J&K Budget 2010-11

First published in daily Greater Kashmir, Feb 28, 2010

Omar’s new road
Would Budget 2010-11 go beyond populism?

By: Arjimand Hussain Talib

J&K state stands at a crucial juncture of its history. Its political economy today plays a critical role in shaping its politics. And even security.

The state’s budget for 2010-11 has to make a choice: either to take the beaten track or chart a new destiny based on self reliance and dignity. But would this government opt for the latter? Would it risk short–term public unpopularity for the sake of longer-term stability and well being of the state?

Chief Minister, Omar Abdullah, in his speech in the Assembly on Thursday hinted at days of tough love ahead. In a long-overdue confession, he said he finds it uncomfortable going to India’s Planning Commission with a begging bowl every time. In other words, the upcoming state budget may introduce new taxes in the state, which could even go beyond political populism.

We have been saying this in this column since long that there is no substitute to introducing greater and newer taxes in the state. At an individual level, greater taxes are bound to hurt us, but at a collective level we will be surely better off. There is absolutely no alternative. However, the government must bear in mind that a mere introduction of a tougher and wider tax regime is not going to help; we need to reform our governance systems as well. There are too many loopholes under the current governance system that hinders a uniform and robust tax regime.
A greater and wider tax regime is fundamentally required to create newer jobs. It is a foregone conclusion that the employment scheme announced in December last year is a flop.

The government of India’s announcement of 2000 jobs for the state’s youth in paramilitary forces is a cynical move; rather than stabilising and making our youth productive, it is likely to fuel social animosity, militarization and instability. This move goes to reinforce the misgivings about New Delhi’s thinking process on this state.

Looking from a macro perspective, J&K state today looks akin to those African states which survive by foreign aid. For years, poverty eradication and economic growth strategies in such countries have failed to deliver for many reasons. The most striking reasons being donor dictates, lack of political sovereignty, unjust international trade regimes, poor taxation systems, abysmal governance and acute corruption. Same is the case with us.

Zambian economist, Dambisa Moyo’s path-breaking book ‘Dead Aid’ has some unmistakable lessons – especially why the ‘aid model’ has actually failed, and what havoc aid dependency was wrecking with most of the African countries. Given J&K’s case of aggravating aid dependency and poor tax revenues, our case also needs to be looked from the same prism.

As the government is finalising the state’s budget for 2010-11, a focus on the macro picture is long overdue. That macro picture would help us analyse where the state is headed. Excessive focus on the micro aspects of the budget exercise would, at best, address the populism constituency. We require a political will to look at the policy part of it – from a macro perspective.

J&K state is at a highly critical juncture today. The level of dependency on the Government of India (GoI) aid – in our case ‘grants’ – is reaching a critically high level. In Budget 2009-2010, the GoI grants constituted 59 per cent of the state’s total annual income. Salaries, pension liabilities, interest payments and the power bill alone constitute 53 per cent of our expenditure. Capital expenditure in 2009-10 was a mere 34 per cent.

In 2002-03, the overdraft from the Jammu and Kashmir Bank (the state’s official banker) was Rs 814 crore as against the maximum permissible limit set by the Reserve Bank of India of Rs 950 crore. Today, the government has a whopping overdraft of Rs 2,200 crore to deal with, which Omar Abdullah himself on Thursday referred to a gigantic challenge. Then there are other systemic problems, as acknowledged by the Finance Minister himself, related to delayed payment of salaries to government employees and the delayed clearance of bills in the government treasury.

The government on Thursday made it clear to its employees that it doesn’t have the money to pay for the arrears of the Sixth Pay Commission salary revision. That much is fine, but we must bear in mind that post-union budget 2010-11, inflation is going to aggravate further. That is going to hit the employees’ purchasing power even further.

The state’s debt to GSDP ratio also requires some imaginative thinking. J&K's overall fiscal liabilities are constantly increasing. Fiscal and primary deficits are also burgeoning. The growth rate of fiscal liabilities was 18.33 per cent during 2005-06 over the previous year. The ratio of fiscal liabilities to GSDP also increased from 60.37 per cent in 2000-01 to 73.78 per cent in 2005-06. That means that the fiscal liabilities had grown faster than the State's GSDP. The state’s spiralling debt liabilities have become a sort of a vicious cycle of deficit, debt and debt service payments.

There is a constituency that believes that since J&K’s GSDP and the per capita incomes are relatively better, the state can ward off any public finance crisis. That is only partly right. We must bear in mind that in J&K’s case a relatively better GSDP does not necessarily mean corresponding buoyancy in the state’s tax revenues. Our taxation system has too many loopholes. Imperatives of ‘public order’ and ‘peace through populism’ would continue to remain paramount as long as the larger political conflict remains unaddressed.

The crisis of our power sector is acute and beyond the band aids of any budget exercise. Our power sector losses are now at staggering Rs 2500 crores per annum. The revenue deficit in the sector is again likely to make the state’s budget go haywire. It is again a political issue, which requires a political solution. And it remains to be seen whether Mr. Omar Abdullah can go beyond the usual band aids or not.

The columnist can be reached at Arjimand@greaterkashmir.com. His book ‘Omar Abdullah: The Burdens of Inheritance’ is due for release in the coming months.

Jammu & Kashmir Forest Policy 2010

First published in daily Greater Kashmir (14 Feb, 2010)

Trees, Mr. Minister

Arjimand Hussain Talib

The last 3-4 decades have seen devastation of forests in almost every country, barring a few exceptions, mainly in Europe. Now, there are two kinds of countries: one, that have reversed the trend of deforestation, and, second, that live with the decay. We belong to the second category.

The problems with our environment are grotesquely huge. As our plantation season is about to begin, and J&K’s Forest Department is finalising the state’s new Forest Policy, it is high time we talk about our forests and urban greenery.

The draft of the 2010 Forest Policy looks impressive. But it needs to consider some other issues as well. The crux of any Forest Policy in today’s circumstances must be to increase the forest cover; restore and reclaim it, wherever possible, and make forests a renewable source of people’s ethical livelihoods. The latter one has a particular significance.

We are said to have had a forest cover of 21,000 sq. km. in 1930, which went down to 13,000 sq. km. in 1980. We are said to have lost another 20 per cent during the previous 20 years. So what are our options?

Simply put, there are two dimensions of the debate on our forests - one is moral and another commercial. The moral question that we must all preserve forests for our better future has, sadly, lost its appeal and relevance. If the Forest Policy is based on such a disingenuous moral argument, it would be like living with a farce.

We live in an age of intense survival competition. It is going to get worse with each passing day. J&K’s Forest Policy (2010) must focus on creating conditions for ethical business activities from our forests. And that is not going to happen with the current system of making a government corporation to do all that.

Ideally, government agencies must be relieved from the business of maintaining forests and other plantation. Preservation, new plantation and exploitation must go to private hands. That must happen in the countryside as well as in our cities. That would generate massive productive employment for us. I have seen many countries having done wonders with reforestation – China, Indonesia and Zimbabwe being the most impressive ones. We need to look at their success stories little closely.

The reason Kashmir’s rural lands, outside the designated forest areas, are green is because they are privately owned, and offer viable commercial incentive. People plant and cut trees for making money. They replant on their own, again to make money. And all that doesn’t happen under a government-promoted or sponsored scheme.

The timber sale policy of the State Forest Corporation also needs a rethinking. It is good that the new Forest Policy has talked about institutionalising imported timber sale in the state. That will relieve a good deal of stress.

There is, however, a bigger problem which hasn’t been addressed in the new policy draft. The problem relates to the rural-urban distinction in the state’s subsidised timber sale. It doesn’t make sense to make subsidised timber available across all segments of people in the rural areas. Similarly, the policy of selling timber at high rates in urban areas, particularly in Srinagar, irrespective of purchasing power, needs reconsideration. Considerable amount of subsidised timber is consumed in rural areas, especially in commercial construction. The new Forest Policy must ideally envisage selling timber at flat rates in both urban and rural areas. Subsidised timber should ideally go only to the families duly recognised living below the poverty line. It may be a politically unpopular step, but it is inevitable.

When it comes to forest preservation, or tree survival outside designated forest areas, the fundamental problem is that of maintenance and care. The reason most of the social and urban forestry projects have failed is that there is no incentive to government employees to preserve them. National Rural Employment Guarantee Scheme (NREGS) offers a good opportunity on that. The scheme could be handy in engaging people in plantation and maintenance on community lands.

Urban tree cover in our state, especially in Srinagar city, is dismally low. Popular news portal - MSN – last fortnight published the findings of a survey on India’s eight greenest cities. Normally, one would expect Srinagar to figure somewhere in such a list. But it did not.

Success stories of some of India’s cities are worth emulating. According to MSN, from 1991 to 2007 Chandigarh's 17,000 trees came under axe, but during the same period the city planted over 21 lakh trees. What a feat!

Gujarat’s capital, Gandhinagar, is today seen as one of India’s greenest cities. It boasts of some 32 lakh trees for a 1.5 lakh population. Delhi Government’s Green Delhi Action Plan undertaken in 2004 has focused on planting saplings that specifically combat air pollution. Bhopal has today a designated National Park within the city, covering an area of 445 hectares. The same area was once barren.

Due to growing urbanisation, Bangalore lost 50,000 trees over the last two decades. But its citizens are saying ‘no-more.’ Last year alone, 300 individuals and a few corporate houses have come together to plant around 4,000 trees in various parts of the city.

The question that arises is: why haven’t we been able to create a decent tree cover in Srinagar on public lands and along the roads? Why do we prune the residual trees on our roads so often not to make them really grow? Why do we see trees as a ‘public nuisance’?

The performance of the Landscape Division – entrusted with maintaining landscapes and roadside trees – in Srinagar city needs close scrutiny. Good deal of public money in spent on installing steel casings for saplings, but saplings disappear normally within no time. The disaster with the conifer plantation along the Dr. Ali Jan Road is a ready example.

The 2010 Forest Policy must allow for involving private players in planting and maintaining green lands in Srinagar city and elsewhere. And it must be done by law. To create an incentive, the person/entity responsible for maintenance may be entitled to the sale of firewood of the trees whenever pruning is deemed feasible. And it must have clear guidelines on that.

When it comes to Srinagar, I would be the first person to undertake plantation of a public space and maintain that. There would definitely be many others who would be interested in doing that.

Another serious environmental issue related to our urban landscaping also needs immediate attention. It concerns the macadamisation, concretisation and ever-increasing civil drainage work of our urban spaces. The drainage phenomenon and fast-disappearing natural green spaces are preventing groundwater recharge. ‘Drainage’ of the sort that we develop ends up sending rain and snow water directly to our rivers. It is essential that the Forest Policy addresses this related aspect. Groundwater depletion is not going to be a good omen for our future.

Feedback at Arjimand@greaterkashmir.com