Maharashtra Finance Minister Sudhir Mungantiwar discusses plans to push allied farm businesses and open up new avenues for distressed farmers in his 2016-17 budget. He spoke to Sandeep Ashar on challenges before state’s economy
The Centre’s budget for 2016-17 has focused on fiscal consolidation. But Maharashtra has consistently missed meeting fiscal targets. What measures do you plan to roll out to improve overall fiscal prudence?
A turnaround of any economy does not happen overnight. While I won’t say we have achieved a great deal on fiscal management in the past year, we certainly have taken some positive strides. The main problem is that the state has amassed huge liabilities over the years. States such as Gujarat and Madhya Pradesh are revenue surplus since they have relatively low liabilities. You would appreciate that no finance minister can cut down on committed liabilities such as money spent on welfare schemes for employees.
But the state’s financial health worsened in 2015-16. The state would miss the fiscal targets. Why did the state’s short term fiscal strategy misfire?
It’s true we may miss fiscal targets set for the current year. But that is mainly because we spent big sums in extending relief to drought-stressed farmers. I feel that using this as a sole measure to rate the government on steps taken towards improving fiscal prudence may not be entirely correct. In 2015-16, we focused on expenditure-side management. We brought in a new procurement policy that curbed imprudent purchase of items at the departmental level, which was rampant in the past. We expect to save Rs 2000 crore-Rs 2500 crore through this initiative this year.
We also took steps to cut down on non-productive expenditure. In the coming year, I have plans to introduce some more measures to improve fiscal discipline on the expenditure side. But what has worsened the hit is drop in revenue. Income from sales tax has taken a hit amid the contraction of the global economy and dip in crude oil prices. In 2016-17, we’ll focus more on raising more revenues and income side management.
Does this mean citizens will have to brace for newer taxes, levies in 2016-17?
I can’t divulge details on tax proposals. But I can say that at this stage there is no proposal for levying new taxes. But there are several areas that are not taxed at present. We are exploring these. We will also work on improving efficiency of tax collection.
We are also hopeful that certain measures rolled out last December would curb evasion of sales tax. We will also look to contain the revenue expenditure and cut down further on non-productive spend.
How does the Centre’s decision to defer implementation of the Goods and Services Tax (GST) impact the state’s economy?
I must admit that our plan proposals for 2016-17 were based on a consideration that the Centre will roll out GST from April 1, 2016. We even abolished LBT last October considering that GST regime will cushion the hit. The delay in implementation of the GST has certainly burdened the state budget. It has forced us to recast our plan. We have had to come up with a plan B. I’m confident that even this plan B will be able to rev up the state’s economy.
Farmer suicides have been a sore point for your government. The government has invited flak over its failure to curb farm distress. What is the big plan to rein in the agrarian crisis?
Last year we took one step in this direction by working on water security under the Jalyukt Shivar initiative. But water security alone cannot overcome the crisis.
The focus of the 2016-17 budget would be on promoting allied farm businesses and value additions, improving marketing of crops, and providing more avenues for farm finance. Dairy and sericulture, for instance, can be a good allied farm business.
The slashing of central assistance hit the state hard in 2015-16. The irrigation projects were the worst hit. The Centre hasn’t altered the financing formula this year too. How do you cope with the situation?
There was no shortage of irrigation funds in 2015-16. We released 100 per cent of the budgeted amount. Central assistance may have come down for certain irrigation projects (under the Accelerated Irrigation Benefit Programme) but we had budgeted for it.
The Chief Minister recently held a meeting on the irrigation sector. We are looking at various avenues for project finance. There would be no budgetary constraint for the irrigation sector this time around too. Seven dam projects from Maharashtra have been included in the Pradhan Mantri Jal Sinchai Yojana.
While the Centre may have discontinued schemes in some other sector, the state has customized these and continued with them at the state level. A centrally sponsored scheme for food processing that has been discontinued will now be taken up at the state level.
The manufacturing sector is looking for a stimulus as it remains in the grip of a slowdown. Would your budget have anything they can look forward too?
Make in India and Make in Maharashtra are our mantras. The budget will push infrastructure such as airports, railways, and roads as a stimulus to push growth in the manufacturing sector. The small scale sector is a big asset. It accounts for the highest employment. But about 30,550 small scale businesses have downed shutters amid the global contraction. We are exploring ways on how to revive these. We are weighing options including tax concessions and sops, financing assistance, and changes in policy to provide the right stimulus.
Affordable housing is a big problem in the Mumbai Metropolitan Region. The industry has been pushing for some tax sops at the state level. Does your budget have plans for them?
We have drafted a housing policy that envisages that every citizen in the state would have a shelter by 2022. The finance department has already committed to provide all budgetary support needed for this. We are working on the pendency of house requirement in the scheduled caste/scheduled tribe communities by 2019. The budget will announce some initiative in this regard.
Some policy analysts believe that the BJP’s perception crisis has overshadowed efforts to rev up the economy. Your thoughts.
Acchon ko bura saabit karna yeh Congress ki purani aadat hai. The criticism is nothing but political agenda. People still believe that the Modi government can bring Acche Din. All I wish to convey to Rahul Gandhi and the rest of the Opposition is that however angry you are, don’t let it impact the country’s economic climate.