2004-2005 Budget Speech



Mr. Speaker Sir,

1. I rise to present the Budget of the Government of Manipur for the year 2004-05. This is the 3rd Consecutive budget of the Secular Progressive Front since it assumed office in March, 2002. While the full budget will be discussed later, for the present it seeks a Vote on Account to enable the Government to discharge its responsibilities and to meet all essential expenditure during the first four months of 2004-05.

2. This SPF Government inherited, when it assumed office in March, 2002, an economy with unsustainable dimensions in which the Government could not even regularly pay the salaries of the State Government employees. The cause of the malady can be largely ascribed to the pay revision in 1999-2000, limited own revenue of the State and the inadequate award by the Eleventh Finance Commission. These factors of a huge liability arising due to adoption of Fifth Pay Commission Scales for the State Government employees, low levels of State’s own revenues and the inadequate award from the Eleventh Finance Commission have created wide mismatch between the overall availability of resources and the expenditure requirements.

3. The adverse fiscal position continues to plague the State for the last many years as is evident from yearly closing balance. The year 2001-02 ended with a negative balance of Rs. 557.68 crores. During 2002-03, Central Govt. had helped the State with a medium term fiscal loan of Rs. 371 crores and yet the year 2002-03 ended with a negative balance of Rs. 367.70 crores. A request to Central Govt. for similar help of a loan during this financial year did not materialize and so I apprehend that closing deficit in 2003-04 financial year will be to the tune of Rs. 580.27 crores.

4. The insurgency problem continues to have an adverse impact on the security environment in the State. Though the government has been able to contain the insurgency problem to a great extent and maintain law and order, the overall situation is still not yet conducive for accelerated economic activities. The strategy for economic development now heavily depends on private sector initiative and investment. Unfortunately, due to law and order situation in Manipur, the atmosphere is not perceived to be investor friendly, thus depriving the State of the opportunities of investment, employment, generation of income, etc.

5. The continuing adverse fiscal position is impacting all aspects of life in the State. The State Government is still has not been able to pay salaries and pensions regularly. Moreover the implementation of developmental projects has been below the desirable levels due to fund constraints. The low levels of development affect all groups of people and society in general. Today, I sincerely express my gratitude to the people of Manipur for their perseverance and co-operation in this critical phase through which the State is passing.

6. At the core of our economic endeavor and management of the State’s finances are the interests of our citizens. The priority towards achieving this is the restoration of the macroeconomic stability as well as to make funds available for developmental purposes. However, this goal cannot be achieved by the efforts only of the State Govt. The State’s own tax and non-tax revenue sources represent only 7% to 12% of the consolidated fund. Even substantial increase in this area cannot make any appreciable dent in the huge gap existing between receipts and the expenditure. On the other hand, efforts at curbing expenditure under Non—Plan encounter severe limitation due to essentiality of requirement for salaries, pensions, debt servicing.

7. Since State’s own tax and non-tax revenues, Share in Central Taxes, Non-Plan grants from the Centre and Non-Plan loans from the Centre are grossly inadequate to meet the requirements of non-plan expenditure, there is no alternative but to pose these problems to the Central Government. Towards the direction of fiscal reforms, my predecessor government as well as SPF Government has taken various initiatives. An MOU was signed with Central Government in April 1999. This was followed by another MOU signed in June 2002. These MOUs and the Medium Term fiscal Reforms Programme (MTFRP) together have become the road map for achieving the fiscal reforms and macroeconomic stability.

8. While several measures were introduced to contain the Non-plan revenue expenditure, the huge gap between receipts and expenditures could not be bridged fully. The Central Government was requested from time to time to bail out the State finances from the difficult position. The Government of India extended Special Central Assistance to the tune of Rs. 125 crores in 2001-02, Rs. 100 crores in 2002-03 and Rs. 70 crores in 2003-04. In addition, a Medium Term Fiscal Loan of Rs. 371 crores was also sanctioned to Manipur during 2002-03. However, these does of Central assistance have not been sufficient to fully neutralize the deficits occurring every year.

9. Mr. Speaker Sir, as mentioned by me earlier, the problem of today can be traced back to the unsustainably huge implications arising out of adoption of Fifth Pay Commission scales for State Govt. employees and the inadequate award given by the Eleventh Finance Commission. It would logically follow that we need to ensure that similar causes do not occur in future and corrective measures are taken in time. Being conscious of this fact, we are drafting our Memorandum very carefully for the Twelfth Finance Commission which is likely to visit Manipur in the early part of the next financial year. My Government had also constituted the Second Manipur State Finance Commission to recommend devolution of resources to them. Its recommendations would be presented to the Twelfth Finance Commission for its consideration. The strengthening of the third tier of administration through the local bodies already initiated by this Government will continue with more thrust to fulfill the obligation under the 73rd and 74th Constitutional Amendments.

10. The State Govt. and the people of Manipur are keenly looking forward to the award of Twelfth Finance Commission and it is expected that our fiscal difficulties will be appropriately addressed and we may get the long awaited relief. However, the award will be known only later and will be applicable for the five years from 2005-06 onwards. In the interim, our endeavor to contain revenue expenditure under non-plan account is continuing, as per spirit of the MOU signed with Govt. of India in June 2002.

11. The effect of expenditure compression measures can be seen from the fact that the expenditure on salaries has more or less stabilized. However, the requirement for payment of pensions and debt servicing are bound to increase. As such, containment of overall revenue deficit under Non-Plan is only feasible till such time that Twelfth Finance Commission recommends a suitable award and the same is accepted by the Central Government.

12. Implementation of an important commitment in the MOU is the winding up the unviable Public Sector Undertakings (PSUs). For this purpose, this Government has already taken up measures for retrenchment of employees in the unviable Public Sector Undertakings prior to their winding up under the Companies Act. Voluntary Retirement Scheme (VRS) has been introduced for down sizing the staff in the undertakings which are to be retained. The retrenchment of employees has been effected in nine PSUs, that is, Manipur Cement Ltd., Manipur Cycle Corporation Ltd., Manipur Pulp & Allied Industries Ltd., Manipur Food Industries Corporation Ltd., Manipur Spinning Mills Corporation Ltd., Manipur Drugs and Pharmaceuticals Ltd., Manipur State Road Transport Corporation Ltd., Manipur Agro Industries Corporation Ltd. And Manipur Plantation Crops Corporation Ltd. Necessary assistance for retrenchment has been received from the Government of India under Fiscal Reforms Programme.

13. This Government had also inherited a liability of Rs. 157.10 crores as on 30th September, 2001 in the form of dues for purchase of power from two Central Public Sector Undertakings, that is, NEEPCO and PGCI Ltd. These dues have been securitized into 20 Power Bonds of varied dates of maturities.

14. In view of falling interest rates, there is a need to get the loans appropriately rescheduled. While the NCDC loans have been rescheduled with lower interest rates, efforts are underway for rescheduling of loans from REC and HUDCO with lower interest rate and moratorium on repayment of principal.

15. The State Government has been given facilities for converting the high cost debt into low cost market loans under the Debt Swap Scheme introduced by the Central Government since 2002-03. Under this scheme, the high cost debts, such as Small Savings loans are to be converted into low cost Open Market Borrowings. In 2002-03, outstanding Government of India loans amounting Rs. 18 crores were replaced by Open Market Loans. In 2003-04, Government of India loans for an amount of Rs. 40 crores will be converted into low interest bearing Open Market loans.

16. The State’s Annual Plan for 2003-04 has an approved outlay of Rs. 590.30 crores with several earmarked sectors as well as specific projects under one-time Additional Central Assistance (ACA). In addition to the schemes under the State Plan, the State Government made efforts for getting funds from different sources including the Department for Development of North Eastern Region. The State Government is giving priority to expeditious implementation of the projects sanctioned under Non-Lapsable Central Pool of Resources Scheme particularly in power, water supply, education and road sectors. Similarly, projects under NEC are being accorded priority.

17. In spite of the difficulties encountered by the State Government in garnering more projects under Externally Aided Projects (EAP), the State Government have so far succeeded in completion of three schemes/projects with French Assistance. In the Annual Plan, 2003-04, an outlay of Rs. 72.90 crores has been provided for implementation of two ongoing projects namely Sewerage Project Phase-I for Imphal City with French Assistance and Manipur Sericulture Project with Japanese Assistance. Both these projects will be pursued vigorously in 2004-05.

18. The Eleventh Finance Commission recommended an amount of Rs. 58.59 crores for upgradation of Standards of Administration and Special problems. Major among the schemes are Construction of Imphal East District Building, Police Administration, Health Services, Computer Training, Public Libraries, Kangla Fort, Secretariat Block and State Capital Project. The entire award of Rs.58.59 crores is to be utilized by the end of 2004-05 and as such State Government will accord priority to these projects for timely implementation.

19. Mr. Speaker Sir, the State Government will continue its efforts to contain the non-plan revenue expenditure during 2004-05 also as per the MOU signed with Government of India. We will conduct a comprehensive review of the initiatives taken to contain expenditure on staff salaries. We propose to frame a voluntary retirement scheme (VRS) for the State Government employees and pose the same to the Central Government for extending financial assistance for its implementation. With regard to the PSUs which are to be retained, a; revival scheme will be prepared. In order to arrest the growth of expenditure on pensions and retirement benefits, the new pension scheme of the Central Government is under examination for adoption by the State Government for new employees.

20. In order to bring down the debt servicing liabilities, Central Government will be approached to earmark higher amounts to Manipur under “Debt Swap Scheme” so that lower interest bearing loans from the Open Market can be accessed replace the high interest bearing Government of India loans. An exercise is also being conducted to identify some of the high cost internal debts which can also be replaced by the low cost Market Loans under the Debt Swap Scheme.

21. Planning and development strategy needs expert inputs and professional approach. Towards this objective, a “State Development Report” for Manipur will be finalized in 2004-05. The report is being prepared by the Institute of Human Development under the aegis of the Planning Commission.

22. In line with our commitment to promote information technology, the Government has taken the initiative to earmark 2% of the State Plan Outlay for IT Sector in the Budget Estimates of 2004-05. This will give boost to the IT enabled services in the State.

23. The State Government is committed to bring wide ranging reforms in the Power Sector. In this regard, the Administrative Staff College Hyderabad was assigned a study to review the status of the power sector in Manipur and to suggest measures for improvement. A draft report on the study has been received and the final report is expected soon. A Joint Regulatory Commission for Manipur and Mizoram is also being constituted shortly.

24. I must now present the Revised Estimates for 2003-04 and Budget Estimates for 2004-05.


25. The Revised Estimates for 2003-04 with a gross expenditure of Rs. 4467.67 crores show an increase of Rs. 804.18 crores over the amount of Rs. 3663.49 crores reflected in the Budget Estimates, 2003-04. Out of the Revised Estimates of Rs. 4467.67 crores, an amount of Rs. 2262.21 crores is shown as “charged” expenditure under Consolidated Fund of the State and the remaining amount of Rs. 2205.46 crores is shown as “Voted” expenditure.

26. The Plan Outlay of Rs. 419.44 crores shown in the Budget Estimates was tentative. This is now increased to Rs. 590.30 crores as per approved plan outlay for 2003-04.

27. The Non-Plan provision has been increased by an amount of Rs. 511.54 crores from Rs. 3112.93 crores to Rs.3624.47 crores. The increases are due to payment of dues amounting Rs. 157.10 crores for purchase of power from The Central Public Sector Undertakings by way of securitization of the same, increase in a transaction on Ways & Means and Overdrafts by Rs. 100 crores, increase in Interest Payment by Rs. 74.46 cores and provision for retrenchment and VRS for employees of Public Sector Undertakings, etc.

28. The provision for Centrally Sponsored Schemes, Central Plan Schemes and North Eastern Council Schemes in the Revised Estimates, 2003-04 is Rs. 252.90 crores which is Rs. 121.78 crores more than the provision in BE,03-04. The increase is due to inclusion of a backlog of Rs.87.68 crores of earlier years.

29. Consequent upon the recommendation of the Eleventh Finance Commission, the Tax Revenue in the account of the State Government is shown as the aggregate of the State’s Own Tax Revenues and Share in Central Taxes. The Tax Revenue in the Revised Estimates is Rs. 303.05 crores against Budget Estimates of Rs. 293.38 crores. The increase is Rs. 9.67 crores. The non-tax revenues which the State Government expects to collect for the services rendered by it is shown in the Revised Estimates as Rs. 61.51 crores which is Rs. 48.14 crores lower than the Budget Estimates. The decrease is mainly under Lotteries and Power Sectors.

30. The major chunk of the State’s resources comes form the Grant-in-aid from the Central Government. In BE 2003-04, the figure was Rs. 1111.55 crores which has been enhanced to Rs. 1233.63 crores in RE 2003-04. The increase is Rs. 122.08 crores and is mainly under Grants for Central Plan Schemes.

31. The net accretion under Public Debt is shown to increase from Rs. 146.89 crores. In BE, 03-04 to Rs. 321.55 crores in RE, 03-04.The increase is mainly due to securitisation of the dues for purchase of power from Central Public Sector Undertakings.

32. The net accretion in the Public Account is shown to increase by Rs. 178.72. With this, the year 2003-04 is expected to end with a closing deficit of Rs. 580.27 crores although the year started with a deficit of 367.70 crores.


33. The year 2004-05 is expected to begin with a; deficit of Rs. 580.27 crores and end with a deficit of Rs. 682.36 crores.

34. Mr. Speaker Sir, as you are aware, the Annual Plan Outlay for 2004-05 has not yet been finalized by the Planning Commission and therefore a tentative outlay of Rs. 425.88 crores for State Plan is provided in the Budget Estimates. This is subject to revision in due course after finalization of the Annual Plan Outlay by the Planning Commission. Since allocations under One Time ACA are at the discretion of Planning Commission, no provision of funds is made in the tentative outlay. Similarly, there is reduction in provision for schemes under EFC award as per overall allocations.

35. The State’s Own Tax and Non-Tax Revenues are estimated at as Rs. 136.58 crores representing 9.08 per cent of the total revenue receipts of Rs. 1504.65 crores or 8.10 per cent of the total revenue expenditure of the State. Sir, here, I would like to point out that State is expected to run with a revenue deficit of Rs. 182.18 crores and with a deficit under Capital account to the tune of Rs. 111.93 crores under Capital Account including Public Debt and Loans & Advances, the consolidated fund of the State will be rendered with a deficit of Rs. 294.11 crores.

36. The deficit under Consolidated fund will be partly offset by an amount of Rs. 192.02 crores shown as the net accretions under Public Account. The resultant net transactions during the year will therefore be Rs. 102.09 crores and this together with a deficit of Rs. 582.36 crores.

37. In view of the huge opening deficit of the year and RBI regulations on overdrafts and Ways and Means Advances, a provision of Rs.500 crores is reflected as Ways and Means Advances from Government of India. This aims at making the budget for 2004-05 sustainable. I hope, Government of India will favourably address this issue and sanction the Advance.

38. As the detailed discussion on the Demands for Grants will take some time, I propose to move separately a “Vote on Account” for grant of expenditure covering the first four months of the financial year 2004-05 so as to enable the State Government to carry on its activities from the 1st of April, 2004.

39. With this submission, Mr. Speaker Sir, I present the Revised Estimates for 2003-04 and Budget Estimates for 2004-05 with the hope that the same will receive the approval of this august House.

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Manipur Legislative Assembly 
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Thangmeiband  Imphal-795001,
Manipur (INDIA)