The Hindu : A difficult year

Online edition of India's National Newspaper
Thursday, Mar 27, 2003

Opinion

Opinion - Editorials

A difficult year

IT HAS BEEN a difficult year for Karnataka both politically and financially. The dispute over the sharing of Cauvery waters, the running battle with Tamil Nadu in the Supreme Court and the Tribunal, the farmers' agitation in the Mandya region and one of the worst-ever droughts in recent years have left the State in a bad shape. Weathering the political storm over the dispute and release of the Cauvery water to the neighbouring State was a political and law and order problem for most of the year and this has also adversely affected the finances of the Government. Presenting his budget to the Legislature last week, the Chief Minister, S. M. Krishna, who also holds the Finance portfolio, admitted, "We were unable to adhere fully to the fiscal targets under the Medium Term Fiscal Plan". Apart from drought, the power sector has become a major burden and an area of "fiscal concern". Largely due to its inability to "deliver on reform parameters", Karnataka was unable to draw the third tranche of Rs. 1,200 crores under the Karnataka Economic Restructuring Loan. This, compounded by an estimated revenue shortfall of about Rs. 1,600 crores, has told on the State's finances for the current year. Despite these problems, Mr. Krishna has projected an ambitious annual plan of Rs. 9,780 crores for 2003-04, marking a 16 per cent increase over the current year's outlay of Rs. 8,611 crores. Indications are that the Government would utilise only Rs. 8,621 crores of the plan this year.

In the budget and in dealing with the fiscal problems, the Chief Minister has kept his focus on the energy sector. After all, the Government provides a subsidy of Rs. 2,340 crores to the power sector — nearly equal to the entire revenue deficit of the State. And yet, Mr. Krishna himself admits that there is "considerable dissatisfaction" amongst the consumers on the reliability and quality of power. He has, therefore, decided to link the support to the performance of the Electricity Board. For the coming year, the Board will have to reduce its technical and commercial losses from 32 to 30 per cent — which is certainly high by any standard. The Government will introduce the `purchaser-provider' model of budgeted support to the power sector. To tide over the present drought situation, a three-month period of full interest waiver has been offered to all farmers who pay the electricity dues in full. All these are welcome measures, but Mr. Krishna also knows that any success in this area will depend on the next monsoon. Going by the law of averages, he hopes to have a successful southwest monsoon in the coming year.

Despite all these inherent problems and the seasonal crisis, Karnataka will have an overall surplus of Rs. 67.66 crores, thanks to some additional resource mobilisation. But after providing for a negative opening balance of Rs. 173.34 crores, there will still be a net deficit of Rs. 105.68 crores — which is manageable. To raise additional resources, Mr. Krishna has invariably turned to the liquor trade and enhanced the luxury taxes as well. He has proposed to levy the Value Added Tax on textile, sugar, tobacco and tobacco products when the State Government is permitted to do so. While levying these additional taxes, the decision to repeal the Karnataka Contract Carriages (Acquisition) Act to let the private sector step in and provide more transport services in the State is a welcome measure. While there can be no compromise on safety on the roads, or the condition and quality of the buses to be operated, the people deserve more and better services. If the State and its agencies cannot provide the required buses, the private sector must be encouraged to bridge the gap. In infrastructure, a great deal more needs to be done to keep Karnataka in the top league of States in this highly competitive environment.

Printer friendly page
Send this article to Friends by E-Mail

Opinion

Stories in this Section

Ill-prepared for VAT

A difficult year

Interlinking of rivers — II

India and the Iraq war

Time to accelerate peace process

Rage against the dying of the light