State finances
The Chief Minister of J&K, Omar Abdullah admitted, (The Times of India 8/9/2013) that J&K’s annual total income is Rs 6,500 crs while the State’s annual liability on staff salaries is Rs 13,500 crs and on pensions is Rs 2,000 crs. The state’s annual income is way behind the salaries of the State forcing to be totally dependent on financial assistance from the Union Government.
Q. Is the state of J&K discriminated against by the Centre?
A. V Shankar Aiyar wrote in India Today (14/10/2002), ‘A Kashmiri gets eight times more money from the Centre than citizens from other states. While per capita Central assistance to other states moved from Rs.576.24 in 1992-93 to Rs.1,137 in 2000-1, that of the Kashmiri spiralled from Rs.3,197 to Rs.8,092. The number of people living below the poverty line has dropped from 24.24 % in the 1980s to a mere 3.48%, compared to 26.10 % across India though the state's contribution to the GDP was less than 1 per cent in 2000-1.
While other States got Central Assistance in the ratio of 70% loan, 30% grant, J&K gets 90% as grant and 10% as loan. Since 1997-98- though the CAG has indicted the state Government for misuse of plan funds-even the 10 per cent repayment criteria has been removed and the Centre has been funding the entire plan expenditure of Jammu and Kashmir of Rs.11,400 crore in five years.’ To read more http://indiatoday.intoday.in/story/jammu-and-kashmir-most-pampered-state-in-india/1/218463.html
A 2008 article by same author, ‘J&K got Rs.35,571 crs in grants assistance between 1990 and 2002 and Rs.38,156 crs between 2003 and 2008. In 2007-08 the state contributed Rs.533 crs as direct taxes to the Centre and received Rs.1,471 crs from the Central tax kitty and Rs.8,962 crs in grants.’
Further in 2013-14 net collection of income-tax was only Rs 961.2 crs as against share of Central taxes Rs 4,514 crs Central Grants Rs 16,493 crs (RE). Out of Rs 961.2 crs collected, 83% was collected by Range I and II (both having jurisdiction over Jammu region) and Rs 174.5 crore by Range-3 having jurisdiction over entire Kashmir valley. To read more http://www.dailyexcelsior.com/it-deptt-creates-history-collects-whopping-rs-1058-cr-tax-in-jk/
One reason for lower share of central taxes is the low contribution to central taxes kitty which is linked to the level of economic activity (manufacturing+services) & payment of Income-tax. Two, services are taxed by the State since the Services Tax Act is not applicable to J&K.
According to the Institute of Chartered Accountants of India, of the 308 CA’s who hold a Certificate of Practice in J&K, 24% are from Kashmir and 69% from Jammu region. This indicates level of economic activity; importance attached to compliance and is reflected in collection of income-tax referred to above.
Above data reinforces a point often made that the Valley contributes negligible sums to the state treasury but accounts for the bulk of the expenditure. Below is a snap shot of State Finances.
Overview of State Budget (Table 6)
Rs crs
|
09-10Act |
10-11Act |
11-12Act |
12-13Act |
RE13-14 |
BE14-15 |
| 1.State Revenue |
|
|
|
|
|
|
| Tax |
3,027 |
3483 |
4745 |
5833 |
6820 |
7496 |
| Non-tax |
955 |
1093 |
2002 |
2160 |
3400 |
3561 |
| 2.Share of Central Taxes |
1,915 |
3067 |
3495 |
3870 |
4514 |
5191 |
| State Revenue 1+2 |
5,897 |
7,643 |
10,242 |
11,863 |
14,734 |
16,248 |
| 3.Grants from Centre |
11,691 |
14,592 |
14,541 |
14,354 |
16,493 |
22,973 |
| 4.Revenue Receipts (1to3) |
17,588 |
22,235 |
24,783 |
26,217 |
31,227 |
39,221 |
| 5.Revenue Expenditure |
15,324 |
18,467 |
22,680 |
25,117 |
27,617 |
32,948 |
| 6.Revenue Surplus (4-5) |
2,264 |
3,768 |
2,103 |
1,100 |
3,660 |
6,273 |
| 7.Reveue Deficit i.e. Surplus less Grants from Centre 6-3 |
(9,427) |
(10,824) |
(12,438) |
(13,254) |
(12,833) |
(16,700) |
| 8.Capital Receipts |
4,751 |
3334 |
4,785 |
5,560 |
5,062 |
4,322 |
| 9.Capital Expenditure |
7,015 |
7,102 |
6,888 |
6,660 |
8,672 |
10,595 |
| 10.Total Receipts (4+8) |
22,339 |
25,569 |
29,568 |
31,777 |
36,289 |
43,543 |
| 11.Total Expenditure (5+9) |
22,339 |
25,569 |
29,568 |
31,777 |
36,289 |
43,543 |
Data from State Budget documents. RE stands for revised budget. BE stands for budget estimates.
State revenue plus share of central taxes is Rs 10,242 crs (11-12 actuals) and Rs 14,734 crs (RE13-14) which is nearly 50% of revenue expenditure of Rs 22,680 crs and Rs 27,617 crs respectively. Figures in row 7 give you an idea of the State’s financial condition.
Find below a summary of how the State spends its money?
Revenue Expenditure (Table 7)
Rs crs
|
09-10Act |
10-11Act |
11-12Act |
12-13Act |
RE13-14 |
BE14-15 |
| 1.State Rev + Central Taxes |
5,897 |
7,643 |
10,242 |
11,863 |
14,734 |
16,248 |
| 2.Revenue Expenditure 3+4 |
15,324 |
18,467 |
22,680 |
25,117 |
27,617 |
32,948 |
| 3.Plan Revenue Exp |
553 |
909 |
1,248 |
1,442 |
1,564 |
3,395 |
| 4.Non-Plan RevExp4to8 |
14,771 |
17,558 |
21,432 |
23,560 |
26,023 |
29,553 |
| 5.Interest |
2,139 |
2,283 |
2,399 |
2,707 |
3,300 |
3,470 |
| 6.Salaries |
5,971 |
7,297 |
9,608 |
10,137 |
11,928 |
14,282 |
| 7.Migrants Salaries |
124 |
143 |
- |
- |
189 |
183 |
| 8.Pension |
1,568 |
2,242 |
3,296 |
3,463 |
3,673 |
3,980 |
| 9.Others |
4,969 |
5,593 |
6,129 |
7,253 |
6,933 |
7,638 |
Data from J&K State Budget documents
In every year salaries and pensions exceed revenues (row one). In absolute numbers increase in salaries and pension is steep. Salary in RE13-14 is 100% of what it was in 2009-10. Corresponding % for pension is 134%.
Note that in 1962 the PM of J&K Bakshi Ghulam Mohammad said that the State cannot remain independent. Geographically, the situation does not warrant it at all. Moreover, J&K is a poor state and cannot stand on its own feet. 1 pg 88
Nevertheless, did you know that between 1990-91 and 2013-14 the State of J&K received Grants from the Centre amounting to Rs 1,51,321 crs? To this add expenditure by the Centre towards railways, road and power projects.