Cash-strapped Himachal seeks grant of Rs 12 crore

Facing severe financial crunch, Himachal Pradesh chief minister Virbhadra Singh on Tuesday sought financial assistance of Rs 12,466 crore as special grant for the state from the visiting 14th finance commission.

india Updated: Aug 13, 2013 18:22 IST
HT Correspondent
HT Correspondent
Hindustan Times

Facing severe financial crunch, Himachal Pradesh chief minister Virbhadra Singh on Tuesday sought financial assistance of Rs 12,466 crore as special grant for the state from the visiting 14th finance commission.

Singh demanded Rs 1,430 crore as grant for forest wealth management, Rs 4,750 crore for revenue foregone from forests, Rs 2,521 crore for preparedness of disaster management, Rs 1,425 crore for local bodies and Rs 2,340 crore for state specific grants.

The chief minister made a strong case for higher devolution to the Himachal Pradesh Finance Commission. Singh said intangible benefits from forests needed to be quantified as was being done in some parts of the world.

Accentuating that the cost of conservation of the ecosystem was being borne by the state, while benefits were accrued to the nation as whole, he said indirect benefits from the forest wealth of Himachal were about Rs 99,000 crore and the revenue foregone for being unable to remove forest as per the working plan was over Rs 22, 900 crore for six-year period.

Singh demanded the commission to compensate the state for intangible benefits accruing to the nation and the loss of revenue to the state on the restrictions imposed on removal of forests. Singh apprised the commission that over 95% of the total 23,000 MW exploitable hydropower capacity available in the state had been allocated and the upfront premium received in this respect.

He said per unit sale rate of power has come down from Rs 7 to about Rs 2-3 per unit which further dissuaded independent power producers who have been allotted power projects.

Explaining the difficulties of terrain of the hills, Singh said topographical conditions, cost of construction and maintenance of capital assets like roads, health and educational institutions and irrigation and water supply schemes were much higher in Himachal Pradesh.

He advanced irrefutable arguments for necessity to provide assets to cater to the needs of people living in dispersed areas in harsh and hostile climatic conditions. He further explained that unlike other states, where repairs of these capital assets require maintenance only once after monsoon season, in Himachal Pradesh maintenance of capital assets has to be carried out twice every year, once after the rainy season and subsequently after the snowfall.

He said withdrawal of industrial package by the central government even before the expiry date under pressure from the neighboring states have significantly reduced the tax and non-tax base.

He said the conventional taxes have reached a saturation level. He brought to the notice of the commission that whereas the 13th Finance Commission has only assumed 6% annual growth in dearness allowance, the average DA hike during the past three years of award period of the 13th Finance Commission have been over 15% per annum.

Singh urged the commission to remove the cap fixed by the 13th Finance Commission that the salary expenditure should not exceed 35% of the revenue expenditure, net of pension and interest payment.

Singh said investments in the social sector have brought rich dividends and were reflected in well recognised indicators in health and education fields. He elaborated higher service delivery responsibilities of the state compared to the central government and suggested vertical devolution to be raised to 40%.

Singh said the debt liabilities of the state were 39.18 % of GSDP and were almost double of all states average of 20.55 %. He requested the commission to consider the state's debt stress and bail the state out of its financial situation through an appropriate intervention.

The chief minister urged the commission to double the state disaster response fund and said it should be made 100% centrally funded for special category states.

Expressing hope that the commission would make realistic assessment of revenue potential and expenditure needs of the state, Singh said under assessment made by the 13th Finance Commission would be suitably compensated and that reward for conservation would be recognised and devolutions would be as per the request of the state.

Chairman of the 14th Finance Commission Padam Vibhushan Dr Y Venugopal Reddy, while appreciating the developmental needs of the state government, said the state government has made marked progress in various developmental indicators despite difficult topographical and geographical conditions.

He assured the state of all possible help to tide over the financial health of the state. He said better coordination was vital.

Members of the council of ministers, members of the 14th finance commission, Padam Bhushan awardee Prof Abhijit Sen, Sushma Nath, Dr M Govinda Rao and Dr Sudipto Mundle, and secretary of the commission SN Jha also gave their valuable suggestions.

First Published: Aug 13, 2013 18:20 IST