Recommends State to restructure & rationalize expenditure priorities
Dimapur, February 3: Nagaland has the second highest debt in India, and needs to restructure and rationalize its expenditure priorities, says the Fifteenth (XV) Finance Commission.
“Nagaland has the second highest debt in the country,” the commission said in its report for 2021-2026. Finance Minister Nirmala Sitharaman tabled the XV-FC report in the Lok Sabha on February 1 last.
The FC-XV report said though Nagaland’s debt/ Gross State Domestic Product (GSDP) has reduced from 55.5% in 2011-12 to 42.7 in 2018-19, it is still much higher than the North Eastern and Himalayan States average of 29.61%.
Debt should be consolidated in line with the new Fiscal Responsibility and Budget Management (FRBM) Act and the recommendations of FC-XV, the report said.
‘Burden of salaries’
The report also showed Nagaland has high committed expenditure while capital expenditure has seen a decline over the years, and recommended the State to restructure and rationalize its expenditure priorities.
The FC-XV said committed expenditure (including grants-in-aid salary) of Nagaland was 67.3% of its total revenue expenditure in 2018-19 (all States average 50.6%). On the other hand, capital expenditure in Nagaland declined between 2011-12 and 2018-19 both as a percentage of GSDP (from 10.3% to 5.9%) and total expenditure (20.4% to 12.8%).
Measures should be taken to reduce burden of salaries to free up resources for development expenditure. At the same time, the State needs to reduce its infrastructure deficit by increasing the capital expenditure and finding alternate sources of funding like Public Private Partnership (PPP), it recommended.
The report also showed Nagaland’s high dependence on the Union Government for funds. Nagaland’s Own Tax Revenue (OTR)/GSDP was only 3.1% in 2018-19, while the average for North Eastern and Himalayan States (NEHS) was 5%.
Nagaland State’s collections from VAT/GST, stamp duty and registration fees, and excise are also very low as compared NEHS average. However, its collections have improved with the implementation of GST, said the report.
Nagaland’s non-tax revenue is only 0.94% as compared to NEHS average of 2%. It gets 90% of its total revenue receipts from Union transfers (highest across all States).
The State needs to widen its tax base and tighten its tax administration to improve its own revenues, it recommended.
Nagaland is placed 19th of 29 States in the Sustainable Development Goal (SDG) ranking 2019 by the NITI Aayog. While Nagaland regressed on SDG-1 No Poverty, with incidence of poverty in the State rising from 9% in 2004-05 to 18.88% in 2011-12, it reported decent economic growth in the last few years, it said.
The reports recommended the State to ensure that benefits of economic growth trickle down to all sections of society.
‘Low Share of Secondary Sector’
The FC report also showed low share of secondary sector to the State GSDP, with only 12% of Nagaland’s GSDP coming from the secondary sector.
The reason for this, the report indicated, was that the secondary sector in Nagaland, already hamstrung by its remoteness, lack of connectivity to mainland India, and low credit-deposit ratio, is further disrupted by insurgency.
It recommended that the tertiary sector could be encouraged in the State through capacity building activities, establishment of vocational training institutes, developing Indigenous skill curriculum, and establishment of traditional skill resource centre in all districts.
‘Public Sector Undertakings’
On public sector undertakings (PSUs), the FC said the number of accounts in arrears had increased from 18 in 2013-14 to 21 in 2017-18. Three PSUs (Nagaland Industrial Development Corporation, Nagaland State Mineral Development Corporation, and Nagaland Industrial Raw Materials & Supply Corporation Ltd., Dimapur) finalized 6 accounts as of 30 September 2018, while the remaining PSUs (2) did not finalize any accounts. The delay in finalization of accounts of these PSUs was mainly due to delay in compilation/adoption of accounts by the Board of Directors of respective PSUs. In addition to above, the accounts of one non-working PSU had arrears of accounts for 16 years (2002-2018), it said.
In view of this, the FC recommended that the State Government monitor and ensure timely finalization of accounts in conformity with the provisions of the Companies Act, 1956 and orders of the Ministry of Corporate Affairs issued from time to time. The timely auditing of account should also be ensured, it recommended.
‘State Finance Commission’
On State Finance Commission (SFC), the report said Nagaland should ensure constitution of SFCs, timely report submission, and tabling of action taken report (ATR) before start of the award period.
The report said Nagaland is exempted from forming SFC under 73rd and 74th Constitutional Amendments Act, 1992. However, the State constituted its Second SFC on 1 June 2013 for award period 2015-2020. But report has not been tabled yet, it said. (Page News Service)