People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


Vol. XXXIV

No. 52

December 26, 2010

 

13th Finance Commission Metes out Injustice to Tripura  

 

Haripada Das

 

THE 13th Finance Commission (13th FC), which submitted its report to the central government on February 2, 2010, made, like the earlier finance commissions, awards of non-plan committed expenditures for the period 2010-15 for various states. Thereafter, the central government formed a committee to examine the FC recommendations and decide to what extent the recommendations could be accepted. The committeeís report is termed as the Action Taken Report (ATR).

 

But the 13th FC award as well as the ATR painfully failed to appreciate the ground realities that prevail in the state of Tripura. Also, the award sanctioned to Tripura doesnít have any reflection of the track record of prudent fiscal management of the state in the preceding years.  

 

Before going into the details of the commissionís award to Tripura, we may have a look at the salient points of the memorandum which the Left Front government of Tripura submitted to the 13th FC.

 

SPECIAL DISPENSATION

NEEDED FOR NE STATES

1) Considering the severe resource crunch of the states of the north-east (NE) region, non-plan revenue deficit grants may be provided for them.

2) Ten per cent of total central taxes may be earmarked for the NE states.

3) A one-time debt relief package may be recommended for the NE states so that they can get rid of debt liabilities dragging for many years.

4) Upgradation and special programme grants may be considered on a more liberal basis.

5) The non-plan expenditures including the salaries and pension of the employees of the TTAADC (Tripura  Tribal Areas Autonomous District Council) may be granted separately.

6) Considering the specific problems the state of Tripura has been facing, such as cross border terrorism, extremist problems etc, increased expenditure for raising several IR battalions and modernisation of the police administration must be reimbursed from the centre.

7) In case of Tripura, the pre-devolution gap, i.e. the projected deficit in non-plan revenue from the non-plan expenditure, was estimated Rs 22,123.83 crore. The major amounts included therein were the revised emoluments of employees (with effect from January 1, 2009), which were obligatory after the Sixth Central Pay Commission recommendations. These emoluments included a revised salary bill of Rs 13924.43 crore, salary arrears of Rs 2200.00 crore, pensions of employees worth Rs 3944.79 crore and interest on loans amounting to Rs 2544.93 crore. The state government also urged the commission to provide a special grant for meeting cent percent the additional financial implications of salary and pension revisions with effect from January 1, 2006.

 

ON SHAREABLE

RESOURCES

The state government strongly urged the commission to raise the statesí share to 50 per cent of the central taxes from the existing 30.5 per cent. Its memorandum said the policy of distribution of the shareable central taxes may be so devised that the underdeveloped states could get a higher percentage of shares in order to catch up with the advanced states. The commission was urged that while formulating such a policy, it must take into consideration the criteria such as infrastructural gap, demographic composition of population including the SC and ST percentages, statesí fiscal discipline and management, forest coverage etc.

 

So far as the GST (goods service tax) is concerned, the state urged that while 100 per cent state GST should be retained by the respective states, the central GST should be horizontally distributed among the states.

 

Tripura also sought a sanction of grants of Rs 4536.61 crore under different heads like local bodies, specific needs, calamity relief, maintenance of roads and bridges, public buildings, maintenance of forests, health and education etc. It requested the commission to consider providing a grant of Rs 125.00 crore from the CRF (central relief fund) and demanded simplification of the CRF guidelines so that the fund may be easily accessed by the states.

 

Table I shows the demands of the state and the 13th FC award item-wise.

 

TABLE I

Sl. No.

Item

Amt. Projected by State Government

Assessment and Award of 13th FC

 

Own Revenue Receipt

(Rs in Crore)

(Rs in Crore)

1

Own Tax Revenue

4012.89

3699.15

2

Own non-tax Revenue

712.04

785.09

A

Total Revenue Receipt

4724.93

4484.24

 

 

 

 

1

Non-Plan Revenue Expenditure

 

 

2

Salary of employees

13924.43

7727.90

3

Arrear salary of employees

2200.00

0.00

4

Pension

3944.79

2779.09

5

Interest payment

2544.93

2649.88

6

Others

4234.61

3192.26

B

Total Revenue Expenditure

26848.76

16349.13

 

 

 

 

C

Non-Plan Revenue Deficit (B-A)

22123.83

11864.89

D

Other Grants

4536.61

1262.59

 

Total Grants (C+D)

26660.44

13127.48

 

While submitting the projected non-plan revenue expenditure requirement of Rs 26,848.76 crore, the state government amply justified its demands in each items, particularly the committed expenditures like salaries, pensions and interest payments etc. But the 13th FC award assessed it as Rs 16,349.13 crore, much below the projected amount. The unrealistic and irrational nature of the commissionís assessment is clear from the fact that even in the current financial year, the salary and pension expenditures of the state stand at Rs 2000.00 crore and Rs 540.00 crore respectively, and these amounts will certainly go up in compound manner in the subsequent years. But the 13th Finance Commission arbitrarily ignored this fact.

 

INCREASED

EXPENDITURE

Following the central governmentís decision to give effect to the Sixth Central Pay Commission (6th CPC) recommendations for its employees, the state government constituted a pay review committee whose report suggested a revised pay scale based on the Sixth CPC report. After a careful scrutiny of the report, the state government implemented a revised pay scale for its employees, effective from January 1, 2009. However, this pay revision increased the salary expenditure from Rs 1289.69 crore in 2008-09 to Rs 1995.14 crore in 2009-10, up by 54.60 per cent. Similarly, the expenditure on pensions went up from Rs 356.43 crore in 2008-09 to Rs 537.13 crore in 2009-10, a 51 per cent hike. In spite of taking into consideration about 16,000 employees are likely to retire in the ongoing plan period, about 30,000 new recruitments and regularisation of about 7000 fixed-pay employees are expected to be made in this period. Besides yearly increments and release of DA/DR at six-monthly intervals, the state government projected an 11 per cent compound growth of expenditure every year in salary and pension. But the 13th FC totally ignored these hard facts of the stateís financial affairs. 

 

A comparative assessment of year to year salary and pension expenditure and the 13th FCís award are furnished in Table II alongside.

 

TABLE II

Assess-

ment of

Item

2010-11

2011-12

2012-13

2013-14

2014-15

Total

2010-15

St Govt

Salary

2235.85

2481.79

2754.79

3057.82

3394.18

13924.43

13th FC  Award

1505.05

1528.20

1548.67

1566.06

1579.92

7727.90

 

Shortfall

730.80

953.59

1206.12

1491.76

1814.26

6196.53

 

 

 

 

 

 

 

 

St Govt

Pension

620.95

695.46

778.92

872.39

977.08

3944.80

13th FC  Award

455.21

500.73

550.80

605.88

666.47

2779.09

 

Shortfall

165.74

194.73

228.12

266.51

310.61

1165.71

                                                                              (Rupees crore)

 

It is impossible for a resource-crunched state like Tripura to overcome this huge shortfall of Rs 6196.53 crore and Rs 1165.71 crore on salary and pension expenditures respectively, unless special financial support from the central government comes to it.  

 

COMMISSIONíS

FORMULA

The formula that the 13th FC adopted for assessing the salary and pension expenditures during the award period is as below:

1) Implementation of revised pay scale from April 1, 2009 with retrospective effect from April 1, 2006.

2) Net reduction of the number of employees by one per cent per year.

3) Because of pay scale revisions, a 35 per cent one-time increase in salary expenditure in 2006-07 over the expenditure in 2005-06 taken as the base year.

4) In the subsequent years, the expected growth of salary expenditures because of three per cent increment and six per cent DA as well as one per cent reduction due to retirement of employees.

 

According to the above formula, the net yearly increase on salary expenditure stands 3 per cent + 6 per cent --1 per cent = 8 per cent. But the commission assessed the yearly growth in salary expenditure at 6 per cent for the award period. Here the commission arbitrarily reduced it by 2 per cent in calculating the yearly increase rate of salary expenditure for the award period.

Moreover, in calculating the award for the salary item, the commission deviated from its own accepted formula of 6 per cent yearly increase. The year to year calculations, according to the norms and formula of the 13th FC, is shown Table III alongside, taking 2005-06 as the base year, as per the financial position according to the Comptroller & Auditor Generalís records. 

 

TABLE III

Financial Year

Per Cent Increase

Amt. as 13th FC Formula

Award of 13th FC

Amount of Shortfall

2006-07

35 per cent of Rs 930.83

1256.62

 

 

2007-08

6 per cent

1332.02

 

 

2008-09

6 per cent

1411.94

 

 

2009-10

6 per cent

1496.66

 

 

2010-11

6 per cent

1586.45

1505.05

81.40

2011-12

6 per cent

1681.64

1528.20

153.44

2012-13

6 per cent

1782.54

1548.67

233.87

2013-14

6 per cent

1889.49

1566.06

323.43

2014-15

6 per cent

2002.86

1579.92

422.94

Total for 2010-15

 

8942.98

7727.90

1215.08

 

 

 

 

 

                                                                                                    (Rupees crore)

 

The 13th FC award to Tripura reveals that while the year to year growth of salary expenditure ranges from 4.14 per cent to 9.17 per cent in case of 22 states, in respect of Tripura it ranges from 0.89 per cent to 1.54 per cent, lowest among all the states in the country.

 

All the earlier Finance Commissions so far had taken the salary and pension expenditure in the last year of the preceding award period, as the base year for assessing the quantum for the next award period. However, the 13th FC made an arbitrary departure from the practice of the earlier commissions, taking as the base the salary and pension expenditure incurred in the first year of the preceding award period. In this way, the 13th FC gave a short shrift to the additional liabilities of the Tripura government due to pay revision and recruitment of about 30,000 new employees in the later part of the last award period.

 

While pronouncing its award for Tripura, the 13th FC did not consider the peculiar features of the state such as remote geographical location surrounded by the Indo-Bangladesh border on three sides, highly inadequate communication facilities, poor infrastructure, economic backwardness, extraordinary demographic composition, absence of self-employment potential, and its position as one of the declared Ďspecial category statesí in the north-east.

 

Tripura finance minister Badal Chowdhury has conveyed to the union finance minister all the details of the 13th FC award in case of the state and the deprivation it has caused to the latter. Chowdhury has sought an appointment with the union finance minister for making a written submission.

 

Now the people of Tripura are waiting to see how the central government makes a redress to this gross injustice meted out to Tripura by the 13th FC award.