Maharashtra has been in news for rising debt pressure on its finances. State finance minister Ajit Pawar, who recently presented the state's annual Budget for 2012-13, in an interview with Sanjay Jog, talks about the state's economy and the way forward. Edited excerpts:
What is the logic behind imposing five per cent tax on liquefied petroleum gas (LPG) and natural gas?
I have explained the logic in my speech. Kerosene under the PDS (Public Distribution System) is subject to VAT (value-added tax). About 60 per cent of the families use kerosene for cooking. Also, there are less well-off families. Many states have imposed a VAT on LPG. So, in principle, exemption to LPG is somewhat anomalous. As far as taxing LNG (liquefied natural gas) is concerned, it is more by way of providing a level taxation treatment between LNG sourced domestically, as well as from outside the state.
Critics have questioned your claim of a revenue surplus Budget of Rs 152.49 crore? Is it achievable, especially when revenue expenditure is increasing?
Last year, we had projected a revenue surplus of Rs 58 crore. That was based on serious revenue-generation efforts, especially in state excise. However, we had to take the burden of Rs 1,600 crore as relief to farmers. Also, additional funds were allocated for subsidy for agricultural pumps and for industrial promotion. We are likely to end the year with a deficit. This year's projections are based on conservative estimates of revenue growth. I hope we have minimal unforeseen expenditures. Our estimates are reasonably robust and we should meet our targets.
The rising debt burden and expenditures, especially on salaries, pensions and interest payments, are a matter of concern. How is the government tackling these issues?
As far as salaries are concerned, you have to take a medium-term view of the situation. Whenever there is a Pay Commission award, the expenditure moves up sharply, leading to a higher deficit. This would be seen for another couple of years. However, the correction and adjustment in this Pay Commission has been much better than that in the Fifth Pay Commission. Our fiscal deficit is just about two per cent of gross state domestic product. In fact, at times, I am asked why we are not using the headroom available. We do not want to have an increased interest burden. We are keeping the revenue deficit under control.
Despite your claims to bring in fiscal discipline, the government goes on distributing subsidies and providing guarantees. For fiscal prudence, how can these be minimised?
We are providing minimal guarantees. Indeed, at times, the central financial institutions insist on guarantees when a loan may otherwise be commercially viable. Subsidies are a challenge. However, we will not shy away from difficult decisions.
How is the government able to raise finances for various development works? For example, the government needs Rs 80,000 crore to complete irrigation projects, while substantial funds are needed for roads and bridges.
Last year, I had increased allocations of all major departments significantly. This year, because of the slowdown, I have been conservative. I made a modest increase in the allocation and have raised some taxes, while keeping the fiscal deficit under check. The Plan allocation for health has increased from Rs 400 crore in 2010-11 to about Rs 1,500 core in 2012-13. Allocation for medical colleges and for agriculture has also been raised in the past two years.
How do you justify the proposed rise in the annual Plan to Rs 45,000 crore and the 12th Plan size of Rs 275,000 crore when large funds remain used or are carried forward?
Infrastructure development is a key issue, especially the increase in power generation capacity to remove load shedding. Mumbai particularly needs strengthening of infrastructure. However, the allocation for this is low. How would funds be mobilised to meet the requirement? Our allocation for the energy sector is almost Rs 2,500 crore every year. The energy companies have an investment programme of about Rs 10,000 crore a year.