Tamil Nadu employees pay hike to cut revenue surplus

March 20th, 2008 - 6:33 pm ICT by admin  


Chennai, March 20 (IANS) The likely increase in the Tamil Nadu government’s salary and pension bill from next fiscal is expected to eat into the revenue surplus, said Finance Minister K. Anbazhagan here Thursday. Anbazhagan presented the Medium Term Fiscal Plan (MTFP) for Tamil Nadu along with the state’s annual budget.

His budgetary proposals showed a revenue surplus of Rs.840 million for the year 2008-09, but the projected figure for 2009-10 is Rs.650 million owing to the increase in salary and pension bill.

In the same vein, Anbazhagan said revenue surplus would be maintained in the coming years as per Tamil Nadu Fiscal Responsibility Act 2003 that mandates elimination of revenue deficit and limiting the fiscal deficit to less than three percent of the State Gross Domestic Products (SGDP).

According to the minister, the MTFP covering 2008-2011 has taken into account the financial commitments involved due the farm loan waiver of around Rs.70 billion last year, the expenditure on various welfare schemes announced and implemented by the government, and the likely increase in salary expenditure due to the recommendation of Sixth Pay Commission.

Anbazhagan said the fiscal deficit as a percentage of GSDP was estimated at 2.98 percent for 2008-2009 and the MTFP envisages this ratio would be brought down to 2.96 percent during financial year 2010 and 2.93 percent during 2011.

The government, he said, is prudently managing its contingent liabilities restricting the outstanding guarantees below 100 percent of the total revenue receipts in the preceding year or below 10 percent of the GSDP whichever is lower.

“The outstanding guarantee as on 31.3.2007 was 14.3 percent of the total revenue receipts and 2.3 percent of GSDP.”

The government has decided to restrict the issue of new guarantees to productive and viable projects alone.

Projecting a 15 percent growth in the share of central taxes from the current estimates of Rs.94.96 billion, he said the state’s own tax revenue was estimated at Rs.331.56 billion.

The revenue loss owing to the implementation of value added tax (VAT) has been higher than the initial estimates.

For 2009, the major tax sources are commercial taxes (Rs.207.97 billion), state excise duty (Rs.53.29 billion), vehicle tax (Rs.17.07 billion) and the stamp duty.

The non-tax revenue is estimated at Rs.32.76 billion.

According to the MTFP, non-tax revenue contributes only 6.4 percent of the total revenue receipts without any scope to improve further.

The interest receipts also will show a declining trend in the coming years in view of reduced lending by the government to various public sector undertakings and statutory boards.

“Taking all these factors into consideration, non-tax revenue has been projected to grow at only 8 percent in the future years,” Anbazhagan said.

The grants-in-aid from the central government have been estimated at Rs.55.75 billion for 2009.

The revenue expenditure during next fiscal is estimated at Rs.514.21 billion higher than the revised estimates for 2007-08 owing to filling up of vacant posts in the government and the impact of sixth pay commission recommendations.

The State will swap high-cost loans to bring down the interest commitment so as to keep the interest component to less than 15 per cent of the total revenue receipts.

According to Anbazhagan, the state has achieved all targets fixed under the MTFP for the financial year 2006-2007 and it is expected that the same will be true for the financial year 2007-2008 also.

He said a record capital outlay of Rs.93.72 billion is provided in the budget estimates 2008-2009.

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