Column: Bankruptcy of funds, ideas

Written by Sudipta Datta | Updated: Jan 31 2012, 05:37am hrs
At a press conference 10 days ago, Bengal finance minister Amit Mitra unveiled his governments second phase of e-governance, a five-point online plan to help traders interface with the commercial taxes directorate. Mitra said the move would definitely improve compliance, which has been an area of grave concern. But as has been the wont of the new governmentin this it appears to be continuing a Left legacyhe refused to share any numbers. For instance, we were not told how the slew of measures announced last August to improve compliance actually translated in figures.

On August 11, when he had presented a summary of the financial status of the state in the assemblythe state went without a Budget presentation in fiscal 2011-12he had projected a 31.4% rise in revenue receipts, thanks to the various e-governance measures that would improve compliance.

Even as the financial year draws to a close, there is no clarity on how close he is to the target, only whispers that theres a yawning gap between the actual mop-up and the target. Mitra had also said that the state would raise an additional revenue of R6,390 crorehe didnt give out any numbers on this either. During his vote-on-account speech, he had said that the state, which now spends 93% of its resources on salaries, pensions and interest payout, would reduce the outgo to 74%. But with the tax base yet to be widened, and chief minister Mamata Banerjee against raising taxes on a variety of goods and services, tax collections of the state arent going to go up significantly; in fact, with the government announcing one populist measure after another, it will be almost impossible to reach the target. With the finance minister and his officials tight-lipped about revenue collections and with the state almost exhausting its borrowing limit from the marketit has borrowed R17,728 crore and can only raise about R1,000 crore morethere are concerns about whether salaries for February and March can be paid and on time. It needs R8,000 crore for the two months just to pay salaries, pension and interest payouts. Now top government officials are in damage-control mode to avoid a salary crisis, something that the Left government was adept at doing.

Whenever in crisisthe Trinamool government inherited a debt burden of R2 lakh crorethe Left government would divert funds meant for development to pay salaries and so forth, stop paying contractors. According to sources, some of the top crisis managers in the Trinamool government are now working round-the-clock to ensure funds flow in to the state, and that the salaries can be paid on time.

For one, the state government has decided to withhold interest payout from Januarythe state had sought a waiver from the Centre, but theres been no word on that front. This will save the state R1,258 crore a month. The state government has also decided to increase expenditure on development to R2,000 crore, which will help it get a grant of R4,000 crore from the Centre. Earlier, the government wouldnt spend more than R800 crore on development. Working days under the employment guarantee scheme are also being increasedBengal has a poor record with only 19 working days under the scheme. The state government wants to increase it to 50, which would straight away add R4,000 crore to the kitty. For 19 days, the state got R917 crore from the Centre annually under the employment guarantee scheme. There is some curb on office expenditure as well, all contractors payments are being stopped till March, and only telephone and electricity bills will be cleared, thus saving 35% on bills.

But these are stop-gap, fire-fighting measures, at best. The Mamata government has done little to send the right signals on the economy. It only didnt present the Budget, thus skirting detailed presentations on tax, revenue and expenditure proposals, the finance minister has refused to answer questions on the states fiscal health ever since he took control. And thereby hangs a tale. The chief minister hasnt really let Mitra put his stamp on the Bengal economy. Apart from announcing a detailed e-governance plan and writing out the Trinamool manifesto, he hasnt had a free hand in financial matters. With the government not spilling out a clear land policy yet, Bengal is losing out to investment going to other states like Gujarat and Rajasthan. Many of Bengals home-grown industrialists are also now being forced to expand outside the state. Falling finances apart, the state government is also grappling with several issues like farmers suicides, a state of lawlessness, and as one economist put it, lack of vision to improve the financial health of the state. There appears to be a bankruptcy of ideas in how to run the state, and the poor state of finances isnt helping.