State heading towards financial Disaster, warns Dr. JP

The State is hurtling towards a financial disaster because of unsustainable subsidies on power and irrigation and skewed priorities in education and health care, said Lok Satta President Dr. Jayaprakash Narayan here today.

Addressing a media conference on the State’s budget presented by Finance Minister K. Rosaiah in the Assembly earlier in the day, Dr. JP said the budget portrayed many dangerous trends which if not halted and reversed immediately would make the life of ordinary people miserable.

Dr. JP recalled the State’s growth rate had been higher than the national growth rate over the last five years. Because of the global economic recession, the nation’s growth rate had fallen from 9 percent to 6.8 percent during 2008-09. In contrast, the State’s growth rate had fallen from 10 percent to 5.5 percent. “The steep decline in the growth rate in the State shows that something is going wrong terribly in the State.”

The interim budget talked of Rs.1.1 crore acres being irrigated at a cost of Rs.1,51,000 crore whereas the regular budget put the expenditure at Rs.1,76,000 crore and the area to be irrigated at one crore acres. “Are the increase in expenditure and the decline in area to be irrigated related to the election expenditure the ruling party incurred in the 2009 general elections?”

Dr. JP referred to the subsidy on power escalating not by year to year but from month to month. Last year, the subsidy on power was Rs.2385 crore. The interim budget mentioned the subsidy as Rs.5040 crore and the regular budget at Rs.6040 crore. “I will not be surprised if the subsidy were to shoot up to Rs.15,000 crore- Rs.20,000 crore in the next five years as all the lift irrigation schemes taken up and planned will utilize most of the 11,000 mw of power to be produced in the next five years.”

Till now, the State had paid Rs.1000 crore a year to private power producers although they did not produce even a single unit of power because of gas unavailability. Thanks to gas availability, the Government could save on this expenditure now. But by reviving the moribund Hinduja thermal power project which called for tariff based on investment, the Government was getting mired in the power crisis deeper. “Poor distribution management and future liabilities on account of unwise schemes are deepening the deficit. Gujarat State improved distribution and guaranteed 24-hour power to all villages. As a result, its rural economy is growing rapidly, and migration to urban areas has come down by 30 percent.”

Dr. JP said the budget once again exemplified the Government’s skewed priorities in education and health care. The allocation for school education had come down by Rs.634 crore and for higher education went up by Rs.400 crore. While the allocation for Arogyasri had gone up from Rs.625 crore in the interim budget to Rs.925 crore in the regular budget, it would end up with Rs.1275 crore going by the Finance Minister’s claim that Rs.3.5 crore was being spent on it every day. “I will not be surprised if Arogyasri were to cost Rs.5000 crore a year in five years, even as a lakh of people go without medical care every day now.”

“The budget’s silence on the liquor menace is eloquent. It implied the policy of liquor shop auctioning would continue resulting in shops proliferating and people consuming more and more liquor and ruining their lives.”

Without confining himself to criticizing the budget, Dr. JP offered his suggestions for reversing the dangerous portents. First, the Government’s focus should be on school education and people’s general health and not on higher education and Arogyasri. Secondly, the Government should prevent waste by abandoning unsustainable schemes like the Pranahita-Chevella lift irrigation scheme. Thirdly, the Government should ensure that it got better value for money. That was possible only if it made a per capita grant of Rs.1000 in both rural and urban areas.

Dr. JP added that he had high respect for the Finance Minister who had displayed fiscal rectitude year after year. The increase in the fiscal deficit from 2.95 percent of the GSDP in the interim budget to 3.95 percent in the regular budget too could be understood in the context of the economic slowdown and the need to kick-start the economy.

Yet, after a dispassionate analysis, Dr. JP said, he was constrained to conclude that the budgetary traends would land the State in financial disaster and worsen people’s living conditions.