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Kashmiris finally pay income tax

Years after languishing in a financial mess, the state of J&K sees a positive change, reports Neelesh Misra.

india Updated: Dec 13, 2006 03:26 IST

It has rarely happened in the last decade and a half: Jammu and Kashmir residents paying income tax. Some are even paying electricity bills.

It is a reflection of the dire state of money matters in the state, which has long survived mainly on central funds. Economic governance has been tardy and critics say the insurgency has been blamed too long by local administrators and tax-payers, who did little to salvage the wrecked economy.

Finances are in a shambles. The state government has received Rs 43,500 crores in central grants alone since 1990, and has taken an overdraft of Rs 1,700 crore from the J&K Bank – a massive amount for a state of its size. Almost three-fourth of the state's annual budget goes towards paying salaries. But there are some positive signs, as with increased income tax collections. These were negligible in the past.

"There is a lot of improvement across the state," Virendra Singh, the state's income-tax commissioner, told the Hindustan Times. "The growth in collection was 63 per cent until November, which is much above the all-India average." State taxes are also coming in, though they are still only Rs 1,900 crores of the state's Rs 15,000 crore budget.

"There is tremendous tax buoyancy," a top state finance official said. But only some residents have been paying electricity bills. "I have a big hole on the power front. We are in a mess," the same official said. "We are spending Rs 1,900 crore on power, but what we are getting is Rs 400 crores. This is the major challenge to the state's economy."

Union Home Secretary VK Duggal said efforts were being made to boost local growth.

"We have to understand that you cannot run the economy of the state simply on government shoulders," said Duggal. "Economic development has to take place so that the youth find the opportunities. That is where the growth lies."

But so far, that growth has been elusive. Unemployment runs high and there is little industrial development.

Corporate India has largely stayed away from Kashmir through the insurgency. Even apart from the violence, land acquisition has been a key problem. Outsiders cannot own land in the state due to its special status. But in its first major flirtation with Kashmir, the CII is set to build a sprawling Centre of Excellence for vocational training in Srinagar to train thousands of youth every year jointly with major national companies. In collaboration with Pricewaterhouse Coopers, CII is also nudging companies to set up call centres in Kashmir.

But the bottomline is good governance, experts say.

"The explanation they give most of the time for poor performance is the law and order situation. It is true to some extent, but we cannot hide behind it all the time," said Sanjay Puri, CII's state chief.

Email Neelesh Misra: neelesh .misra@hindustantimes.com

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