(The arguments in the White Paper presented by the Finance Minister K M Mani in the Assembly as marked yellow. The responses are made just below of each paragraph)
PART – I
ANALYSIS OF BROAD INDICATORS OF STATE FINANCES
Continued........... from here
Para 47- Paddy Procurement and market Intervention operations by Kerala State
Civil Supplies Corporation (Rs 216 crores)
The white paper has accepted the claim made by KSCSC for 291 crores. Their claims will have to be scrutinized. Given the past record actual payments are much lower than the claims made.
48. Agriculture Department provides subsidy to small and marginal farmers towards electricity used for agricultural purposes. As on 31.03.2011, an amount of A 27 crore was due for payment to Kerala State Electricity Board on this account.
Para 48 - Payment towards free electricity to small and marginal farmers (Rs. 27 crores)
49. The previous Government during the last quarter of 2010-11 extended the scheme of distribution of food grains @ A 2 per kg. to all ration card holders. Due to the large number of APL card holders being brought under the scheme, the total financial commitment would increase to A 458 crore whereas the budget provision available is A 250 crore. This will result in an additional outflow of A 250 crore during the current financial year. Further, the rates of commission to ration dealers were also increased and an amount of A 15.68 crore is required to clear its arrears. The total additional liability works out to A 266 crore.
Para 49- Ration subsidy (Rs 266 crores)
50. Applications for debt relief numbering around 4.14 lakh have been received by the Kerala State farmers Debt Relief Commission. Of this about 1.71 lakh applications have been disposed off by the Commission with a total compensation of A 89.69 crore out of this, A 62.45 crore has been disbursed so far. The balance of A 27.24 crore is pending to be disbursed. The budget provision available is A 8 crore and hence A 19.24 crore is to be provided additionally now. Apart from this, the pending 2.43 lakh applications, when disposed off, can result in additional liability of around A 175 crore, even when assessed with a very nominal compensation of A 7500 on an average.
Para 50 - Debt Relief to farmers (Rs175 crores)
This estimation is made on the assumption that 2.4 lakh applications will be processed during the current year. Realistic estimate would be less than half. And also additional relief is not given to farmers who have benefited from Central Debt Waiver.
51. A 13.81 crore is outstanding to be paid towards the cost of medicines and equipments purchased and water charges payable to Kerala Water Authority by the Medical College Hospitals.
Para 51 - Payments towards medicine equipments, water charges etc. of Medical College Hospitals. (13.81 crores)
52. An additional allocation of A 25 lakh per Constituency was sanctioned in 2010-11 exclusively for taking up road up gradation work under the Special Development Fund for MLA. Majority of works have been taken up and completed and payments are due now. A 35.25 crore is the additional requirement on this account.
Para 52 - Road up gradation works taken up under MLA SDF (Rs. 35.25 crores)
53. About A 100 crore will be immediately required to settle the outstanding claims in land acquisition cases including commitments on account of satisfaction of Court decrees in LAR cases and settlements reached through Lok Adalaths.
Para 53 - Compensation for Land Acquisition (Rs. 100 Crores)
55. Under Irrigation sector, 10 works with a total outlay of A 468.16 crore were sanctioned under this stimulus package. Works bills amounting to A 30.66 crore only is so far paid. The balance payment of around A 320 crore will fall due in the coming months.
56. Under the Water Supply Sector,73 works costing A 515.91 crore were sanctioned under the stimulus package.The payments so far effected on the works executed under this package is A 41.08 crore. The residual payments of about A 355 crore will have to be effected during the course of the succeeding few months.
Para 55-56 - Stimulus package (Rs. 2275 crores)
Estimate is an exaggeration. The real outflow is going to be much less.
57. The scheme 'Vision 2010', envisaging infrastructure development works in all legislative assembly constituencies of the State was initiated by PWD during 2007-08. Works costing one crore each were sanctioned for each Constituency for the years 2007-08 and 2008-09 and all works were to be completed by 2010. Forty such works are still going on and thirteen still remain to be arranged. The liability on account of spill of over works under 'Vision 2010' would cost the state exchequer an amount of A 115.38 crore.
Para 57 - Works under 'Vision 2010' (Rs 115.38 crores)
58. During the five year period from 2006-07 to 2010-11, Government issued Administrative Sanction for civil works costing A 1922.59 crore in the Public Works (Roads and Bridges) Department against total budget provision of A 161.20 crore. The total sanctions thus works out to 1192 % of the budgeted outlay for these 5 years, which is gross violation of the existing norms relating issue of administrative sanctions for works in PWD and against principles fiscal prudence.
59. As per the prevailing norms cost of administrative sanction issued during a year should not exceed 150% of the budget outlay for the year. During the last 4 years, the total cost of the works sanctioned has exceeded the budget provision by over 1000%. In the year 2009-10 the excess was over 2000%. The additional commitment on account of these excessive sanctions is estimated to be above A 1300 crore. For 2011-12 alone, A 715 crore will be required for effecting payment of work bills of this category.
Para 58-59 - Indiscriminate sanctions for works (Rs. 715 crores)
Estimate is an exaggeration. The real outflow is going to be much less.
60. In his budget speech, the former Finance Minister has announced his Government’s intention to enhance the monthly rate of Social Security Pension and other welfare pensions from A 300 to A 400. As this Government can not do way with the proposed enhancement, an additional liability of A 200 crore is to be taken over during the current year.
Para 60- Social Security Pension (Rs 200 crores).
61. Currently the KSRTC is incurring an operating loss of around A 40 crore every month. The annual operating loss will come to A 480 crore. But for the liberal financial support from State Government, KSRTC will not be able to carry out its regular operations. This will add additional pressure on State’s finances.
Para 61 - Kerala State Road Transport Corporation (Rs. 480 crores)
A business model has been worked out to drastically reduce the outstanding debt of the corporation. If it is carried out the liability of the government would be drastically reduced.
62. The Kerala State Housing Board has been in deep financial crisis for several years now. KSHB’s outstanding liabilities with HUDCO alone is A 750 crore State Government is committed to clear at least ⅓ of this liability immediately, lest the State Government will not be able to avail any more loans from HUDCO. Hence the State Government is now compelled to take over a liability of A 250 crore.
Para 62 - Kerala State Housing Board (250 crores)
The state government has already made a payment of rs. 300 crores to meet the hudco bill arrears.
63. The additional financial liability on account of the above commitments would be A 10197 crore for the financial year 2011-12. However, only an amount of A 5133 crore was provided in the budget 2011-12 for defraying expenses on account of pay and pension revision and part of liability under anti-recession stimulus package. Deducting the above amount from the total commitment of A 10197 crore, an uncovered commitment of A 5064 crore remains for which no provision was made at all in the budget 2011-12 presented in February 2011. This additional liability is a heavy burden, resulting in severe strain on State’s finances
Para 63 - We shall quote verbatim the final statement regarding uncovered committed liabilities in the white paper “The additional financial liability on account of the above commitments would be A 10197 crore for the financial year 2011-12. However, only an amount of A 5133 crore was provided in the budget 2011-12 for defraying expenses on account of pay and pension revision and part of liability under anti-recession stimulus package. Deducting the above amount from the total commitment of A 10197 crore, an uncovered commitment of A 5064 crore remains for which no provision was made at all in the budget 2011-12 presented in February 2011. This additional liability is a heavy burden, resulting in severe strain on State’s finances” .
As against the net uncovered committed liability of Rs. 5064 crores two provisions may be set:
A minimum of 2500 crores is available from the treasury surplus of 3800 crores at the end of March 31. Even after setting aside the provision for pending drafts and bills of the previous year, Rs 2500 crores will be available as opening balance from the previous year.
Of the additional provision made for salary revision for more than Rs. 6000 crores there is a minimum cushion of 2500 crores as we have already explained.
There is sufficient cushion within the budget to meet the committed expenditure for the year 2011-12.