Rs 3523.58 cr vote-on-account passed by State Assemly

DAN govt solved the financial problems of the State: Rio

Principal Correspondent
KOHIMA, MARCH 24

THE 4th session of the 12th Nagaland Legislative Assembly (NLA) session was adjourned sine die today after passing Rs. 3523.58 crore vote-on-account to settle the expenses of the State Government during the first four months of the fiscal 2014-15.The vote-on-account was presented by Chief Minister Neiphiu Rio, who also holds the finance portfolio on Friday. Today, it was passed by voice-vote without any cut motions or discussions as the NLA Speaker Chotisuh Sazo announced that since the amount is for the first four months only, the members can discuss at length on the matter during the full budget, which would be presented somewhere in July.
Making statement before asking for consideration of the Nagaland Appropriation (No. 2) Bill, 2014 relating to the vote-on-account, Chief Minister Neiphiu Rio apprised the salient features of the state’s finances.
He informed the house that since the year 1989 the Government of India (GoI) had discontinued funding pattern which used to cover all Non-Plan gaps of the respective year, as was expected in terms of the provisions of the 16 Point Agreement.
Consequently, the financial problems of the State started from the year 1990 onwards, he said adding that from the year 1990 to 2002 the State had to impose restrictions such as Pro-rata cuts in both Plan and Non-Plan expenditure from time to time; all salary payments, including Work Charged salary could not be released in time and there was a time when even pensions, Leave Encashment, Medical Reimbursement, Debt servicing and power purchase dues could not be cleared in time etc. Because of this, he said there was a time when even pensions, leave encashment, medical reimbursement, GPF could not be paid while DA of employees had to be impounded. He also maintained that debt servicing and power purchase dues could not be cleared in time.
He added, Nagaland is one of the best states in the country in the area of repayment of debt to all the Financial Institutions in time. The positive management of the State’s finances was even acknowledged by the Governor of the RBI during his visit to the State in the year 2007. The 13 Finance Commission fixed the ceiling on the state’s salary expenditure at 35% of the total revenue expenditure excluding pension and interest payments, despite knowing that during the time of their visit our expenditure on salary was already around 60%. In order to comply with the recommendations of the 13 Finance Commission, the State Government would have to retrench 46,599 employees, which is of very serious implications. However, we have not resorted to any drastic measure keeping in mind the welfare of the employees. We have presently an excess of 54,689 employees and it is necessary for all of us to remember that the problem of excess State Government employees is not a recent phenomenon but has been occurring since the existence of statehood.
Rio, however, claimed that after DAN government took over in its first tenure (2003), “we were able to solve all the above problems”.
Contrary to the claims of the work charged employees agitation demanding release of their pending salaries, Rio said “as we had promised in our manifesto to pay all work charged salaries regularly, we are still fulfilling our commitment”. There has not been a single time when salaries, pensions, leave encashment, medical reimbursement etc. were not cleared in time, he added.
Rio also proudly claimed that Nagaland is one of the best states in the country in the area of repayment of debt to all the Financial Institutes on time while also adding that the positive management of the state’s finances was even acknowledged by the Governor of the RBI during his visit to the State in the year 2007.
He however regretted that the 13th Finance Commission fixed the ceiling on the salary expenditure of state at 35% of the total revenue expenditure excluding pension and interest payments, despite knowing that during the time of their visit our expenditure on salary was already around 60%.
In order to comply with the recommendations of the 13 FC, the state government would have to retrench 45,599 employees, which would have had very serious implications, he said, adding that the government did not resort to such a drastic measure keeping in mind the welfare of the employees who would have been affected.
“We are still maintaining our salary expenditure around 60%,” he said adding that going on the basis of the 13 FC, the government presently has an excess of 54,689 employees. He however justified that the problem of excess state government employees is not a recent phenomenon, and has been occurring since the existence of statehood.
He said one major reason for the negative state of our finances was the arbitrary imposition of cash drawdown by the Planning Commission on the State. This method took into account the artificial cash balances shown against the balance of the State on the last day of March as an available resource of the State for the State Plan, without recognizing the fact that it was unreconciled by RBI. In fact, by the last day of March the State’s cash balance is always in negative. The positive balance shown was mainly on account of inability of RBI to reconcile accounts due to heavy financial year ending transactions of all States. As a result, we were penalized for resources that did not exist and it was an unfair method, he said.
He informed that unlike most other States, Nagaland government adopted preventive measures to tackle this problem by closing the financial year effectively a few days ahead, so that the actual cash position is established on or before March 31 so that we are not victimized by an unfair practice called ‘Cash Drawdown’ which has been put in place since 2012-13.
Appreciating the GoI for providing more than 90% of State’s resources as compared to the own resources of the state, which come to less than 10%, Rio also highlighted that for the last 53 year, i.e. from the year 1961-62 when the Interim Government was in place to 2013-14, the total money received by the State for developmental purposes is Rs. 15,999 crores.
The amount provided to Nagaland since statehood for developmental purposes is less than a year’s Plan outlay of a medium sized State in our country, he remarked.
He added that, during the 50th year of statehood the Plan outlay for the current year 2013-14 as compared with the Plan size of the previous year has in fact been reduced by 13.04%. But if we are to exclude NEC & NLCPR which have been included arbitrarily in the State Plan for 2013-14, the actual reduction comes to about 26%.
He said even last year, out of the total Plan outlay of Rs. 2300 crores, the actual amount released by the Government of India was Rs. 1726.85 crores, resulting in a shortfall of Rs. 573.15 crores, which included Rs. 300 ENPO package, short receipt under JNNURM Rs. 61.57 crores, Accelerated Irrigation Benefit Programme (AIBP) – Rs. 107.56 crores, External Aided Programme (EAP) – Rs. 69.81 crores and 13th FC Grant – Rs. 34.21 crores.
Rio however said that as initiated by the DAN Government at the level of Prime Minister and Finance Minister, a decision was taken by the GoI to open a special window of funding to reduce the negative impact of the 13th FC recommendations to basically cover the Balance from Current Revenue (BCR) Gap, especially for the Special Category States. However, the GoI was unable to provide the SCA untied as per the BCR amounting to Rs. 978.64 crore, he said.
He also revealed that the GoI was unable to release the pending reimbursements of the State and as of today, the pending amount stands at Rs. 324.18 crores.
Rio further stated that while the closing deficit for the year 2013-14 is estimated at Rs. 950.90 crores, the actual deficit could have been much less had the pending reimbursement been released to the state government. He maintained that the deficit has been on the higher side due to reasons like less receipt of State Share of Central Taxes – Rs. 90.52 crores and pending reimbursement from GoI – Rs. 324.18 crores. With these two receipts, the actual deficit would have been only Rs. 536.20 crores only, he said.
Nevertheless, he maintained that in spite of many difficulties the State Finances were managed well during the past 11 years and the Government has never failed to pay salary and pension on time and also has not defaulted in servicing of debt.
“I can safely assure that the state finances will continue to be managed as efficiently as has been done during the past year,” he asserted.