Financial crisis: Nagaland staring at grim budget shortfall

Our Correspondent
Kohima, May 2 (EMN): Nagaland is facing an imminent budget deficit with a cash shortfall of over INR 100 crore in the month of April, which is likely to increase by the end of the financial year.  

Union ministry of Finance had sanctioned INR 263.80 crore to Nagaland for its April instalment of devolution of state share in central taxes.

According to the state’s Finance department, the projection of the Centre in its budget for Nagaland was INR 374.45 as state’s share of central taxes, which resulted in a cash shortfall of nearly INR 111 crore for the month of April.

Considering the grim financial situation of the state, Finance Commissioner and Additional Chief Secretary, Sentiyanger Imchen on May 1 said that the deficit is likely to increase as the Covid-19 pandemic will also leave the government ‘no choice’ but to allocate more funds for health infrastructure and other related areas which have not been budgeted.

“A review of the position towards the end of April shows that the level of deterioration in the state’s own revenue receipts has been more than what was earlier estimated, and had fallen to INR 28.47 crore as of today. Based on this actual position emerging, it is clear that the shortfall in the coming months may be higher than what we have initially anticipated,” he said.

 Chief Minister Neiphiu Rio had written to Prime Minister Narendra Modi, highlighting the ‘crisis-like’ financial situation of the state. He also presented an annual cash shortfall of minus INR 955.44 crore with an estimated monthly cash shortfall of minus INR 79.62 crore. 

In the revised estimates of the union budget presented in February, the state’s share of taxes was projected at INR 3,267 crore against the initial union budget estimate of INR 4,206 crore resulting in a reduction of INR 939 crore.

This shortfall in tax collections of the centre has affected all the states and union territories including Nagaland.

“We are now facing a crisis in the management of our finances which actually began last year due to the huge shortfall in state’s share of Union Taxes and Duties when an amount of INR 939 crore was received less. Being a post-tax devolution revenue deficit state, we had no escape but to add to the accumulated deficit,” Rio stated in the letter.

The chief minister further stated: “Even during the current financial year, against a projection of INR 4900 crore by the 15th FC the amount incorporated in the union budget is INR 4493 crore only. The receipts in April of INR 264 crore reflect a further decline by about INR 57 core monthly. This may go down even further in May, which will further compound the already grim situation.”

Keeping in view the emerging scenario, Rio has urged the central government to consider “providing a special dispensation” and further requested the Centre to release the pending liabilities of INR 529 crore under the Special Plan Assistance, which the Niti Aayog has already cleared.

As reported earlier, Nagaland government has already taken a few measures to address the deficit financial status in the state including freezing of fresh appointments, freezing of dearness allowances and relief, cut on non-development expenditure including ban on purchase of vehicles; and pro-rata cuts on developmental expenditure, which is under examination.

In addition, the state government is levying a Covid-19 cess on petrol and other motor spirit at INR 6 and diesel at INR 5, which came into effect from April 28 midnight.

During the Nagaland Legislative Assembly, the chief minister had presented a revenue deficit budget of INR 2358.81 crore for 2020-21 on February 13 and the House went on to pass INR 21,068 crore state budget for financial year 2020-21, two days later.