Good Governance For Good Resource

The financial situation of Manipur does not present a rosy picture. There has been lack of sound monetary system and financial discipline over the past few years. This is indicated by frequent withdrawal of huge amount of ways and means advances and overdrafts and rising payment of interest thereon. It would be relevant here to define normal, special ways and means and unauthorized overdrafts in the interest of general public. Basically normal ways and means advances are made without any security and are provided upto certain limits prescribed by the RBI. They are sanctioned up to thrice the level of minimum daily cash balance of Rs.24 lakhs. Special ways and means advances are made against pledge of Central Government up to thrice the level of normal ways and means advances. Unauthorized overdrafts arise either because the limits agreed to between the States and the RBI for ways and means advances and special ways and means advances are exceeded or because these advances are not repaid within a period of three months as per rules.

Rising fiscal deficit associated with negative balance from current revenue has become a major feature of the financial position of the State. In other words, continuous imbalance between revenue receipts and expenditure of State Government overshadows the financial performance of the State. We don’t have many resources to spend on plan expenditure which is vital for the economic development of our State. It may be said here that the negative impact of frequent overdraft in the State is undoubtedly felt by the general public. Many States across India have also experienced this kind of problem and they have already taken up a series of initiatives aimed at correcting this problem.

The reasons for the poor financial management in Manipur are not far to seek. State Government has not been able to maintain with the Bank a minimum daily cash balance of Rs.0.24 crore over the years. Since the minimum daily cash balance dropped below the agreed minimum amount on any day, the shortage amount had to be supplemented by taking ways and means advanced/overdraft from the Bank. Further, special ways and means advances are also made by the Bank whenever necessary. Recourse to ways and means advances means an imbalance between the receipts and expenditure of the Government. For example, the ways and means advances accounted for Rs. 252.89 crores while the overdraft stood at Rs.1388.32 crores in 2000-01.

The overdrafts are generally cleared through adjustment made against Central assistance to the concerned State for Plan schemes sanctioned by the Government of India or through advance payment made by the Center to States in respect of the State’s share of taxes and grants-in-aid. Sometimes the Center grants ways and means assistance to States to enable them to clear their unauthorized overdrafts.

For this purpose the Center may sell ad-hoc treasury bills to RBI to clear the overdrafts of a State Government. In other words, a loan by the RBI to a State becomes ultimately a loan from the Central Government to the State Government. The amount of overdrafts thus cleared by the Central Government is treated as ad-hoc loan to the States. In spite of the above process, the State Government of Manipur has been finding it difficult to clear the overdrafts for the last few years. The paper here made an attempt to exhibit the financial picture of the State of Manipur to the general public. It is based on the Finance Account and CAG Report, 2001 Government of Manipur. The State Government has not been able to generate additional resources over the past couple of year. The revenue receipts of Manipur swooped down to Rs. 10, 44.62 crores in 2000-o1 from Rs.10, 69.85 crores in 1999-00 showing a net decrease of Rs. 25.23 crores in the receipts.

The main sources of funds of the Government of Manipur generally comprises the revenue receipts of the Government, recoveries of loans and advances, public debt and the receipts in the Public Account. Revenue receipts constitute the major source of funds for the State of Manipur. Revenue receipts consist of Tax and Non-tax revenue and receipts from Government of India. It may be mentioned here that the contribution of tax accruing from Land Revenue, State Excise declined while there was zero contribution from tax on agriculture income. Non-tax revenue constituted about 4 percent of the revenue receipts of the Government and their shares in the revenue receipts declined gradually from 6 per cent in 1996-97 to 4 percent in 2000-01.

The Finance Account, Government of Manipur, 2000-2001 pointed out the following factors as responsible for the decline in the receipts. They are viz., less receipts under net proceeds of Income other than Corporation Tax, less collection on their receipts of buildings, less collection on sale proceeds of election forms, documents, etc., less collection on State Lotteries, decrease in State share of Union Excise Duties and no new tax was levied during the year. In our State sharp rise in the assistance and borrowing from the Central Government is accompanied by a fall in the State’s own generation of resources. Grants-in-aid from Central Government increased from Rs. 6, 69.38 crores in 1999-00 to Rs. 7, 90.37 crores in 2000-02. Of the revenue receipts of Rs 10, 44.62 crores in 2000-01, Rs. 9, 53.89 crores were received from the Government of India. There has been a significant increase in aggregate borrowings of the State Government indicated by fiscal deficit which rose from Rs. 156.95 crores in 1996-97 to Rs. 226.61 crores during 2000-01 over the years.

Fiscal deficit shows the aggregate of all the borrowings. In other words, it may be defined as the excess of revenue and capital expenditure including net loans given over the revenue receipts including grants-in-aids received. These borrowings are used for meeting the capital expenditure and for giving loans to various bodies for developmental and other purposes.

CAG Report, 2001 pointed out that actions initiated by the State Government as regards raising of additional resources and applying of economic measures had not been effective. Commitment made in respect of power could also not be fulfilled. It also showed that the State Government had negative balance from current revenue receipts during the last five years indicating that Government resorted to borrowings for meeting its plan expenditure. What is balance from current Revenue? It is quite simple. If you deduct plan assistance grants and non-plan revenue expenditure from current revenue you will find the balance from current revenue. A positive balance from current revenue receipts shows that the State Government has surplus amount from its revenues for meeting Plan expenditure.

A negative balance from current revenue receipts shows that Government has to depend on borrowings for meeting its Plan expenditure. If the negative balance from current revenue receipts is minimized to some extent, the financial health of the State Government of Manipur could be significantly improved.

*The article is written by Thiyam Bharat

(Courtesy: The Sangai Express)

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