe drinking water to the inhabitants of the state. Using information from the National Family-wise Health Survey (2005-06) it states that while safe drinking water is provided to 84.2% and 78.4% families in Tamil Nadu and Maharashtra respectively, while in West Bengal only 27.9% families have access to safe drinking water.

Real Fact: The sample survey which has been referred to in this “Report” uses a very small sample for West Bengal. While the number of total families in West Bengal is around 2.29 Crore (1.34 Crore in rural area and 0.45 Crore in urban areas), this survey takes a sample size of 5992 families, which is a meager 0.03% of the total. In sharp contrast, according to the survey conducted by the State Government in which complete information from 1.34 Crore families in 40000 villages and around 0.40 Crore families in urban areas was collected, 90.5% rural families and 96.8% urban families have access to safe drinking water. Therefore here too the actual position is are just the opposite of what has been projected in the “Report.”

However, the Left Front Government feels that there is still some more scope for improvement and targets have already been fixed to make safe drinking water available to 100% families in urban and rural areas of the state. Simultaneously steps have been taken to supervise and maintain all water projects through panchayats and municipal corporations.

Slander 3: In the area of public health nothing much has been done during the Left Front rule because the average Body Mass Index of women in West Bengal is less than the national average in comparison and so on.

Real Fact: Information on women’s health is taken from the National Family-wise Sample Survey which has a serious statistical problem of very small sample size, as mentioned earlier. According to the latest round of this survey (2005-06), as far as BMI is concerned 51.8% women in this country have normal BMI while in West Bengal this ratio stands at 49.6%. What this so called “Report” forgets to mention is that the same source of information reveals data lower than West Bengal in some other major and more affluent and developed states like Maharashtra (49.3%), Karnataka (49.2%) and Gujarat (47.0%). Moreover, according to the latest report of FAO (2008) special mention has been made of India in the area of food insecurity and problems of women’s health; and more specific and serious concerns are expressed regarding some other states like Andhra Pradesh, Madhya Pradesh, Bihar, Gujarat, Karnataka, Orissa and Maharashtra. We feel instead of singling out a particular state by using this problem to make vulgar political points it is much more desirable to find a humane acceptable way towards solution to this problem through discussions with all the states in the country.

The progress of public healthcare in a state is ideally measured by looking at how rapidly a reduction in overall mortality rate and child mortality rate has been achieved and what has been the role of the state government in that reduction. The point to be noted here is that while only 40% patients get the opportunity to be treated in a government hospital nationally, in West Bengal 73% of the total patients get treatment in government hospitals. In the Left Front era this welfare role of the state government has been institutionalized and re-enforced; and the endeavour to provide decentralized preventive healthcare and treatment through panchayats and municipal corporations adds more strength to this emphasis, particularly on the basis of expansion of healthcare by employing more health workers. As a result of all these the latest published data of the central government (Source: SRS survey, 2007) show that mortality rate per thousand has gone down from 10.9 in 1980 to 6.3 now, which is much lower than national average of 7.4. Incidentally among the major states West Bengal has the lowest mortality rate and Kerala stands just after West Bengal at 6.4. Child mortality rate per thousand has also gone down from 91 in 1980 to 37 currently, which is lower than the national average (57) and fourth among the major states after Kerala (14), Tamil Nadu (36) and Maharashtra (37). Here one outstanding fact is that the child mortality rate decreased to even below 10 in Kolkata and the 41 adjacent municipal areas due to the involvement of the municipal corporations in the decentralized healthcare system. Moreover, this rate is even lower than the child mortality rate in municipal areas of Kerala.

If one takes all this information together the real picture becomes clear that West Bengal has come up at the top level in the country in public healthcare, but this kind of an intellectually and politically honest and principled approach would have highlighted the successes of the Left Front Government. As a result, the authors of this report and their allies would have been in a politically uncomfortable situation; and that is precisely why they created a huge gap between the reality and their slander to utilize this pack of lies politically.

Slander 4: During the Left Front Government’s tenure poverty and hunger have become significant in West Bengal. Murshidabad is the poorest district in the country and so on.

Real Fact: Information provided by the Planning Commission is the most acceptable source for comparing state-wise figures for population below the poverty line in our country. According to those statistics, during Congress rule in West Bengal in 1973-74 the percentage of population below poverty line was 63.43%, which was much higher than the national average of 54.88%. This was the intensity of poverty in the state during Congress rule. In contrast, during Left Front tenure using land reform as the basis and implementing alternative policies the percentage of population below poverty line rapidly decreased. The same Planning Commission’s latest information reveals that in the year 2004-05 this figure has come down to 20.6% which is less than national average of 21.6% unlike the Congress-ruled era in the State. Therefore, the scenario has transformed in favour of common people compared to the dismal situation during Congress government.

After knowing this what do the authors of this slander do and where can they find some faults? They incoherently quote from an article written by Dreze and Deaton (EPW, 14th February, 2009) and say that the percentage of population without adequate food intake is 11.7% which is higher than national average of 2.5%. The architects of this slanderous report either tried to exploit this article or they could not find the time to read it fully, or else they have deliberately hidden the facts. Page 45 of this article clearly mentions that these ratios were derived from a survey whose questionnaire was changed in between to a more controversial and questionable one. In the changed methodology the surveyors were instructed to write down the answers by asking questions based on completely psychological perceptions instead of asking objective and scientific questions. This methodology resulted in varied and unexplainable sets of answers from different states, and hence the authors cautioned that using this set of information may give rise to suspicious results for a state-wise comparison. Without reading this, or may be by hiding this, the authors of the Congress Report utilized this unreliable information.

That is not all. The authors forgot that the last National Sample Survey on state-wise information of food intake was published in that very year of 2004-05 based on solid objective and material information(61st round). That survey clearly spells out that in rural West Bengal per capita calorie intake is 2070 which is not only more than the national average of 2047 but also it is higher than Maharashtra (1933), Gujarat (1929), Karnataka (1845) and Tamil Nadu (1842).

West Bengal government undertook a survey in each village of each district which shows that at present the percentage of population not getting adequate food is only 3.59%. If the urban data is added to this then this ratio will go below 2.5% for the entire West Bengal. Therefore once again real facts and slander propagated as facts are absolutely different even in the matter of food intake.

The Congress report states that Indian Statistical Institute (ISI) has conducted a survey which shows that 56% of Murshidabad district’s population lives in abject poverty and this district is the poorest district in the country. We don’t know about any such survey conducted by ISI, but according to the family and district-wise survey conducted by the state government the population living in abject poverty in Murshidabad is 4.3% (not 56% as mentioned in Congress Report), and as far as this ratio is concerned Murshidabad is better than some of the districts in West Bengal itself.

However, the main reason for economic hardship of the common people of Murshidabad is the erosion of soil in the banks of the Ganga-Padma river. Since this erosion takes place along the international border the state government repeatedly petitioned the central government to treat the problem of erosion in the banks of Ganga-Padma as a crucial national level issue and the central government take adequate responsibility to solve this problem. In spite of this, the central government under both the Congress rule and the NDA rule (of which Trinamool Congress was a constituent) did not pay any attention to this legitimate demand of the people of Murshidabad. So, the majority (around Rs. 400 Crore) of the total money spent (Rs. 717.89 Crore) on preventing this erosion from 1977-78 to 2008-09 was done by the Left Front Government of West Bengal on its own.

Dr. Asim Kumar Dasgupta is finance minister of West Bengal government