Mobilising our own resources

Prof E Bijoykumar Singh *

Commandos raid liquor vendors in Imphal on April 03 2013 :: Pix - Hueiyen Lanpao

Sometimes what matters is not the number. What matters is the directional message. That was how I looked at NDA's latest budget. It was as good as any budget presented by a 45-day old government. The direction has been clearly shown and the 2015-16 Budget will be the real test. Coming down to reality, can we properly utilise the Rs.100 crore for the Sports University? Over the Budgets, both central and state, crores have been spent. The institutional mechanisms for ensuring proper utilisation of the funds have failed us and now we are in a stage where we have run out of excuses for our non-performance.

At this juncture the announcement that the government is seriously thinking of mobilising resources through tax came like a whiff of fresh air. The slide from economic independence to absolute dependence in the last few decades has been inexorable. Now with only a sub ten percent share of our own resources in our expenditure over the years and the change of guard at the centre, the time of free meals is practically over. The planning commission is going to be re-commissioned with a role yet to be defined. Thus the government is compelled to seriously think about resource mobilisation.

A state government can raise resources through tax and restructuring the prices of services it provides. It can borrow from the open market. It has to borrow from the central government because a portion of plan assistance comes as loan. For special category states it is 10%. With the UPA out of power the threat to the status is no longer there. The government can also disinvest from public sector units.

The Finance commission awards also constitute a major source of funds for any state government for financing its no plan expenditure. Simply stated plan expenditure is about new investment and non plan expenditure, about maintenance. Besides, most of the plan programmes become non plan in the next plan and after their completion.

Everything needs maintenance and it has been a common complaint that our infrastructure has been deteriorating due to shortage of fund for maintenance. Regarding the FC award one may also argue that it is not a dole, it is our rightful share. The XIV Finance Commission is yet to submit its report and I think the quality of our submission to the commission has improved dramatically. Though the major part of the award will be formula based, a portion depends on how 'good' our proposed special projects are. 'Good' projects will be generously funded.

Having said that, saying that resources will be mobilised is very different from actually mobilising the resources. The reality is that every market is interconnected and people buy and sell in a market. When a tax is imposed the price rises and price rise is a signal of many things. The demand for a commodity falls when its price rises. Whether the additional tax will increase our revenue depends on the nature of the commodity in terms of its elasticity.

A tax on a necessity will raise the revenue because the consumer has to buy it irrespective of its price. A tax on a luxury or nonessential item may actually reduce the revenue as people may decide to do without it. There are exceptions like the band wagon effect or keeping up with the Jones where a commodity is bought because other people buy it and flaunt as status symbol. Some items have the potential for high revenue generation like tax on liquor but socially unacceptable. Almost every expert committee for resource mobilisation in Manipur has recommended the lifting of prohibition.

Though there are risks in lifting prohibition, one may re-examine the pros and cons of this. Has prohibition had the desired effect of reducing the social effect of drinking? Banning the Hindi films created a vacuum which was filled up by our digital films and it grew. What does prohibition have to show? Healthier or less corrupt society? If we say so, we are naive. Today if it is lifted the revenue may be close to Rs 100 crore as large as what has been allotted for the sports university. In one of our reports we had recommended earmarking the revenue from liquor for socially desirable sectors like health and education.

Otherwise also we can do a lot with Rs 100 crore. By not taking the risk of lifting prohibition we have missed many opportunities for doing something big for the society. The country liquor business in Sekmai and Andro are flourishing. In Andro it is like contract farming. The villagers in Andro produce country liquor with rice supplied by traders who lift the supply from the village. There is no marketing problem. I have a feeling that the growth of Santhei Park, all its positive aspects notwithstanding, is somewhat associated with this cottage industry.

There are some items which can be brought under the tax net. The ubiquitous housie or tambola, Eigyagi Chakshangs and premiere shows of digital shows should be taxed. The proceeds of first shows of digital films at BOAT should be taxed also. The last few years have seen the growth of this game in every locality. Though it has helped many civil society groups in mobilising resources, it has been misused also by 'entrepreneurs' after easy money. My local club is entirely financed by proceeds from a housie we organise every year on Ningol Chakouba.

People generously buy our tickets because we pay for the electrification of our locality and keeping the drains unclogged. Unfortunately the house full prize is becoming larger and larger, so is the price of a ticket. We sometimes feel guilty if we do not buy a ticket. Growing ganja is still the livelihood in some remote villages and only a fraction of ganja smuggled out of the state is caught.

At least one research scholar is working on the economics of ganja cultivation in Ukhrul. We are registering only symbolic protest. Why can't we legalise it and put it to better use? Seeing packets of ganja and bottles and packets of liquor, both foreign and local being destroyed in public is really painful and is a senseless wastage. In some of the Indian states, ganja is grown legally with some restrictions. That is a livelihood for local people and also a source of revenue for the state.

Another issue, as important as additional taxation, is plugging the leakages. At present a large share of revenue never reach the exchequer. Even proceeds of selling railway tickets are routinely swindled. Everyday we see the police dutifully frisking two wheelers and making them pay fines as most of them never carry all the documents. We do not know how much of the revenue revenue so collected is passed on to the state exchequer.

Government officials, from top to the bottom, feel that the state is their zamindari and they have the right to exact rent in any manner. If there is a crackdown on government employees with assets disproportionate to their known source of income, our offices will be deserted. That is why we never feel confident if we have not already bribed the authority.

I don't think cost benefit analysis provides an eternal answer. When we have the capacity to understand more and we have access to more data, the conclusions also may change. We should take risk. After all, globalisation and liberalisation are also risky. What matters is how we capitalise on the opportunities provided.