Finance panel asks state to overcome challenges
SHILLONG: Despite the notion of Meghalaya being a performing state, a dismal scenario in terms of debt burden, poor health sector and loss making public sector undertakings, affecting the overall development of the state emerged during the meeting of the government with the 15th Finance Commission delegation led by its chairman N K Singh.
However, the commission said it has full faith in the government and that its varied initiatives will bear fruit while downplaying lack of development on key fronts.
The main issues discussed in the meeting were the deficiencies which the state is facing and the efforts to overcome them.
As far as own-tax revenue of Meghalaya is concerned the Gross State Domestic Product (GSDP) was 4.38% in 2016-17 while the average for the North East & other hill states was 5.02%.
Dependence on Centre
The dependence on union government is high as Meghalaya gets 80% of its total revenue receipts from the Centre.
During a press conference, holding out hope to the state government, Singh said since the government has launched several programmes as narrated by Chief Minister Conrad Sangma, the state would be able to reduce dependence on the Centre within five years.
As far as debt is concerned, the debt/GSDP ratio of 33.19% in 2016-17 and 31.76% in 2017-18 is much higher than the Financial Responsibility and Budget Management (FRBM) target of 20%.
This is also higher than the average debt of other Northeast and other hill states which is 29.32% in 2016-17.
Low GDP growth
Singh expressed concern over the low Gross Domestic Product (GDP) growth of Meghalaya saying that from the year 2011-to 2018, the state GDP came close to 5-6 percent which is significantly below the normal GDP growth of the country and many other Northeastern states.
Asking Meghalaya to grow well above the double digit of 10.5 percent, he said the state needs to catch up on lost time and improve its rating in development index so that revenue streams can be enhanced and Meghalaya can become self-reliant rather than being dependent on the Centre.
Another deficiency is that cash-deposit ratio in the state has been only 35-40% over the last 10 years while that of the country is 60%.
On the health front, some of the health indicators of Meghalaya are below the national average like stunting among children, anemia among women and Infant Mortality Rate (IMR).
Poor infrastructure
The meeting also discussed on the poor road infrastructure as the total density of roads in Meghalaya is only 401 km/1000 square km. However, the average density of roads in India is 952.8.
Besides, Meghalaya ranks 22nd on all Sustainable Development Goals (SDGs) and the composite SDG index of Meghalaya calculated by Niti Aayog is 52 which is lower than India’s composite index of 56. Assam is the only Northeastern state which is ranked below Meghalaya.
Loss making PSUs
The State Public Sector Undertakings (SPSUs) had also come under discussion in the meeting. Out of 15 SPSUs in the state, only one SPSU, Forest Development Corporation Meghalaya Limited witnessed accumulated account of profit at the end of 2016-17.
The distress is aggravated by the power sector SPSUs in the state.
The power sector SPSUs bear an accumulated loss of Rs 1836 crore, which is 6.5 percent of GSDP. However, six SPSUs including one power sector SPSU have shown account of profit in 2016-17 which comes as the only positive indicator from SPSUs. This dismal performance of SPSUs brings medium term fiscal risks for Meghalaya, the meeting observed.
In the power sector, the Aggregate Technical & Commercial (AT &C) losses are 34.64% (2017-18) against target of 27.50%.
Revenue issues
Singh said Meghalaya has a feeling that following the loss of revenue on account of ban on coal mining and uncertainty in GST, there are some revenue issues which deserve attention of the Commission.
The Commission also discussed the impact of the implementation of the 5th Pay Commission and also the financial implications for holding National Games in 2022.
“We will look into all these and see where these issues are reversible and whether the impact can be mitigated over the time. We will consider the request for additional revenue grant looking at the fiscal space which you have,” he said.
The state government has also urged the 15th Finance Commission for vertical devolution of taxes to be enhanced from 42 percent to 48 percent, adding 30 percent out of the 48 percent should be earmarked for special category states so as to insulate the state from the volatility of the economy of the country that can have an impact on its revenue collection.
The state also projected a pre-devolution deficit to be Rs 62,870 crore for the period of 15th Finance Commission.
Panel’s assurance
To a question, the chairman of the Commission said there are huge challenges but there are equal opportunities as well.
Singh said most of the traders and industries in Meghalaya are seeking better connectivity with Bangladesh through Chittagong port.
He added that the opening of the trade and commerce with Bangladesh will help not only Meghalaya but other Northeastern states as well.
He urged the Northeastern states to collectively take up the matter with the Centre and the union government in turn can take up the matter with Bangladesh.
When asked about the State PSUs which are not yielding benefits to the state exchequer, he added that that the most dominant issue which they face is the issue of power.
The chief minister himself has admitted that the transmission and distribution losses need to be addressed, he said.
“Unless the health of the power sector improves, the overall health of Meghalaya will remain problematic, “he said while urging the state government to move towards renewable energy.
The chairman maintained that the state government has credible plans to improve every sphere and boost the economy through its strategies.
He, however, said that there is a need for focused and aggressive approach for attracting private investment in tourism and allied sector while laying emphasis and priority on development of renewable energy given the natural advantages of the state.