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No new taxes proposed in BJP's first budget in Haryana

Presenting the maiden budget of the first-ever BJP government in Haryana, finance minister Capt Abhimanyu on Tuesday appeared profound while announcing that the state government had neither imposed any fresh taxes nor effected an upward revision of taxes in the budget estimates for 2015-16.

chandigarh Updated: Mar 17, 2015 22:21 IST
Hitender Rao PTI
Hitender Rao PTI
Hindustan Times
Chandigarh,Haryana government,Manohar Lal Khattar

Presenting the maiden budget of the first-ever BJP government in Haryana, finance minister Capt Abhimanyu on Tuesday appeared profound while announcing that the state government had neither imposed any fresh taxes nor effected an upward revision of taxes in the budget estimates for 2015-16.

However, his optimism could be short-lived as a revenue deficit of about Rs 9,499 crore stares the new government in the face, a whopping 89% increase over the estimated revenue deficit of Rs 5,012 crore pegged by the previous Congress government in the 2014-15 budget. In common parlance, this means that spending has soared enormously as compared to earnings. While the revenue receipts earned in the 2014-15 fiscal were about Rs 45,419 crore, the expenditure ballooned to about Rs 54,919 crore, thanks to the poll-centric benevolence of then Congress regime that was facing anti-incumbency. The fiscal deficit has also gone up from Rs 11,393 crore mentioned in the budget estimates for the 2014-15 fiscal to Rs 15,628 crore in the 2014-15 revised estimates.

Optimism of growth in receipts

The finance minister was optimistic when he said the revenue receipts for 2015-16 were expected to register a 15% increase (about Rs 52,312 crore) over the 2014-15 financial year. But his problem is that the revenue expenditure, too, indicates an increase of about 12% (about Rs 61,869 crore), thus taking the revenue deficit further up in the 2015-16 fiscal. “About 17,000 crore will be spent on salaries, Rs 5,900 crore on pensions and Rs 8,563 crore on interest payment,” Capt Abhimanyu told the state assembly while presenting the budget estimates.

When asked whether the new government would have to take hard decisions to tide over the crisis, he only indicated course correction measures without compromising the requirements of growth and development of economy. “We will be able to contain this revenue deficit within the prescribed limits set by the central government,” he maintained.

The finance minister also did not give any commitment regarding the prospects of non-imposition of fresh levies on the public.

Cause of concern

While under the Haryana Fiscal Responsibility and Budget Management Act, it was targeted to eliminate revenue deficit and contain fiscal deficit within 3% of the gross state domestic product (GSDP) by 2011-12 and 2010-11, respectively, these fiscal targets could not be achieved. The revenue deficit is about 2.10 % in the 2014-15 revised estimates and about 1.83% of the GSDP in the 2015-16 budget estimates. The fiscal deficit is estimated to be 3.46% of the GSDP in the 2014-15 revised estimates and 3.14% in the 2015-16 budget estimates.

“This aspect of the fiscal health of the economy is a cause of concern. A new set of targets will have to be set for the next five years under the Act after examining the growth projections and our capability to service debt. The 14th Finance Commission has projected an average annual growth rate of 15.73% at current prices for Haryana for 2015-16 to 2019-20. The fiscal deficit is recommended to be capped at 3.25% of the GSDP during this period while the net borrowing limit of the state is suggested to be capped at 3.25% of GSDP from 2015-16 onwards,” the finance minister told the assembly.

Tax concessions

The finance minister announced that value-added tax (VAT) on bio-fertilisers will be abolished and the rate of VAT on LED lights, pipe-fittings and prefabricated steel structures will be reduced to 5%. “The chemical fertiliser is already exempted from tax. We would like to promote bio-fertiliser use for the sake of environment and soil health,” he said.

“The estimated revenue loss on account of these concessions is about Rs 21 crore annually. Despite these concessions, we will have buoyancy in our tax receipts next year because of simplified administration and better compliance,” the FM said.

Power subsidy swells further

A major drain on the state exchequer is the rural electrification (RE) subsidy bill which no government has the political will to check. Things seems to be no different in the case of the BJP regime as the subsidy bill is estimated to swell to Rs 5,624 crore in 2015-16 as compared to Rs 5,338 crore in 2014-15. The estimated RE subsidy when then finance minister HS Chatha presented the 2014-15 budget estimates was Rs 4,495 crore.

Plan outlay increased

The finance minister said the new government had increased the plan outlay by about 16% from Rs 22,109 crore for 2014-15 to Rs 25,743 crore for 2015-16. This also includes central assistance of Rs 5,106 crore for centrally sponsored schemes.

Also, an off-budget outlay of Rs 7,467 crore by the state public sector enterprises and Rs 798 crore by the local bodies will be spent on development activities in 2015-16.

The finance minister said capital expenditure for 2015-16 was estimated at Rs 7,270 crore, an 11% increase from what the government spent on asset creation in the 2014-15 fiscal.

Debt liability goes further

The debt liability (short and long term loans, borrowings etc) is also set to increase by more than Rs 17,000 crore in 2015-16 which will the first full financial year of the BJP government. The increase indicates government’s growing dependence on borrowings. While the debt liability in 2013-14 fiscal during then Congress government was about Rs 71,300 crore and rose to about Rs 81,000 crore (approximately by Rs 10,000 crore), the new government is looking at a jump of over Rs 17,000 crore.

What becomes cheaper

Bio-fertiliser: Value added tax (VAT) abolished

Light emitting diode (LED) lights: VAT reduced to 5% from 12.5%

Pipe-fittings VAT reduced to 5% from 12.5%

Prefabricated steel structures: VAT reduced to 5%

First Published: Mar 17, 2015 15:41 IST