2006 -2007 Budget Speech


February 2006

Mr. Speaker Sir,

I rise to present the Budget of the Government of Manipur for the year 2006­07. This is the 5th consecutive Budget of the Secular Progressive Front since it assumed office in March, 2002. I am happy to be able to present the full budget to the Legislature in stead of a Vote on Account for the next financial year as has been the practice in the past. This has been possible because of timely finalization of the State Annual Plan for the next financial year 2006­07.

Sir, let me first draw attention of the Hon'ble members to the finances of the State. The State Government had started this year with an opening deficit of Rs.257.43 crores. This was a result of the continuing burden of unfulfilled commitments of the past. During the first three years of this Government, there were a lot of financial problems on account of lopsided and unfavorable award of the 11th Finance Commission. State Government had to obtain medium term loans of Rs. 371 crores in 2002-03 and Rs. 609 crores in 2004­-05 from the Government of India to overcome the gap in resources. We also had to securitise the dues of Rs. 157.09 crores on account of pending dues for purchase of power from Central Power Sector Undertakings (CPSUs). The medium term loan of Rs 609 crores taken in 2004-05 is due for repayment in 3 equal installments from next year casting an enormous responsibility of debt management on the State.

We have, therefore, made strong and active efforts during the last one year to improve the flow of resources to the State and consolidate the fiscal situation. This has paid dividends. During the current year upto 31st January, 2006, the State has taken ways & means advance from RBI for only 43 days. The interest earned from the cash surpluses during the rest of the Year has been projected at Rs.8 crores for the financial year 2005-06 and Rs.9 crores for 2006-07.The State's finances have been put on an even keel and the Government is now able to focus on building people's confidence and take initiatives on various fronts.

The improved fiscal position is both a result of the streamlining of financial management and the increased devolution from the Centre on account of non-plan revenue deficit grants. Hon'ble members would recall the details of the recommendations of the 12th Finance Commission that I had provided to the legislature at the time of presenting the demands for grants for the current year. Having appreciated State's financial problems, the Finance Commission had agreed to enhance the non-plan revenue deficit grants for the 5 years 2005-06 to 2009-10. Although, these grants are not fully commensurate with our requirements, these are designed to keep the fiscal situation of the State stable during the award period if we incur the non plan expenditure within reasonable limits as fixed by the Finance Commission. There is, therefore, no room for complacency. I am happy to report to the House that, so far, we have been able to fulfill our commitments on social, economic and administrative development without overstepping the limits envisaged by the Finance Commission.

Sir, I would like to inform this August House, that our efforts in this direction have been helped by the scheme for Debt Consolidation and Relief Facility. The scheme has been introduced by the Government of India following recommendation of the 12th Finance Commission. In pursuance of the scheme and with the support of this House, the State Government has already enacted the Manipur Fiscal Responsibility and Budget management Act, 2005 and its attendant Rules. As Hon'ble members would recall, the objective of the Act is to monitor the financial health of the State periodically and ensure discipline in the use of resources. The Act has laid down certain targets that the State Government must achieve in terms of reducing the revenue deficit, fiscal deficit and containing the establishment expenditure below a prescribed level. We will keep the House briefed on the situation periodically in course of the year.

I am happy to announce that, in recognition of the steps taken by the State Government on the fiscal front, the Government of India has agreed to reschedule the loans obtained by the State Government and allow us to repay them over a period of 20 years at a lower rate of interest. The Government of India loans up to 2003-04 and outstanding as on 31/3/2005 amounting to Rs 750.81 crores have been consolidated into a single loan and the same has been rescheduled for repayment in the next 20 years in equal installments of Rs 37.54 crores. This will now carry a lower interest rate of 7.5 % per annum as against an average of 12.40 % in the past. The benefit from rescheduling of the loans is Rs 319.40 crores in the 5 years of the award period. The rescheduled annual debt repayment liability will be Rs.37.54 crores per year instead of Rs.96.13 crores per year as per the pre­consolidation arrangements. Further, the State Government will get the benefit of write-off of the debt if the annual targets of revenue deficit and fiscal deficit are met as per the Act passed by this House.

I am, therefore, tabling, along-with these demand for grants, a Medium Term Fiscal Policy Statement and a Fiscal Strategy Statement for the information and perusal of this August House. The two statements show the likely fiscal scenario for the State in the medium term and the short term and indicate the proposed annual targets for reduction of the revenue deficit and fiscal deficit as envisaged under the Act and the relevant Rules. Hon'ble members may note that these fiscal arrangements cast an onerous obligation on us to plan and limit our expenditure within the assessed resources and strive our utmost to reduce the deficit. I am hopeful that, with improved resource flows and sustained measures aimed at better financial management, we will be able to fulfill the targets and be eligible for the facility of debt write-off under the scheme of Debt Consolidation and Relief Facility of the Government of India.

One of the most significant results of the improved fiscal situation is that the State Government has not diverted any of the Plan resources this year for meeting the non-plan expenditure as has been the practice in the past. I am happy to report to the House that the improved financial management has enabled us to achieve 70% of the Plan Expenditure by the end of January, 2006. This is a record of sorts and speaks volume about the State's consistent efforts towards a meaningful and purposeful management of the State finances.

With this background, I now present the revised Estimates, 2005-06 and Budget Estimates, 2006-07.


The Revised Estimates of expenditure for 2005-06, with a gross expenditure of Rs.3141.03 crores show an increase of Rs.85.96 crores as compared to Rs. 3226.99 crores reflected in the Budget Estimates for 2005-06. Out of the Revised Estimates, an amount of Rs. 447.89 crores is charged expenditure under the Consolidated Fund of the State and the remaining amount of Rs. 2693.14 crores is shown as "Voted" expenditure.

Under Non-Plan Revenue Account, the expenditure provision has increased from Rs.1528.85 crores in Budget Estimates to Rs.1702.84 crores in the Revised Estimates. This is primarily due to higher provision for salaries on account of dearness allowance of the State Government employees. State Government has allowed the Government employees and the pensioners to receive the doses of dearness allowance that were announced by the Government of India from 1.1.2001 to 1.7.2003 and were withheld in view of the difficult financial position of the State Government. The total effect of such doses amounts to 18% with retrospective effect from various dates. With a view to moderate the impact of the additional outgo in a single year, part of the DA doses have been impounded into General Provident Fund Account of employees.

Significant increase in non-salary expenditure over the Budget Estimates are noticeable in the demands of the Departments of Power, Public Works Department, etc. This is necessitated because of purchase of power, maintenance of roads and bridges, etc. There is a major increase .in revised estimates of expenditure on account of power purchase because of the Memorandum of Understanding signed with the Central Power Sector Undertakings. Under the MoU, the State Government has an obligation to clear the accumulated backlog of Rs121.62 crores of power purchase dues made in the past. Clearance of the dues will help us avoid power regulation from the power supplying units as also facilitate release of funds under the Accelerated Power Development Reforms Programme of the Government of India that is a part of the State Plan.

With improvement in the State's financial position, the Revised estimates contemplate that the State will not need large ways and means advances from the RBI in 2005-06. However, for meeting likely temporary mismatches, State Government has assumed a ways and means advance of Rs.130 crores in 2005-06.

The estimates of State Plan outlay of Rs.915 crores reflected in BE 05-06 have been revised to Rs.992.59 crores following the increased allocations from the Planning Commission for Accelerated Irrigation Benefit Programme, National E-Governance Action Plan and Border Area Development Programme.

The provision for Centrally Sponsored Schemes, Central Plan Schemes and North Eastern Council Schemes in the Revised Estimates, 2005-06 is Rs.150.2S crores more than the provision in BE,OS-06. The Provision in the Revised Estimates includes an amount of Rs.87.14 crores for expenditure on schemes for which funds have been received in the past.

The State Government is expected to have a revenue surplus of Rs. 481.78 crores as compared to Budget estimate of Rs.530.SS crores. The capital outlay in the Revised Estimates shows an increase from Rs.530.04 crores to Rs.740.54 crores.

The fiscal deficit of the State which was Rs. 75.97 crores in BE 05-06 is now estimated at Rs.319.24 crores in the Revised Estimates. The fiscal deficit in the Revised Estimates is 6.80% of the GSDP of the State as against 1.62% that was recorded in the year 2005-06 in the Budget Estimates. This will improve next year when the resources increase.

The State is expected to end the year 2005-06 with a deficit at Rs. 106.19 crores as against the opening deficit of Rs.257.43 crores. It is estimated that this will be achieved despite the unfilled opening deficit of the current year because of higher resource flows on account of the 12th Finance Commission recommendations and better resource management.


I now turn to the Budget Estimates for the Year 2006-07. I will first touch upon the receipt side.

Contribution of the State Government's owns tax and non tax revenue towards the State's overall requirement of resources is small. Currently, our tax and non-tax collections finance only 14.45% of the net non-plan revenue expenditure. This is primarily because the tax to GSDP ratio in the State is 4.42% which needs to be strengthened. I would therefore, urge the members to extend their fullest co-operation to impress the general public for paying their taxes and dues to the Government in time.

The State Government has taken the decisive step of introducing the value Added Tax in order to improve the tax collection. VAT has been introduced in the State from 1st July, 2005 and it is expected that the tax revenue of the State will rise. A total of 989 dealers have been registered in the State so far under the New Act. The new arrangements provide for the facility of filing returns electronically and making self assessments. With improved collections, we expect a growth of at least 9 to 11 % in the tax resources.

I do not propose to modify the existing rate of the value added tax as the rates were approved and notified after calling objections only recently in the month of November 2005. There is also no proposal to modify the rates of any other taxes and fees for services at this stage. The State Government, however, does intend to approach the issue of collection of power consumption charges seriously.

Power consumption charges are the single largest component of non-tax receipts. With a view to improve the position of such collections, the State Government is contemplating the legislation of the Indian Electricity (Manipur Amendment) Bill, 2006 in the current session of the Assembly to provide for penal action on power theft and setting up of police stations empowered to deal with power related offences, etc. There is, therefore, likelihood of improvement in collection of power tariff in 2006-07

While we aim at improving the tax and non-tax resources, it is equally important to effectively monitor the flow of resources and expenditure through an efficient system. With this view, the State Government has initiated the programme of computerization of 6 treasuries in the first phase with the help of the National Informatics Centre. This will enable the State Government to automate the treasuries and render the budget formulation and expenditure control more transparent and efficient. Measures to revamp the system of financial audit by reorganization of Local Fund Audit and accounting wings of other departments are also contemplated.

The total estimates of tax and no-tax receipts assumed in the Budget Estimates are Rs.104.31 crores and Rs.127.25 crores respectively. These are higher by 10.12 % and 10.13 % respectively over the Revised Estimates of these receipts. The receipts from the State's share in Central taxes & Duties are expected to rise by 8% and have been estimated at Rs.371.53 crores in 2006-07. The non-plan grants from the centre will be Rs.896 crores implying an increase of Rs.6.94% over the year 2005-06.

Let me now come to the expenditure estimates.

The Budget estimates for 2006-07 show a total gross expenditure of Rs.3362.93 crores from out of the Consolidated Fund of the State. Out of the this, Rs.2071.23 crores is under Non-Plan, Rs.1160 crores under State Plan and Rs.131.70 crores under Centrally Sponsored Schemes, Central Plan Schemes and NEC schemes. The provision for expenditure in respect of the centrally sponsored schemes, central plan schemes and NEC schemes are subject to change according to actual releases in due course of the year.

The Estimates show an increase of Rs.221.60 crores in expenditure as compared with Rs. 3141.03 crores reflected in the Revised Estimates for 2005-06. Out of the Budget Estimates, an amount of Rs. 637.35 crores is charged expenditure under the Consolidated Fund of the State and the remaining amount of Rs.2725.58 crores is shown as "Voted" expenditure.

Under Non-Plan Revenue Account, the expenditure provision has decreased to Rs. 1811.47 crores in the Budget Estimates as compared with the Revised Estimates of Rs.1883.31 crores. The decrease is primarily due to lower provision for salaries. However, the growth in non-plan expenditure has been projected in line with the recommendations of the recommendations of the 12th Finance Commission. The Demand for Grants where there is a significant increase in non-salary expenditure over the Revised Estimates pertain to the Departments of Election, Power, Public Works, etc. This is necessitated because of election expenses due in the coming year, purchase of power, maintenance of roads and bridges.

On the capital outlay, the expenditure shows an increase of Rs. 98.75 crores over Rs. 740.54 crores reflected in the Revised Estimates for 2005-06. This is mainly because of increase in Public Works, Irrigation, Education, Sports & Arty & Culture, Medical, Industries, Housing, Urban Development, etc.

The total outstanding debt liability excluding public account liability of the State at the end of 2006-07 is Rs. 2300.21 crores of which Rs.278.14 crores is repayable in 2006-07. Part of this amounting to Rs. 37.54 crores will be written off if the targets of reduction of fiscal deficit and revenue deficit are met as per the Fiscal responsibility & Budget Management Act, 2005. The debt management in 2006-07 is difficult as the Medium term Loan of Rs 609 crores taken in 2004-05 is due for repayment from 2006-07 in 3 annual installments. The loan is also not a part of consolidated loans. However, on our request, the Central Government has agreed to provide loans from the National Small Savings Fund amounting to Rs 203 crores each year from 2006-07 to 2008-09 to meet the emerging debt liability on this account.

Sir, I will now describe the Plan Outlay shown in the budget. My estimates of expenditure on State Plan Outlay are firm and final. I am happy to inform the House that, with the initiative of the State Government and, with the generous support from the UPA Government at the centre, the Outlay for the State Plan has been fixed at Rs. 1160 crores in 2006-07. This is 16.87% above the level of 2005-06 for which the Revised outlay is Rs. 992.60 crores. With the early finalization of the State Plan Outlay, the State will benefit in many ways. State Government will be able to plan and execute the development schemes in the State in time and this will improve the quality of the Plan Expenditure. The higher Plan Outlay is both a tremendous opportunity as well as responsibility for us. The efficiency of the delivery system of the Government will be critical in translating this level of State Plan expenditure into reality.

The State Plan will be financed to the extent of 95.36% by the Central Assistance and Special Plan Assistance. Normal Central Assistance for this purpose is fixed at Rs 514.79 crores which is 8% higher than last year level. Special Plan Assistance is pegged at Rs 419.75 crores. The Assistance for External Aided projects is Rs. 67.11 crores The rest will be financed by way of Additional Central Assistance, open market borrowings, negotiated loans, small saving loans and balances from the Public Account of the State.

As the House is aware, the releases of Central Assistance for Plan schemes are now limited to the grant component, that is, 90% of the assistance. The States are expected to raise the balance 10% loan component of the Central Assistance themselves. However, the central Government has agreed to raise the loans for the fiscally weak states such as the Special category States and provide the loans through open market borrowings. During the year 2005-06, the State was provided with a borrowing limit of Rs 240 crores. Permission to raise the loans up-to this limit was obtained to finance the Plan Outlay. During the year 2006-07, we expect that our borrowing limit will be similarly enhanced and loans will be raised by the Government of India to finance our Annual Plan.

Out of the approved outlay of Rs.1160 crores for Annual Plan 2006-07, Rs. 419.75 crores are devoted to the important and priority projects in the state under Special Plan Assistance (SPA). Balance Rs. 634.56 crores of the State Plan Outlay is proposed to be spent on other schemes including those covered under Additional Central Assistance for which Rs. 214.81 crores are earmarked. Out of Rs. 419.75 crores, Rs. 163.74 crores are meant for funding the ongoing projects under. Reconstruction Plan, Rs. 101 crores are to be spent on Special Reconstruction Plan and Rs. 155 crores will be spent on funding other SPA projects.

Under the SPA, special provisions have been made for development of Hill areas. These include specific funds for education, medical and roads infrastructure. Rs.11.00 lakh has been provided for construction of Jr. High School/Hr. Sec. Schools, Rs. 400 lakhs for construction of quarters for Mathematics and Science Teachers in remote hill areas, Rs. 300 lakhs for construction of a Hr. Sec School at Senapati which is the only district in the State without a Government Hr. Sec. School and Rs. 300 lakhs for strengthening Ukhrul Hr. Sec. school with additional class rooms, girls hostel and other infrastructure, and Rs. 300 lakhs for construction of schools in the district council areas. Fund has also been provided for construction of m building at Ukhrul. In the area of health under SPA, Rs. 1801 lakhs has been provided for construction of quarters for doctors and medical staff for CHC/PHC/PHSC. The thrust given to education and medical sectors is expected to improve the services of there sectors in the hill areas

Allocation of the outlay among various sectors has been made in accordance with the needs of development and priorities of the Government. Outlay for agriculture, horticulture and allied activities reflects the concern of the Government for the rural areas. It has been raised next year to Rs 34.79 crores and constitutes 3% of the total plan outlay. For the development of rural areas, the Government has allocated a sum of Rs 48.56 crores representing 4.18% of the total outlay.

Among the economic sectors, mention may be made of Power sector which has been allocated a sum of Rs 75.84 crores representing 6.5% of the outlay. For the Irrigation & Flood Control schemes, adequate allocation under the Accelerated irrigation Benefit Scheme has been made for completing the ongoing projects of Khuga, Thoubal and Dolaithabi projects. A sum of Rs 205.60 being 17.72% of the outlay has been allocated for this purpose. The industry & minerals sector has been provided Rs 82.75 crores being 7.13% of the outlay. For the Roads & bridges including other transport infrastructure, Rs 68.63 crores have been provided. For special Area programmes devoted to the development of border and tribal areas, a sum of Rs 11.09 crores has been earmarked. In addition a sum of Rs. 15.00 crores has been provided for the district of Tamenglong under Backward Area District Fund.

Among the social sectors, Education & Arts & Culture have been allocated a sum of Rs 106.38 crores, representing 9.17% of the outlay while the Health and water supply sectors have been provided a sum of Rs 28.37 crores and Rs 85.25 crores respectively. For urban development including the capital project, Rs 135.70 crores have been earmarked. For public Works, the sum earmarked is Rs 112.12 crores. Specific provisions have been made for the welfare of Scheduled caste and Scheduled Tribes amounting to Rs 14.50 crores. Similar provision has been made for the welfare of OBCs and minorities amounting to Rs 7.46 crores.

In the sectoral allocation, adequate provision has been made to provide matching share for the Centrally Sponsored Schemes. Rs. 110.20 crores are provided for current state matching share, Rs.5.51 crores for backlog state matching share and Rs.54.10 crores for State matching share of the Externally Aided projects. The EAP component in the State Plan is Rs.67.11 crores. For the timely completion of ongoing projects under NLCPR and NEC funded projects, state plan support have also been provided. The amount is Rs. 11.37 crores for NLCPR funded projects and Rs.0.94 crores for NEC funded projects. Among the important SPA projects, mention may be made of the ongoing work on Capital Project, Special Employment Generation Programme, Development of District/ADC HQ, Upgradation of roads from State HQ to district HQs, and Upgradation of roads from District HQ to sub-­divisional HQs.

The State Government will continue to be have a revenue surplus in 2006-07 thereby fulfilling the condition for availing the facility of debt write off under the scheme of Debt consolidation and Relief Facility. However, the estimates do not, at this stage, assume the benefit from the debt write off. The benefit will be accounted for at the time of Revised Estimates when firm indications are received from the Government of India. The position will further improve in such eventuality.

The fiscal deficit in BE 06-07 is estimated at Rs.107.81 crores. This is 2.06% of the GSDP in 2006-07. Thus, the target of reduction of fiscal deficit to 3% of GSDP in 2008-09 will be achieved as highlighted in the Medium Term Fiscal Policy Statement tabled in the House.

The projected deficit for the Financial Year 2006-07 is Rs 239.46 crores. Against the backdrop of the Medium term Loan of Rs 609 crores of 2004-05 and the unfilled opening deficit of year 2005-06 the task of reducing the deficit to a lower level was extremely difficult. However, the deficit has been contained at Rs. 239.46 crores in 2006-07, a level that is lower than the level of opening deficit of the year 2005-06. Higher non-Plan grants and better resource management is expected to help us achieve this level.

Sir, I have come to the end of my presentation. I would like to seek cooperation of the Hon'ble members in making a departure from the normal practice. The State Government does not propose to move a Vote On Account for the Year 2006-07. The State Government proposes to have a discussion on each and every demand for grant for 2006-07 and move for seeking authorization of expenditure for the full financial year 2006-07 to enable the State Government to carry on its activities from the 1st April, 2006.

With this submission, Mr. Speaker Sir, I present the Revised Estimates for 2005-06 and Budget Estimates for 2006-07 with the hope that the same will receive approval of this August House.

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