Karnataka Budget Must Focus On Efficiency And Eliminate Wasteful Expenditure

by Krishnakumar N V - Mar 15, 2016 10:35 AM
Karnataka Budget Must Focus On Efficiency And Eliminate Wasteful ExpenditureKarnataka Chief Minister Siddaramaiah
Snapshot
  • Despite humongous welfare spending in past years, farmers are in distress, rural economy is in shambles and the youth are migrating.

    The Karnataka government must follow in the footsteps of the central government and divert unproductive expenditure to create long term assets.

    Like the Union Finance Minister, the Karnataka Finance Minister too must announce a disinvestment program for State Public Sector Undertakings.

Karnataka Chief Minister Siddaramaiah, who is also the state’s Finance Minister, will soon present his eleventh state budget. Will it be visionary, path breaking and historic?

Since becoming Chief Minister, Siddaramaiah has been overly focused on populism while underwhelming on the state’s development. Results from recent local body elections indicate that the slew of ‘Bhagaya’ schemes introduced in past budgets have failed to capture the imagination of voters. Moreover, they have been a boon to middlemen and the corrupt while being the bane of poor people. With precious resources being wasted and eaten away unscrupulously by ‘rent seekers’ and intermediaries, taxpayers and voters are asking a pertinent question – is the state government getting bang for the buck?

In the upcoming financial year, more than Rs 1.5 lakh crore will be budgeted and spent on improving the welfare of citizens. Despite such humongous spending in past years, farmers are in distress, rural economy is in shambles, rural and urban poor do not have access to potable water and proper sewage, and youth from across the state are descending on the capital city in search of jobs. Hence, the focus of the upcoming budget must be on relieving the pain of farmers, alleviating rural distress, developing other districts and diverting unproductive expenditure to better targeted programs and schemes.

In order to eradicate farm suicides and relieve farmers in distress, the Finance Minister must create a ‘Farm Distress Fund’ and allocate three percent of total commercial taxes to this fund. Periodic droughts and floods have affected the farming community disproportionately over the last several years. Moreover, even when the rain gods co-operate, farmers in some districts suffers crop losses due to hailstorms and various other reasons. A corpus of Rs 1,500 crore, mandated only for the purpose of assisting farmers in distress, will go a long way in reducing farmer suicides. Unspent money must be carried forward to be used in subsequent years.

Decongesting the Whitefield area in Bangalore must be taken as a priority in this budget. The Outer Ring Road Companies Association (ORRCA) in a recent study estimated a productivity loss of over Rs 22,000 crore due to overcrowding and poor infrastructure. The study also adds that employees are spending approximately five hours commuting to and from their workplace. Rather than risk these companies moving to different states, the Finance Minister must offer wide-ranging incentives to relocate to the neighboring districts of Kolar and Chikkaballpur, and wherever possible to Tumkur and beyond.

Assuming “what is good for the goose is good for the gander”, the Karnataka government must follow in the footsteps of the central government and divert unproductive expenditure to create long term assets. The government must introduce a cash transfer scheme that directly targets the poor rather than following the current process of distributing through various ministries. A commission that includes all stakeholders must be announced in this budget to identify actual beneficiaries before moving to an efficient new system.

Like the Union Finance Minister, the Karnataka Finance Minister too must announce a disinvestment program for State Public Sector Undertakings (PSUs). According to a recent audit report of the Comptroller and Auditor General (CAG), Karnataka has 75 state owned companies and six statutory corporations. Huge losses have been incurred by Chamudeshwari Electricity Supply Corporation, Karnataka Neeravari Nigam Limited and many others, while the state government has contributed over Rs 13,000 crore towards equity, grants and subsidies. Rather than supporting loss-making PSUs, the Finance Minister would be wise to rid them of state control and spend the savings on social development and improving rural infrastructure.

Also on the agenda must be an effort to eliminate departments. According to the NITI Aayog, an efficient state government need not have more than 30 to 35 departments. The official website states that Karnataka has 70 departments indicative of a bloated bureaucracy. Hence as suggested by Aayog, the Finance Minister must announce Zero Based Budgeting to identify departments that can be eliminated in the near future.

Siddaramiah as Finance Minister has presented 10 budgets in the past and is on track to unveil his eleventh. Unfortunately, none has been historic either in form or substance. More of the same from past years will not win the hearts and minds of voters. It is time to steer away from populism and focus on efficiency and problem solving. The upcoming budget is a historic opportunity to deviate from the past and present a visionary document that will set standards for not only future state finance ministers but also a model document for finance ministers across the country.

The author is a Money Manager based in Bangalore.

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