Attack on fiscal federalism

OPINION: Vasundhara Raje, Chief Minister of Rajasthan

This is an uninspiring, insipid, anti-people and anti-federal Budget. The Finance Minister admitted to an increase in the rate of inflation, from 4.2 per cent last year to 5.4 per cent this year. He quoted averages to suggest that inflation is not a new phenomenon. But in quoting these averages, he was trying to hide behind the much larger increase in prices in the last six months, specially food items.

From March 2006 to February 2007, the average price increase in food items is more than 10 per cent.

The Finance Minister also admitted his government's inability to contain inflation by asking the states to control it (as the Prime Minister had done last week). Both know well that macro economic options are available only to the Union government. The attack on fiscal federalism continues.

Centrally-sponsored schemes bypassing state budgets have almost become a norm under the UPA government. Now, state governments will be bypassed altogether.The water harvesting structure scheme announced in the Budget is to be implemented by banks. How a small number of banks and their branches will cover thousands of villages in Rajasthan, and how well, is anybody's guess.

The states' revenues have been attacked again by the increase in the scope of aviation turbine fuel (ATF) as declared goods, under the Central Sales Tax Act (the financial implication will be clearer when more details are available). Only last year, a loss of Rs 100 crore was caused by declaring liquefied petroleum gas (LPG) under the same category.

The threshold level for income tax has been raised by Rs 10,000. The loss on this account will be shared with the state governments. But a 1 per cent additional education cess has been imposed, which will be fully retained by the central government. So, whatever relief there is to the individual, will be at the expense of the states. We strongly oppose and condemn raising central taxes in this non-shareable manner.

At the upper primary level, mid-day meals have been started in only 3427 'educationally backward' blocks. First, the scheme should have covered all areas. Second, the norms for considering a district educationally backward have not been clearly announced, leaving scope for arbitrariness.

The 1 per cent cess for secondary education will yield to the Union government approximately Rs 5400 crore. Yet the allocation increase for the secondary education initiative is only Rs 1900 crore.

It is a shame that even money collected in the name of education is being used to finance the unproductive expenditure of this government.

The UPA government has failed to, and indeed gone back on its, promise to eradicate polio. Though the FM spoke repeatedly of the importance of agriculture, measures announced are feeble and unimaginative "" the same old T&V for extension, the same old ISOPOM (for pulses and oil seeds), same old ATMA (for technology transfer) the same old ICAR training and yet another committee, this time on agriculture indebtedness. Reducing import duties on edible oil is anti-farmer and obviously in contradiction to the avowed claim of wanting to increase production of oil seeds in the country.

The Budget announces several initiatives that have already been taken by the Rajasthan government, like the weather insurance scheme, which has been running in Rajasthan since 2004, for several crops, such as oranges, coriander, cumin and methi.

The so-called Aam Admi Yojana is a cruel joke "" this is, in fact, an on-going scheme (the Jan Shree Beema Yojana of the LIC). All that has been done is that a scheme has been renamed.

The UPA government has attacked the one success story of this country, exports; specially IT exports, by bringing exemptions under Sections 10A & B of the Income-Tax Act within the ambit of Minimum Alternative Tax (MAT). This is especially tragic because this will hit the biggest job-creating industry.