MORE than 460 years after his death from a gunpowder explosion, Sher Shah Suri, the Lion King, is confronted with a serious contender in the person of Punjab’s Chief Minister, Chaudhry Pervaiz Elahi, for the title of the ‘Builder of Roads.’
Not that the incumbent ruler of the province is the only one who has focused more on building roads than his predecessors, he stands out because of enormous allocation for this sector in almost each of the four budgets his government is proud to have presented in the last more than three-and-a-half years.
To many, the Jat from Gujrat is striving hard to match road for road, flyover for flyover, motorway for motorway, etc with Nawaz Sharif and Shahbaz Sharif, who ruled the province between 1985-90 and 1997-99, respectively.
As much as 37 per cent of the record development outlay of Rs100 billion for the next fiscal year has been set aside for the road sector. It also includes a whopping Rs23 billion set aside for the under-construction Lahore Ring Road and the proposed Lahore-Sialkot Motorway. The remainder will be spent on other road projects and schemes in the entire province.
For many the huge spending on roads, especially on the proposed motorway and the truncated Lahore Ring Road, signifies a case of misplaced priorities of the government in times when ordinary people are dying from drinking polluted water. The government defends its decision to make more roads and motorways, saying the ‘improved and expanded road infrastructure is important for economic progress’.
The province’s massive development programme is probably the main feature of the budget for the financial year, and reflects the priorities of the incumbent government.
With Rs12 billion, up by Rs2 billion from the current year’s Rs10 billion, going to the districts/TMAs/UCs for their own development programme and another Rs23 billion set aside for the special road projects mentioned earlier, the core provincial annual development programme is reduced to Rs65 billion. It compares with the development estimates of Rs53 billion for the outgoing year.
The allocation for development forms over 36 per cent of the total estimated revenue budget of Rs274 billion. In his budget speech, the finance minister did claim that when the PML formed its government in the province toward the end of 2002, the allocation for development was just 18 per cent the total revenues of the province. Since then, he said, “our government has doubled the ratio of the development spending as percentage of total revenues”.
The development of the province is being financed by the government from its own resources that would be available with it in the form of net budget surplus of Rs91.124 billion and foreign assistance Rs8.876 billion (consisting of loans of Rs8.831 billion and grants of Rs45 million).
As much as 70 per cent of the funds set aside for the core programme will be spent on the ongoing schemes and the remainder on the new ones. A sum of Rs28.5 billion has been allocated for social sector – education, health, water supply, sanitation, etc. The funds going from the core programme to the social sector next fiscal are estimated to be 35.9 per cent heftier than those given to this sector during the current year, and form 55 per cent of the total core development spending.
Another sum of Rs25.70 billion is allocated for infrastructure development – roads, irrigation and public buildings. This compares with Rs22.800 billion set aside for infrastructure development in the outgoing year’s programme.
Agriculture will get Rs3.375 billion next year, up by Rs701 million from the current year’s allocation for the development of this sector. A sum of Rs3.176 billion has been given to the services and other sectors including environment, culture, etc.
Compared to the massive allocations for the road sector, the rural and urban water supply sector will receive a paltry sum of Rs5.20 billion. Interestingly, this amount too, according to the annual budget statement for 2006-07, is being advanced to the municipalities/autonomous bodies (Wasa) as loan.
Another amount of Rs14.346 billion, budgeted in the core development programme, under the head of urban development is also shown as loan to municipalities and autonomous bodies. The budget makers may have an explanation for including an amount of Rs19.546 billion being advanced to the municipalities and autonomous bodies as loan as a part of the development budget, the combined opposition in the assembly alleges that it has been done in order to ‘falsely swell the size of development budget to draw political mileage’.
The opposition believes that the government should have either parked these loans somewhere else in the budget instead of showing them to be part of development spending or should have transferred them to the ‘poor districts/TMAs as a grant for development’.
Opposition leader in the assembly Qasim Zia says the size of core programme will reduce to Rs45.5 billion if these loans are taken out of it’. The finance department officials do not agree with his point of view, describing it to be a ‘point-scoring exercise’.
The officials say they will spend something like Rs72 billion or more under the core development programme by the end of this fiscal year. The total development spending as shown in the revised budget estimates will be over Rs89 billion. ‘So we expect that the size of our core development programme will be far heftier than what we have projected by the end of next year,’ says a senior official of the planning and development department.
The official said the government will be spending around Rs12-14 billion on water supply and sanitation in the province. “Besides Rs5.2 billion budgeted for water supplies and sanitation, Wasa in different cities is being supported from the funds allocated for urban development. This all is in addition to a specific water supply and sanitation programme for the southern Punjab,” the official says.
Another important feature of the budget for the next year is that no change has been made in the existing taxes as was being expected nor any new tax imposed. Actually, the finance bill revising down court fees and reducing stamp duties on financial instruments was attached to the budget at the eleventh hour in order to fulfil certain legal requirements. The changes proposed in the bill will have no or little impact on the provincial tax revenue and are of cosmetic nature.
Despite the fact that the government has not changed the existing rates of the provincial taxes nor imposed any new one, the target for the provincial own tax revenue for the next year has been enhanced to Rs30.343 billion or by 17.7 per cent from the outgoing year’s estimate of Rs25.771 billion.
At the post-budget press conference, provincial chief secretary Salman Siddique said the government had not touched any existing tax because it plans to set up a major reform of tax regime and its collection during the next year.
He says the government (the finance department) has already completed detailed studies of all the provincial taxes, including agriculture income tax, for revamping them during the next fiscal year.
He says the government wants to have fewer, more efficient and high revenue yielding taxes rather than having numerous, inefficient and low revenue taxes.
He particularly mentioned the long standing demand of the provinces that the federal government allow them to impose provincial sales tax on services. The number of taxes can be brought down to four or five high yielding levies if the provinces are allowed to tax the services sector, he says.
The government is also considering setting up a unified revenue authority (under the provincial finance department) on the pattern of the Central Board of Revenue (CBR) to improve collection efficiencies and plug leakages.
The proposal for the authority was mooted by donors a couple of years, but was never considered seriously owing to resistance from the excise and taxation and revenue departments, which just don’t want to transfer their control over collection for obvious reasons to any other body.
While the establishment of the proposed unified tax collection authority is in the hands of the provincial government, its wish to improve tax regime and get rid of low revenue taxes like provincial sales tax on laundries, doctors, etc and replace them with fewer, less painful, and efficient taxes hugely depends on the federal government.
The issue of provincial sales tax is largely linked to the question of financial autonomy of the provinces. Should the federal government create a legal space for the provinces to levy the provincial sales tax, it will greatly improve their own tax resources and reduce their dependence upon the federal transfers.
Will the federal government, which has so far been resisting the provinces efforts for introducing sales tax on services, relinquish its control over the golden egg laying duck during the next financial year? Few hope so.
