Hyderabad, July 20 (Inditop.com) Vijay Kelkar, chairman of the 13th Finance Commission, Monday voiced concern over subsidies provided by Andhra Pradesh, saying these could potentially jeopardise the state’s recent impressive fiscal achievements.
While acknowledging the need for ensuring food security to the poorest of the poor, he told Chief Minister Y.S. Rajasekhara Reddy that this aim can be best secured through improvements in the income and human capabilities of all citizens.
“Subsidies detract scarce resources towards the development of these capabilities and their prudent control and management is therefore essential,” he said while addressing a meeting with the chief minister, his cabinet colleagues and senior officials.
Andhra Pradesh is the biggest consumer of central food subsidy. “In addition, the state government subsidises the consumer price of rice, the fiscal burden of which is projected to be Rs.1,900 crore in 2008-09 budget estimates,” Kelkar said.
“In the same year, the state also intends to subsidise AP Transco (electricity utility) to the tune of Rs.2,385 crore, again for providing subsidised power to agriculture.”
Kelkar made the observations after the chief minister sought higher transfer of resources from the centre for continuing various programmes like free electricity to farmers, farm loan waivers, “Arogyasri” or community health insurance and massive irrigation programme “Jalayagnam”.
Kelkar said the fiscal projects presented by the state for the period 2010-15 prima facie indicate a worsening in the state’s fiscal management.
He further voiced concern over intra-state disparities in income. “The per capita income of the poorest districts is less than half of the richest district. There are also wide variations in literacy rates and in per capita availability of education and health facilities.”
Referring to Goods and Services Tax (GST) coming into effect from April 1, 2010, the finance commission chief said this was necessary if Indian industry was to survive in this age of globalisation.
While noting that the share of irrigation in total capital expenditure has risen from 52 percent in 1999-2000 to 85 percent in 2007-08, Kelkar wanted to know the impact of this rise on agriculture growth and productivity.
Patting the state for implementing the Fiscal Responsibility and Budget Management (FRBM) Act, he said it was a role model for the country.
Kelkar, however, called for reducing the debt-GSDP (gross state domestic product) ratio, which is currently at 31.1 percent as against 28 percent recommended by the 12th Finance Commission.
He further underlined the need for judicious use of public-private partnerships and strategic divestment of under performing assets to strengthen the public finances.
Quoting state accountant general, the commission chairman said the aggregate losses of the public sector exceeded Rs.2,770 crore (Rs.27.7 billion/$575 million).
“These figures are not fully reliable since the accounts of 27 working companies have been in arrears for periods ranging from one to 10 years.”
Earlier, Chief Minister Reddy urged the commission to help states like Andhra Pradesh by allocating more funds.
He also requested incentives for better performance and higher investments in infrastructure.
The chief minister said as a result of the global economic slowdown, the financial resources had fallen sharply and the state had to be content with 5.6 percent growth rate in 2008-09 as against an average 10.08 annual growth rate during 2004-08.
Reddy also demanded that the state’s share of central taxes be raised to 50 percent from the present 30.5 percent.
