Rio presents deficit budget with new tax proposals

Rio presents deficit budget with new tax proposals
Neiphiu Rio presenting the budget
Correspondent Kohima, Feb 13 (NPN) | Publish Date: 2/13/2020 1:06:08 PM IST


Nagaland chief minister Neiphiu Rio, who also holds the crucial finance portfolio, presented a Rs 123.96 crore deficit budget for the year 2020-21with new tax proposals for registration of heavy vehicle, transport machinery and hikes in duties on petrol, diesel and enhanced rate for road maintenance from petroleum products.

Tabling the budget on the fourth day of the fifth session of the 13th Nagaland Legislative Assembly Thursday, Rio said the current financial year 2019-20 closed with an estimated deficit of Rs.123.96 crore. However, he said, due to the negative opening balance of Rs. 2234.85 crore, the 2020-21 financial year is expected to close with a negative balance of Rs.2358.81 crore. 

It may be pointed out that in his 2019-20 budget speech, Rio had pegged the estimated closing deficit at Rs.1611.98 crore.

The budget documentestimated the total gross receipt of Rs20,826.02 crore and the total gross expenditure of Rs21,049.87 crore for the financial year 2020-2021. The chief minister highlighted the impact of the shortfall in revenue of central government 2020-21 which reflected fall in tax collection estimates for 2019-20. 

Owing to this, he said the state share of central tax earlier projected at Rs.4,206crore was reduced to Rs.3267, showing a shortfall of Rs.939 crore. This he said, has added to the state’s deficit for 2019-20 rising to Rs.2234.85 crore.

Rio’s new tax proposal included a one-time tax of 3% for registration (of the original cost) heavy machinery, non-transport vehicles and equipments, for the first 10 years if it was purchased in the state. Thereafter, for the next five years, those machinery and equipment would be required to pay a tax at the rate of 1 per cent of their original cost. However, Rio said, machinery used for personal use shall be excluded from this tax.

Duty on petrol will be enhanced from the current 20.38% to 25% while duty for diesel will be enhanced from its current 10% to 14.5%. He also proposed to enhance road maintenance cess on petroleum products from Rs 1.50 per litre to Rs 2 per litre, adding that these two measures were expected to generate additional revenue of Rs 33 crore annually. Rio said that the new enhanced rates would become effective from the midnight of February 15, 2020.

Later, addressing a press conference after presenting the budget, Rio explained that there was a shortfall of Rs 2,97,000 crore in the Union Budget, due to which Nagaland also received less by Rs 939 crore. Making a comparative statement, he said North Eastern states including Nagaland received lesser amount because of which the deficit Rs. 1611.98 core was added up with Rs 939 crore taking the actual deficit to Rs. 2550.98 crore. Rio however said that though the state’s financial position was not good, it could still manage some savings/revenue and help reduce the deficit to some extent.

Rio informed the media that the 15th Finance Commission (FC) would begin from 2021-2022 and continue up to 2025-26, adding though the 14th FC was favourable, it did not give the State specific projects like high court construction, trans highway, foothill road, Chiethu airport, shifting of 4th NAP, etc, which were still on demand.

A: Receipts                                                              (Rs. crore)

State’s Own Tax and Non-Tax Revenue                      1283.36

State’s Share in Central Taxes                              4493.37

Central Assistance (Grants & Loans)                      8871.15

Internal Debt (including WMA from RBI)                      6176.64

Recovery of Loans and Advances by State Govt      1.50

Total                                                                      20826.02

B: Expenditures

Non Development Expenditure 

(excluding Servicing of Debt)                                      8715.30

Servicing of Debt (including repayment of WMA)     6241.42

Development Expenditure (including CSS etc)     6093.15

Total                                                                     21049.87

C. BALANCE (A-B)                                                     (-) 223.85

D. PUBLIC ACCOUNT (NET)                                     99.89

E. CURRENT TRANSACTIONS (C+D)                     (-) 123.96

He said the State could not give up hope, but when country’s overall economy was not good, the State could not be too hopeful as well. He regretted that projects taken up during the Planning Commission period worth more than Rs 500 crore liabilities were still not complete, and feared that this would only add to the State’s liabilities and deficit would rise.

Rio said the State received funds from three sources – Central share of taxes, State resources and revenue gap – but the receipt and expenditure (after paying salary, pension and debts), it fell short of more than Rs 20 crore every month.

To query on non-development expenditure that was higher than developmental expenditure, he said it was because of excessive government employment due to which the State paid more than 70% on pensions and services. And because of this, Nagaland was assessed as having the highest government employment though it had highest the rate of unemployment too, meaning private entrepreneurship was nearly absent, he added. 

On the issue of state police battalions stationed outside, Rio said one battalion each were deputed to West Bengal and Delhi. However, West Bengal still owed Nagaland over Rs 100 crore as liabilities, he added.

To queries on maintenance of public properties, Rio said most of the buildings were worn out and hence there was the need to construct new ones. However, the maintenance fund the State received was spent on the over-14,000 work charge employees as they were paid Rs 90 crore annually on their salary.

In power sector, he explained that the State was buying power at lesser price and selling at higher price, but lost more than Rs 120-130 crore.

He claimed that the budget for the year 2020-21 focused on taking innovative steps in various sectors to meet the changing times and new challenges, with a focus on the youth while special emphasis was given in sports and related infrastructure, including promotion of music as an industry since this was an area where Naga youth had much potential that needed to be further encouraged.

He assured that his government would focus on projects that enhanced productivity, had potential of generating revenue and resources to drive State’s economy forward as this was an urgent need for the State in view of the slow economic growth and shortage of resources for developmental activities.

Discussion and debate of the budget will be taken up on Friday.

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