Thursday, 19 October 2017

Meeting of the National Development Council

Following is the text of intervention of Finance Minister Shri P. Chidambaram at the National Development Council meeting held here today:

Following is the text of intervention of Finance Minister Shri P. Chidambaram at the National Development Council meeting held here today:
“While the National Development Council has met a few times since the UPA Government assumed office in May 2004, I believe this is the most important meeting. We are gathered here to consider and approve the draft of the Eleventh Five Year Plan for the period 2007-2012 – a period during which we hope we can consolidate the gains made in the last four years and place India, irreversibly, on the path of faster and more inclusive growth.
Let me compliment the States on their achievement in fiscal consolidation. 26 States have so far enacted the Fiscal Responsibility Legislation. Consolidated gross fiscal deficit of the States is budgeted to be 2.4 per cent of GDP in 2007-08, which is below the desired level of 3 per cent of GDP. Notwithstanding the variations across the States, the consolidated revenue balances is budgeted to show a surplus of 0.4 per cent of GDP in 2007-08. Achievement of the targets set under the fiscal responsibility legislations has not only consolidated the fiscal health of the States, it has also improved the credibility of their budgetary operations. I would, however, like to caution that the States should not become complacent. They must continue to make efforts to mobilise resources and improve the efficiency of their expenditure.
The Gross Budgetary Support  of the Central Government for the Eleventh Plan is estimated at Rs 14,21,711 crore. This is an unprecedented increase of 114.8 per cent over the GBS for the Tenth Plan. Nearly one-half of this budgetary support is earmarked for the priority sectors of education, health, rural development, agriculture and irrigation – priorities which, I believe, are shared by State Governments and to which State Governments also ought to make substantial allocations in their State plans. I would like to emphasise that the primary responsibility in these crucial sectors lies with the States. The Centre is ready and willing to help, and we are indeed doing so by increasing Budgetary support to State Plans from Rs.1,75,021 crore to Rs.3,24,851 crore. With that help, States must forge ahead in delivering education, health and other services in a more efficient and determined manner.
A grave challenge that faces us ¯ as well as and many countries of the world ¯ is the availability of food and the rise in food prices. Many observers have pointed out that the era of cheap food prices is over. In the changed context, the relevance of an efficient public distribution system cannot be over emphasised. We need a PDS for the poor, but unless it is efficient, procures adequate quantities of food grains and delivers food to the poor, the PDS could become an albatross around our neck and an opportunity for rent seekers to enrich themselves. The first concern is procurement of adequate quantities of wheat and paddy/rice. Producing States must cooperate with the Central Government and its agencies. Some wheat producing and some rice producing States have contributed meagre or nearly zero quantities to the Central pool; yet they draw from the Central pool for their PDS. How is this fair to the States which bear a disproportionate share of the burden of procurement? How is this fair to the Central Government which is expected to maintain buffer stocks and put adequate quantities into the PDS system? I earnestly appeal to the wheat and paddy producing States to procure and contribute their fair share of food grains to the Central pool. The next concern is the deeply flawed distribution system. The most recent evaluation study on the Targeted Public Distribution System (TPDS) by the Programme Evaluation Organisation has found, inter alia, that taking into account all the inefficiencies of PDS, Government of India spends Rs. 3.65 to transfer Re 1 to the poor. About 58 per cent of subsidised grains do not reach the target group, of which a little over 36 per cent is siphoned off the supply chain. I ask you, respectfully, do not the poor of India deserve a better PDS? How can we sit back and watch helplessly the poor being robbed of their meagre entitlements? I urge Hon’ble Chief Ministers to collectively resolve today to help the Central Government set right both sides of the PDS – procurement and distribution – because a well functioning PDS is critical to maintaining price stability of food articles.
The exports sector is an important driver of economic growth. Exports are under some stress due to the rapid appreciation of the Rupee against a weak dollar. Government of India has announced major relief packages, and we are hopeful that these will bring some measure of relief to exporters. However, regardless of the exchange rate or any other external circumstance, it is an universally accepted principle that taxes shall not be exported. The Central Government rebates or refunds every tax that is payable or paid and is attributable to goods and services that are exported. I submit that State Governments should do the same. At present, a number of taxes including VAT, Octroi, electricity duty are borne by exporters. They should be rebated or refunded, and I would urge State Governments to look into this issue carefully. Any State which relieves exporters of tax burdens stands to gain: more export-oriented industries will locate in that State. Hence, it is in the long-term interest of the State to rebate or refund all taxes on exports.
The final point I would like to make concerns infrastructure. We need to go forward with a greater sense of urgency in building roads, ports, railway lines and, above all, power plants. Virtually every project, we are told, faces difficulties in the matter of land acquisition, environmental clearance, road connectivity and availability of water. Unless we achieve the planned targets set for each of these sectors in the Eleventh Plan, I am afraid we cannot reach the target growth rate of GDP of 10 per cent in the last year of the Plan. Our record on power is particularly instructive. We did not do well in the Eighth, Ninth and Tenth Plan periods. For example, as against a target of adding 41,110 MW of power generation during the Tenth Plan, only 21,080 MW could be added. Contrast this with China's record of adding 100,000 mw of capacity in the last year alone. We must therefore ensure that the target of power generation capacity in the Eleventh Plan set at 78,577 MW is met. We owe it to our people to accelerate the implementation of all infrastructure projects, especially power projects. States must ensure that land, water and road connectivity for these power projects are made available on time. They must also ensure power grid connectivity so that electricity can be carried to where the need is greatest. The Central Government is determined to achieve the target of bringing 78,577 mw into commercial production, but we can do so only with the fullest cooperation of the States.