State takes Rs 2000-cr loan from market to pay salaries
DIPAK MISHRA
PATNA: Skyrocketing real state prices, rising demand for cars, upcoming malls and shopping complexes and the rush to by gold ornaments may give anyone a misleading notion about economic buoyancy in Bihar.
"Due to implementation of the Sixth Central Pay Commission recommendations, the financial condition of states is under strain. Bihar has, however, not felt the pinch of recession like Maharashtra and Gujarat," said deputy CM Sushil Kumar Modi. He said the implementation of the Sixth Pay Commission recommendation was a compulsion.
The state has taken loans to the tune of Rs 2,000 crore from the market to pay hiked salaries and pensions to its employees. "We took this loan now because the interest rates are going to climb later," Modi, who also holds the finance portfolio, said. He pointed out that the loan was still within the limitation prescribed by the Union government 4% of the state GDP if the state wants to avail of the loan-waiver scheme. He, however, said the final financial figures for the current fiscal was still to come like the shortfall in state's share Central taxes. He did not rule out the possibility of taking more loans to support the state's development programmes.
Before the implementation of of Sixth Pay Commission recommendations, the total expenditure of the state in payment of salaries and pension was Rs 11,405 crore per year. Now it is estimated to be around Rs 16,000 crore. The budgetary outlay of current fiscal stands at Rs 47,447 crore. The state government, like most of the states, is heavily dependent on its share in Central revenue. Initially, the shortfall was estimated to be just Rs 2,000 crore. Subsequently, however, the state finance department estimated a drop of Rs 5,000 crore further compounding the financial strains on the state. There is speculation that Bihar will not be able to support its Rs 16,000 crore annual Plan size on the existing finances.
"The shooting up of real estate price and huge sales of vehicles in Bihar is not giving the true picture of the state's financial conditions. The truth is that the state''s tax base is very limited. Whereas other states raise taxes to the tune of Rs 30,000 to Rs 40,000 crore annually, Bihar's internal revenue is only to the tune of Rs 5,000 crore to Rs 6,000 crore. It is the only state where the barter system still exists," said economist Saibal Gupta.
He pointed out that financial projections of Central taxes can be misleading. "Between the 10th and 11th Finance Commission periods, Bihar got Rs 14,000 crore less than what was projected. The only solution is increasing the state's own tax base," he said.
DIPAK MISHRA
PATNA: Skyrocketing real state prices, rising demand for cars, upcoming malls and shopping complexes and the rush to by gold ornaments may give anyone a misleading notion about economic buoyancy in Bihar.
"Due to implementation of the Sixth Central Pay Commission recommendations, the financial condition of states is under strain. Bihar has, however, not felt the pinch of recession like Maharashtra and Gujarat," said deputy CM Sushil Kumar Modi. He said the implementation of the Sixth Pay Commission recommendation was a compulsion.
The state has taken loans to the tune of Rs 2,000 crore from the market to pay hiked salaries and pensions to its employees. "We took this loan now because the interest rates are going to climb later," Modi, who also holds the finance portfolio, said. He pointed out that the loan was still within the limitation prescribed by the Union government 4% of the state GDP if the state wants to avail of the loan-waiver scheme. He, however, said the final financial figures for the current fiscal was still to come like the shortfall in state's share Central taxes. He did not rule out the possibility of taking more loans to support the state's development programmes.
Before the implementation of of Sixth Pay Commission recommendations, the total expenditure of the state in payment of salaries and pension was Rs 11,405 crore per year. Now it is estimated to be around Rs 16,000 crore. The budgetary outlay of current fiscal stands at Rs 47,447 crore. The state government, like most of the states, is heavily dependent on its share in Central revenue. Initially, the shortfall was estimated to be just Rs 2,000 crore. Subsequently, however, the state finance department estimated a drop of Rs 5,000 crore further compounding the financial strains on the state. There is speculation that Bihar will not be able to support its Rs 16,000 crore annual Plan size on the existing finances.
"The shooting up of real estate price and huge sales of vehicles in Bihar is not giving the true picture of the state's financial conditions. The truth is that the state''s tax base is very limited. Whereas other states raise taxes to the tune of Rs 30,000 to Rs 40,000 crore annually, Bihar's internal revenue is only to the tune of Rs 5,000 crore to Rs 6,000 crore. It is the only state where the barter system still exists," said economist Saibal Gupta.
He pointed out that financial projections of Central taxes can be misleading. "Between the 10th and 11th Finance Commission periods, Bihar got Rs 14,000 crore less than what was projected. The only solution is increasing the state's own tax base," he said.
Source: TNN 16 October 2009
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