In addition to the relief package, the government has also proposed record annual development programme (ADP) of Rs150 billion, up by 50 per cent from the outgoing year’s Rs100 billion, and rationalisation of stamp duty on financial instruments and downward revision of the duty rates on electricity for all users – domestic, industrial and commercial.
While the rationalisation of stamp duty will benefit the financial sector, the cut in the duty on electricity is expected to save the users from paying more as a result of application of new power tariffs, which merges energy charges and all other surcharges into variable charges for charging electricity duty.
The major part of its relief package, estimated to be Rs10-12 billion, will be consumed by the 15-20 per cent raise in the pay and pension of the government employees. Talk to them, particularly those in lower grades, and most would reject the increase out of hand as peanuts in view of rising cost of living on account of increased prices of food, utilities and fuel.
Another sum of Rs3 billion has been set aside for subsidising electricity bills of farm tube-wells (the federal government will chip in Rs4.5 billion), which the farmers say is not going to make much difference to majority of them because only 10 per cent tube-wells are run by electricity in the province. The remainder 90 per cent tube-wells are fueled by diesel. Besides, they say, the government has already increased the power tariff for the farm tube-wells by 10 per cent a couple of months back, and the present subsidy announced by the federal and provincial government was like “returning the money stolen from them in the shape of charity’.
The relief package has allocated a sum of Rs4 billion for providing cash subsidy for the 642,000 poorest of the poor families, which comes about Rs16.66 per day, and Rs3.33 per head per day for a family of five. What impact will it make to their lives is anybody’s guess.
In addition, the province will contribute Rs3 billion for providing subsidised food items through utility stores. It too is likely to make little impact on the lives of the citizens of the province. There are reports that ghee and sugar being sold at the utility stores at subsidised rates is already finding its way to the retail shops and bulk, commercial consumers of these items.
Yet another Rs3 billion have been set aside in the annual development programme for the development of 385 katchi abadis across the province. Though the government says it will give the ownership rights to the people of the katchi abadis by September, before the dissolution of the assemblies ahead of next election, there is little likelihood of completion of development of these settlements by the end of the fiscal year. Hence, the opposition has described the announcement as an election gimmick.
The remaining money shall be spent for distribution of land among the rural poor in three districts of South Punjab and launch of self-employment loan scheme for them.
The budget, which shows expenditure of Rs243.480 billion, estimates surplus of Rs142.056 billion, including savings of Rs112.680 billion in the revenue account, Rs14.59 billion in the current capital account, and Rs14.770 billion in the public account. The surplus, along with foreign borrowing of Rs7.943 billion, will be used to fund the development in the province next year.
This is the fifth and the last budget presented by the incumbent government and was presented by the finance minister, Sardar Hasnain Bahadur Dareshak, amid speculations of early dissolution of the assemblies ahead of the approaching presidential and general elections. A better part of the budget speech, which the minister read out in the midst of loud protest by the opposition against the arrests of its workers as well as leaders across the province, was devoted to what he flaunted as the sitting government’s accomplishments in the production and social sectors during the last four-and-a-half years.
The government claims to have actually spent Rs161.200 billion on provincial development in 2003-06 and is expecting the actual development spending to cross the estimated Rs100 billion by the end of the current year. But, the opposition alleges, the impact of this huge spending is not visible anywhere.
Mr Dareshak dismisses the criticism out of hand, saying it betrays the opposition’s lack of understanding of the government’s economic policies. He says the provincial GDP has grown at an average rate of 8.15 per cent during 2003-07. This compares with the average GDP growth of 4.2 per cent during 1991-2002.
“The per capita income has also shot up to Rs59,219 in 2007 from Rs30,821 in 2002,” Mr Dareshak says. “The government’s development and economic policies, he adds, “have been instrumental in generating 5.8 million jobs, and 13.1 per cent reduction in poverty to 21 per cent.. Some nine million people have been pulled out of poverty during the last four years.” Few economists believe these claims.
“I don’t know on what basis the government has been making these claims. These don’t appear realistic. The government, I think, must hire some independent consultants to check its figures,” says a financial expert who has worked with the provincial government in one capacity or the other in the recent past. He also insists that most employment opportunities created in the province in the recent past had been low-paid, temporary jobs in the services sector including construction and telecommunication. “The credit for such jobs must be given to the federal government and not the provincial government,” he adds.
He also disputes the provincial government’s claims about the poverty reduction. “If you ever visit the rural areas of the province, you’ll find more people without cultivable land, livestock, or any other source of income than ever before. Similarly, we see more poor in the urban areas looking for jobs, even low-paid ones. True, we are talking about ‘visual evidence’ as the officials may want to dub it, this cannot, and should not be dismissed as unfounded criticism. Poverty reduction and job creation also have a visual side,” he says.
The minister claims the share of development expenditure as percentage of total budgetary outlay will grow to 42 per cent next year from 36 per cent in the outgoing year, and promises to raise it to 50 per cent, if his “party is re-elected in the forthcoming elections”.
Other achievements of the sitting government listed by the minister in his speech include a sharp increase of 15 per cent in the literacy rate to 62 per cent, rise of 25 per cent in the primary enrollment to 70 per cent, improvement in the health cover, provision of clean drinking water to 19 per cent rural population, creation of fiscal space of over Rs24 billion through premature retirement of expensive federal debt of Rs17.454 billion and creation of the Punjab Pension Fund.
The revenue receipts for the next year are pitched to be up by almost 30 per cent and revenue expenditure by about 27 per cent over the estimates for the outgoing year. The rise in the revenue receipts is primarily on account of 24.83 per cent growth in federal transfers to Rs233.075 billion. The provincial own tax revenue target has been raised by hefty 22.9 per cent to Rs37.315 billion, without imposing new tax or reshuffling the existing ones. The provincial own non-tax revenue is pitched at Rs59.845 billion in spite of the fact that the government collected only Rs35.183 billion during the outgoing year against the budgetary estimates of Rs42.335 billion.
The scrutiny of the provincial revenue receipts shows that the provincial finances continue to largely remain dependent on federal transfers, which form 65 per cent of the total outlay. This compares with the provincial own tax receipts forming only 10 per cent of the total budgetary outlay.
At the post budget press conference, the finance secretary told the reporters that Punjab had proposed to the federal government to let the provinces levy road users charges to replace the motor vehicle tax. This, he said, will increase provincial tax revenue. In addition to this, he added, the province is also demanding that it may, along with the other provinces, expand the net of sales tax on services like banking, telecommunication, etc on which the federal government charges excise duty being shared by all the provinces and the federation under the National Finance Commission (NFC) Award. Such a step will simplify its tax regime and raise provincial own revenues, helping it reduce its dependence on federal transfers.
But the federal government does not seem to be in a mood to oblige the provinces on this issue.