2014 March Evaluation of State Finances with respect to Jharkhand Xavier Institute of Social Service Dr. Ramakant Agarwal PO Box No 7, Dr. Camil Bulcke Path & Ranchi – 834001, Jharkhand, India Dr. Rohit Vishal Kumar www.xiss.ac.in Political ofMap Jharkhand Political i Contents Acknowledgement viii Preface x 1 Estimation of Revenue Capacities of the State 1 1.1 Estimation of Revenue Capacity of Jharkhand . .2 1.2 Measures to Improve the Tax-GSDP ratio during the last five 5 years . .3 1.2.1 Measures Taken in 2009-10 . .3 1.2.2 Measures Taken in 2010-11 . .3 1.2.3 Measures Taken in 2011-12 . .3 1.2.4 Measures Taken in 2012-13 . .4 1.2.5 Measures taken during 2013-14 . .4 1.3 Suggestions for enhancing the Revenue Productivity of the tax system . .4 1.3.1 Tax or Revenue Productivity . .4 1.3.2 Tax Efficiency in Jharkhand . .5 1.3.3 Tax-to-GSDP Ratio . .6 1.3.4 Improving Tax Compliance . .7 1.3.5 Tax Expenditures . .8 2 Analysis of State’s Own Non-Tax Revenues 9 2.1 Introduction . .9 2.2 Structure of Own Non-Tax Revenue Receipts . .9 2.2.1 Interest Receipts, Dividends and Profits . .9 2.2.2 General Services . 10 2.2.3 Social Services . 10 2.2.4 Economic Services . 10 2.3 Recovery Rate of Select Social and Economic Services . 11 2.4 Suggestions for improving revenue through user-charges . 13 2.5 Profits from departmental enterprises and dividends from non-departmental commercial enterprises . 14 3 Expenditure Pattern and Trends of the State 16 3.1 Analysis of Revenue Expenditure . 17 3.1.1 Development Expenditure . 17 3.1.2 General Services Expenditure (Non Development) . 19 3.2 Analysis of Capital Expenditure . 19 3.3 Repayment of Public Debt . 20 3.4 Loans and Advances by the State Government . 20 3.5 Efficiency of Public Expenditure . 21 3.6 Committed Expenditure of Jharkhand . 22 4 Analysis of Revenue and Deficit Balances of the State 25 ii 5 The level of Debt GSDP Ratio and the uses of Debt 30 5.1 Where can the state government raise loans from? . 31 5.2 Outstanding Liabilities and Composition of Debt of Jharkhand . 32 5.2.1 Internal debt . 32 5.2.2 Loans from Centre . 33 5.2.3 Debt-GSDP Position . 34 5.2.4 Market Loans . 34 5.2.5 Debt Sustainability . 35 5.2.6 Application of Debt-funds . 35 5.3 Glossary . 36 6 Implementation of FRBM Act 38 6.1 Introduction . 38 6.1.1 The JFRBM Act 2007 . 38 6.1.2 Amendments to JFRBM Act 2007 . 39 6.2 Performance of Jharkhand . 40 6.2.1 Sectoral Analysis . 40 6.2.2 Deficit Analysis . 40 6.2.3 Salaries, Pensions and Interest Payments . 43 6.3 Conclusion . 46 7 Analysis of State Transfers to Urban and Rural Local Bodies 48 7.1 State Transfers . 48 7.2 Decentralisation Initiatives Rural Areas . 50 7.2.1 Major Schemes . 51 7.2.2 Analysis of Expenditures . 52 7.3 Decentralisation Initiatives Urban Areas . 53 7.3.1 Issues in Urban Service Delivery . 55 7.3.2 Schemes for Urban Renewal . 56 7.3.3 Analysis of Expenditure . 58 7.4 Jawaharlal Nehru National Urban Renewal Mission . 61 7.4.1 Dhanbad Municipal Corporation . 61 7.4.2 Status of Work Done . 62 7.4.3 Jamshedpur Urban Agglomeration . 63 7.4.4 Status of Work Done . 65 7.4.5 Ranchi Metropolitian Region Area . 66 7.4.6 Status of Work Done . 67 8 State Public Enterprises Finances 68 8.1 Definition of State Level Public Enterprises . 68 8.2 Structure of SLPE’s . 68 8.3 SLPEs and 13th Finance Commission . 69 8.4 State-level public enterprises (SLPEs), The Macro Picture . 69 8.5 Overview of State Level Public Enterprises in Jharkhand . 71 8.6 Total Investment in SLPEs . 71 8.7 Performance of SLPEs . 72 8.8 Arrears in Finalisation of Accounts . 73 8.9 A Brief Note on Unbundling of JSEB and its State of Affairs . 74 8.10 Reforms in the Power Sector . 75 iii 9 Public Expenditure and Financial Management Reforms 80 9.1 Introduction . 80 9.2 Evaluation on Various Parameters . 83 9.2.1 Dimension 1: Credibility of the Budget . 83 9.2.2 Dimension 2: Comprehensiveness and Transparency . 86 9.2.3 Summary . 91 9.3 Reforms Implemented in the State . 91 9.3.1 Online Revenue Generation Initiatives . 92 9.3.2 Online Transparency Enabler Initiatives . 93 9.4 Conclusion . 94 10 Power Sector Reforms in Jharkhand 95 10.1 Introduction . 95 10.2 Key Players in the State . 96 10.2.1 Jharkhand State Electricity Board . 96 10.2.2 Tenughat Vidyut Nigam Limited . 97 10.2.3 Jharkhand Renewable Energy Development Agency . 97 10.2.4 Jharkhand State Electricity Regulatory Commission . 97 10.2.5 Other Players in the State . 98 10.3 Power Sector Reforms in Jharkhand . 99 10.3.1 Jharkhand Urja Sancharan Nigam Limited . 99 10.3.2 Jharkhand Urja Utpadan Nigam Limited . 100 10.3.3 Jharkhand Bijli Vitaran Nigam Limited . 101 10.3.4 Jharkhand Urja Vikas Nigam Limited . 102 10.4 Impact on State Finances . 103 11 Analysis of Contingent Liabilities of the State 107 11.1 Introduction . 107 11.2 Specific areas for fiscal transparency at the state level . 107 11.3 Contingent Liabilities . 108 12 Analysis of Subsidies given by the State 111 12.1 Introduction . 111 12.2 Explicit Subsidies in Jharkhand . 112 12.3 Implied Subsidies . 113 12.4 Merit Goods . 113 12.5 Recovery Rate of Select Social and Economic Services . 115 12.6 Subsidy to Jharkhand State Electricity Board . 116 12.7 Size of overall budgetary Subsidies in Jharkhand . 117 12.8 Subsidy Targeting in Jharkhand . 117 12.8.1 Industry Department . 117 12.8.2 Food, Civil Supplies and Distribution Department . 118 References 120 iv List of Tables 1.1 Efficiency in Tax Collection: Property & Capital Transactions (%) . .5 1.2 Efficiency in Tax Collection: Commodities & Services (%) . .5 1.3 Own Tax Revenues: Comparative Performance of States . .6 2.1 Composition of Own Non-Tax Revenue in Jharkhand (Rs. crore) . 10 2.2 Composition of Own Non-Tax Revenue in Jharkhand (Percentage) . 11 2.3 Revenue Expenditure on select Social and Economic Services (Rs crores) . 12 2.4 RR/RE on select Social and Economic Services in Jharkhand (Percentage) . 12 3.1 States Expenditure: A Brief Summary (Rs. Crores) . 17 3.2 Details of Revenue Expenditure (Rs. Crores) . 18 3.3 Details of Capital Expenditure (Rs. Crores) . 20 3.4 Receipts and Expenditure Behaviour (Rs. Crores) . ..