Revenue has failed expectations, expenditure is high, and chief minister Mamata Banerjee has made a slew of people-friendly announcements. No doubt many a challenge stare at the one-time voice of industry and now West Bengal finance minister Amit Mitra as he girds up to present his first budget in the state on March 23.
For FY12, the state didn’t place a budget, opting for three votes-on-account instead. For FY13, Mitra will now have to make up for revenue lost due to waiver of water taxes and non-receipt of electricity duty. He has his task cut out, because if the state’s revenue generation is low, once the country shifts to a goods and services tax regime, the compensation on account of revenue loss will also be low.
If GST is rolled in April 2013, West Bengal will have to put its financial house in order to cope with the transition.
Former state finance minister Asim Dasgupta in his final vote-on-account in March last year made a gross provision of R98,009 crore with projected revenue (tax and non-tax) expenditure at R72,824 crore. He projected revenue receipts at R64,438 crore, effecting in a revenue deficit of R8,386 crore.
While Mitra found Dasgupta?s revenue receipt projection to be absurd, he did not doubt the projected revenue expenditure, which comprised expenses for normal running of the government, interest payouts and grants given to autonomous bodies.
When Dasgupta presented his vote-on-account, he quoted a revenue deficit of R14,331 crore in 2010-2011. But in his projection for 2011-2012, he brought down the revenue deficit to R8,386 crore without really identifying the sources of additional revenue. The government?s revenue receipt for 2010-2011 was R52,951 crore. So mopping up an additional R11,487 crore didn?t seem feasible for the new finance minister, while there was no opportunity to bring down revenue expenditure.
Hence Mitra, according to officials, took recourse to diverting capital receipts, comprising market loans, government loans, RBI loans and recoveries of loans it granted, towards revenue expenditure and couldn?t spend for capital gains. Officials in the state finance department said the government was likely to end up 2011-2012 with a revenue deficit of around R16,000 crore. So Mitra?s financial provisioning and allocation to departments would have to be made keeping in account the huge revenue gap, which he has to narrow through raising additional resources.
Mitra is thus is likely to modify the VAT structure, while also looking at raising additional tax revenue from sales tax on diesel, petrol and LPG, surcharge on sales tax, excise on liquor, taxes from corporation, taxes from state motor vehicles, toll tax, entry tax, turnover tax, entertainment tax, luxury tax, betting tax, railway passenger fare tax, professional tax, agricultural income tax, land revenue, electricity duty, raw jute tax and service tax.
Tax revenue contributes around 25% to the state?s total revenue receipts (of the state?s total revenue receipt of R52,951 crore, tax revenue was only R13,368 crore in 2010-11) and so the state would have to lay special thrust on increasing non-tax revenue, comprising the state?s share in small savings, licence fee from liquor, interest from agricultural loans, interest from loans to PSUs, dividends from PSUs, interest from cooperative societies, rents from government buildings and fees for examinations conducted by the state.
According to Binod Kumar, commissioner of commercial taxes, tax revenue for FY12 grew 20% against a targeted 31%. Collection could be at R16,000 crore in FY12, with around R48,000 crore coming from non-tax revenue receipts.