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Testing times ahead for CM in poll year

WITH VIDHAN Sabha polls drawing closer, the focus is shifting towards the challenges that Chief Minister Mulayam Singh Yadav may face this financial year that will be the election year in Uttar Pradesh.

india Updated: Apr 03, 2006 00:56 IST

WITH VIDHAN Sabha polls drawing closer, the focus is shifting towards the challenges that Chief Minister Mulayam Singh Yadav may face this financial year that will be the election year in Uttar Pradesh.

The CM’s task is going to be difficult as he may be required to take tough decisions though he continues to make populist announcements.
The State government will face the tough task of generating funds to implement his various announcements and bring an improvement in the power supply situation.

Besides financial implications, many of his populist announcements pose a challenge even to the management skills to his government. Take the issue of paying ‘unemployment allowance’ of Rs 500 per month to all graduates and post-graduates registered with employment exchanges till February 28. The State government proposes to begin disbursement of ‘unemployment allowance’ w. e. f. April 1, 2006. As more and more graduates and post-graduates are getting themselves registered at various employment exchanges every day, the State government will have to apply some restrictions of eligibility if the scheme has to be implemented to benefit the youths.

Another major issue that the government continues to confront is the imposition of Value Added Tax. With the BJP-ruled states Chhattisgarh, Rajasthan and Madhya Pradesh deciding to impose the VAT w. e. f. April 1, 2006, Uttar Pradesh will find itself isolated. The CM is committed not to impose VAT though it has been implemented in almost all other states.

The CM will obviously not like to take any risk in the election year. UP’s financial advisor Surendra Mohan Agarwal said the chief minister was committed not to impose VAT. Another State that had not implemented the VAT was Tamil Nadu, he said. UP has been a gainer if revenue generated in VAT states vis-à-vis non-VAT gave any indication, said Agarwal. An increase of 27 per cent in trade tax revenue was witnessed in UP against the increase of 12 per cent in the states that implemented VAT, he said.

The State government also faces a major challenge of mobilising additional resources to fund annual plan for 2006-2007 the size of which has been revised to Rs 19000 crore, against the annual plan size of Rs 13500 crore for 2005-2006. The government will have to explore new avenues to generate more revenue to fund the annual plan. The CM was committed to impose no new taxes, said Agarwal, adding that checking tax evasion would generate additional funds.

The State government faces another major challenge of meeting its commitment on revenue deficit front. As per projections, the State government is committed to come out of revenue deficit in 2006-2007. As per provisions of the Finance Responsibilities and Budget Management Act, the State government had to end revenue deficit by 2008-2009. The State government proposes to achieve the target two years in advance.

Last, but not the least, the CM faces the biggest challenge of improving the power supply situation. Though a number of steps have been initiated to add to the State’s power generation capacity, time remains a crucial factor.