J&K Misses Targets Set By 13th Finance Commission, FRBM Act

J&K Misses Targets Set By 13th Finance Commission, FRBM Act

6 April 2013
Kashmir Times
Shuchismita

Jammu: J&K could not achieve targets set by the Twelfth and Thirteenth Finance Commissions and incorporated in the Fiscal Responsibility and Budget Management (FRBM) Act for reduction of fiscal deficit, outstanding fiscal liabilities and outstanding public debt. As per the report of the Comptroller and Auditor General of India on state Finances for the year ended March 31, 2012, the original target of reducing the fiscal deficit to three per cent of the GSDP by the end of 2009-10 was missed by a very wide margin as the actual fiscal deficit shot up to 9.1 percent in that year. An amendment in the FRBM Act in April 2010 raising the 2009-10 target to four per cent was of no avail, the report said. As per the customised fiscal correction path recommended by the Thirteenth Finance Commission specifically for Jammu and Kashmir and the corresponding amendment made in the FRBM Act, the J&K had to cap the fiscal deficit at 4.7 percent of GSDP in 2011-12, but the fiscal deficit was actually 5.9 percent. This non-compliance carried an immediate financial penalty of loss of interest relief on loans from the National Small Savings Fund. “The FRBM Act had imposed specific obligations on the state government for the period 2006-07 to 2009-10 and contemplated that the government may, by notification in the Government Gazette, make rules for carrying out the provisions of the Act. However, the government framed and notified the FRBM Rules in January 2008. The delay effectively shifted the compliance deadline,” the report pointed out. The FRBM Act contemplates that the government may setup an agency independent of the government to review periodically the compliance of the provisions of the Act, and table such reviews in each House of the state Legislature. However, no such independent review has been earned out so far. The FRBM Rules specified only the annual targets for Revenue Deficit as percentage of Total Revenue Receipts (TRR), Fiscal Deficit as percentage of GSDP and Total Outstanding Liabilities as percentage of GSDP. The Rules omitted to define annual targets for 'pre-devolution non-plan revenue deficit' which was to be reduced to 20 per cent of GSDP by 2009-10. In fact, this fiscal parameter was not even being mentioned in the Budget documents presented to the state legislature. Apparently, this parameter did not receive government's attention because no fiscal concessions- incentives were attached to its compliance, the report pointed. The FRBM Act was repeatedly amended to align the annual targets for Fiscal Deficit and Total Liabilities as per the recommendations of the Twelfth and Thirteenth Finance Commissions. This was done so mechanically that the targets for 2009-10 and 2010-11 were reset-relaxed through unnecessary amendments to the FRBM Act after the close of the respective financial years. Nothing could have been done by the government to achieve the revised targets after the year was over.