Scrapping Planning Commission Alarms Himachal Planners

Shimla: Prime Minister Narinder Modi’s Independence Day announcement to wind up the planning commission has here set alarm bells ringing, especially among finance department officials, for uncertainty about special grants for revenue deficit Himachal Pradesh hangs in the balance.

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“Under the old dispensation Himachal did get much special grants as the planning commission was liberal in granting funds that enabled the state to bridge the widening gap between shrinking revenues and increasing expenditures,” said a senior officer of the finance department.

The finance department officer, not wanting his identity disclosed, said that many times extra funds allocated to Himachal under successive five year plans have improved roads, healthcare and education standards for an otherwise marginalized hill state.

Doing away with the command economy structure by drawing curtains on the Nehruvian institution set up by an executive order has also jolted the state planners here.

Chief minister Virbhadra Singh in his Independence Day speech at Nahan announced release of 10 percent DA for government employees. Talking about the states precarious finances, an officer from the planning department put the DA outgo at Rs 590 crore.

“Himachal is a queer case,” said. “In the 2014-15 budget outlay of Rs 23613 Crore, the salary bills is likely to exceed Rs 9000 crores, pensions would cross Rs 3500 and about Rs 4500 crore on loan and interest repayments.”

With the states accumulated debt having crossed the Rs 30,000 crore mark, the runaway expenditure has also impacted the states plan size. Where the plan was Rs 4100 crore in 2013-14 it was increased to Rs 4400 crore in 2014-15 that does not even absorb the yearly inflation impact.

“With the states own revenues barely crossing Rs 5500 crores, the state’s finances are heavily dependent upon central grants to bridge the gap,” said the planning department official on conditions of anonymity.

Till outline of the new institution announced in place of the planning commission is drawn up, we are unsure whether the state stands to gain or lose its favoured status under the planning commission dispensation, he said.

As Editor, Ravinder Makhaik has nurtured Hill Post for over a decade. A chequered path had him drift from managing family owned apple orchards, to turning a documentary filmmaker, to a journalist - with India’s leading television networks and newspapers, to boot strapping in founding Start-Ups. He lives in Shimla.

2 Comments

  • NICE STORY :

    in 1985, then PM Rajiv Gandhi suggested to recast the plan panel by terming it a “a bunch of jokers”

  • There is a lack of clarity about the shape of the new Commission that is slated to replace the Planning Commission. Although it is now fairly clear that the Finance Ministry shall be allocating Plan funds to the states henceforth, it is not known whether it shall follow the same formula (including the Gadgil formula) in doing so, whether there will be any changes in the way the CSS (Centrally Sponsored Schemes) have been devised so far, whether the component of discretionary funds will continue, or even whether the Special Category status for some states (HP is one of them) shall continue. All these will become clearer, hopefully, in the days to come.

    But Himachal definitely has reason to be concerned. Going by Mr. Modi’s emphasis on efficiency, market economics and sustainability of programmes, Himachal is right in apprehending that the days of special grants and cheap market borrowings are over.

    That, however, is only how it should be. Himachal has been profligate and scandalously populist in the use of its resources, and we did not learn the right lessons even when the last three Finance Commissions slowly started turning off the tap on tax devolutions.

    It is difficult to comprehend (but not difficult to explain) how a state with the fifth highest per capita income in the country and some of the best socio-economic and HDI indicators has become probably the most indebted state (per capita) in the country.

    With our revenues from hydro-power, horticulture and tourism (not to mention the special Industrial package) we should have been sitting pretty, not begging for funds from the Planning Commission every year or, ironically enough, loudly proclaiming our backwardness to attract more funds!.

    But the plain fact is that we have been so profligate with our non-essential expenditure that we now have reason to be alarmed. The figures given in Mr. Makhaik’s article should make the government take a hard look at our expenditure.

    For one, the government should immediately do something it should have done years ago – trim the size of the bureaucracy. The government can be easily downsized by 10% without any adverse impact on efficiency – but it would save at least Rs.1300 crores per annum.

    Secondly, stop this mad spree of opening new government institutions: I know for a fact that there are hundreds of schools which do not have even twenty students, and sub-standard colleges without students too-they should be shut down (in any case, enrollment in government schools has been declining over the years).

    Thirdly, start shutting down Public Sector Undertakings which do not serve any essential purpose, or whose work can be better done by the private sector-the state cannot be bankrupted just to provide cushy sinecures for failed politicians or camp followers. To the best of my knowledge, every single PSU in Himachal is incurring losses.

    One could go on and on with this list, but the writing on the wall is clear – the gravy train to Shimla will in all probability be cancelled. Fiscal discipline will have to become an integral part of governance.

    In more ways than one, CMs will have to become CEOs. Like the rest of India, Himachal too will have to learn to live within its means.

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