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PÀ£ÁðlPÀ ¸ÀPÁðgÀ Government of Karnataka
GOVERNMENT OF KARNATAKA
FINANCE DEPARTMENT
MEDIUM TERM FISCAL PLAN
2013 - 2017
(2013 è )
(As presented to the Legislature during February 2013)
Medium Term Fiscal Plan 2013-17
Table of Contents
Foreword
Chapter 1- Introduction
a) Economic Outlook
b) Inflationary Trends
c) Fiscal Situation of the State in FY 2012-13 and MTFP 2012-16 Review
d) Fiscal Management Review Committee
e) Key Fiscal Challenges
Chapter 2-Macro Economic Outlook
a) GSDP Forecast
b) Growth Prospects and Road Ahead
Chapter 3-Evaluation of Fiscal Performance
a) Fiscal Consolidation Roadmap and Status
b) Fiscal Performance of the State in FY12-13 vis-à-vis FY11-12
c) Performance of receipts, expenditures and fiscal indicators (FY09-10 to FY12-13)
Chapter 4-Revenue Performance and Reforms
a) Tax Policy and Strategy
b) Tax Effort
c) Performance of Major Own Taxes
i. Commercial Taxes
ii. State Excise
iii. Stamps and Registration
iv. Motor Vehicles Taxes
d) Cess Receipts
e) Non Tax Revenues
i. Royalty on Major and Minor Minerals
ii. Interest Receipts
iii. Other Non Debt Capital Receipts
f) Accounting of direct releases of Central Government
Chapter 5- Expenditure Management
a) Trends in Government Expenditure.
b) Plan, Non Plan, Development and Non Development Expenditure
c) Sector-wise Outlay
d) Beneficiary Oriented Schemes
e) Resource Transfer to Local Bodies
f) Capital Expenditure to GSDP
Chapter 6-Public Finance Management and Systemic Reforms
a) Overall Debt Scenario
b) Composition of Debt
c) Management of Borrowings
d) Maturity Profile of Outstanding State Government Securities
e) Creation of Consolidated Sinking Fund (CSF) f) Contingent Liabilities
g) Cash Management
h) Systemic Reforms
Chapter 7-Medium Term Fiscal Plan Projection 2013-17.
a) Brief assessment of sustainability of certain fiscal parameters
b) MTFP Projections for 2013-17 (TABLE-B)
c) The underlying assumptions for the projections in MTFP2013-17
Annexed Statements - Disclosures as required under Sec 5(2)(c) of KFRA
Statement of Compliance
1. The Medium Term Fiscal Plan 2013-17 is tabled before the Legislature in compliance with Section 3
of the Karnataka Fiscal Responsibility Act (2002). 2. Section 3 of the Act requires the MTFP to include the following elements, all of which can be found
in the document as shown below: 3. The medium-term fiscal objectives of the Government (Chapters 1, 3, 4, 5, 6 and 7). 4. An evaluation of the performance of the prescribed fiscal indicators in the previous year (Chapter
3). 5. A Statement of recent economic trends and prospects for growth and development (Chapter 1& 2). 6. The strategic priorities and key fiscal policies of the Government and an evaluation of their
consistency and broad conformity to fiscal management principles set out in Section 4. (Chapters 4
to 7). 7. Four - year rolling targets (Chapter 7). 8. An assessment of sustainability relating to the balance between revenue receipts and revenue
expenditures and the use of capital receipts including borrowings for generating productive assets.
(Chapter 7)
9. Statements with new disclosures in compliance of recommendations by Thirteenth Finance
Commission (Annexures)
Foreword to Medium Term Fiscal Plan 2013-17
MTFP 13-17 is being presented to the Legislature as required under the
Karnataka Fiscal Responsibility Act (KFRA), 2002 and Karnataka Fiscal
Responsibility Rules, 2003. The statement of compliance at the beginning of
the MTFP 13-17 lists out the key elements covered in this document. MTFP
12-16 had identified some key challenges that the State faced on
management of its finances. MTFP 13-17 continues taking into cognizance
such challenges on the Revenue and Expenditure side.
The Karnataka Fiscal Responsibility (Amendment) Act, 2011 by amending
Section 5 of KFRA now requires State to make certain additional disclosures
as part of Fiscal Transparency. These additional disclosures made are in line
with the recommendations of the Thirteenth Finance Commission and
are reflected as separate statements annexed to the MTFP document.
1
Chapter 1
Introduction
a) Economic Outlook
Global Economy
1. In the first three quarters of the year 2012-13, the global economy has shown some signs of
stabilisation although the situation remains fragile. While economic activity has been picking up
in the U.S and the U.K, near-term prospects in the euro area are still weak. Reserve Bank of India
(RBI) in its Mid-Quarter Monetary Policy Review in Jan 2013 has brought out that headwinds
holding back the global economy have begun to abate gradually, although sluggish conditions
prevail.
2. The region wise analysis shows that while activity gathered momentum in the US in the third
quarter of 2012 this is unlikely to have been sustained in the fourth quarter. The euro area
economy is threatened by continuing contraction, notwithstanding the liquidity firewall of the
European Central Bank (ECB). However growth in other emerging and developing economies
(EDEs) has slowed owing to a combination of a slump in external demand, domestic structural
bottlenecks and contagion risks from advanced economies rendering them vulnerable to further
shocks. Furthermore, inflationary pressures persist in some of them. Overall while global
economic prospects have improved modestly, significant risks remain making the path to global
recovery seem slow and uncertain.
National Economy:
3. The national economy has faced its own challenges in a recessionary global economy. The Prime
Minister’s Economic Advisory Council (PMEAC) in its report in August 2012 has brought out the
slower than expected recovery of the global economy. In view of this it has estimated an overall
economic growth projection of 6.7 per cent in real terms for FY12-13. However going by the
actual growth numbers, RBI in its third quarter review of the Monetary Policy on Jan 29th 2013
has brought out the aspect of significant slowing down of GDP growth to 5.5 per cent in the first
quarter, and further to 5.3 per cent in the second quarter. The decline in the GDP growth rate is
stated to have become more broad based, with consumption demand also slowing alongside the
stalling investment and declining exports. The Central Bank feels that while the series of recent
policy initiatives by the Government has boosted market sentiment, it will take some time to
reverse the investment slowdown and reinvigorate growth. It has also flagged of the risk of twin
2
deficit on account of widening current account deficit and fiscal deficit amidst a slowdown in the
economy. Accordingly, the Central Bank has revised downwards its baseline projection of GDP
growth in real terms for the current year from 5.8 per cent to 5.5 per cent.
4. The other challenge that the country faced this year was the weakening of the South-West
monsoon 2012 and below normal rainfall in many parts of country, particularly Maharashtra and
Karnataka. As per the Indian Meteorological Department’s 2012 South West Monsoon - End of
the Season Report for the country as a whole, the rainfall for the season was 92% of its Long
Period Average. Out of the total 36 meteorological subdivisions, 23 subdivisions constituting
67.3% of the total area of the country received excess/normal season rainfall and the remaining
13 subdivisions (32.7% of the total area of the country) received deficient season rainfall.
5. On the overall national economy, the Organisation for Economic Cooperation and
Development's (OECD) outlook report 2012 has indicated that India's economic growth is likely
to rise to more than 7.5 percent in calendar year 2013 but has warned that continued
government policy uncertainty could erode the country's longer-term growth prospects. It has
further brought out that high inflation would dampen the investment climate in Asia’s third
largest economy. The other major issues of concern are high current account deficit and costly
subsidies which have pushed fiscal deficit beyond the target of 4.6 per cent of GDP in FY11-12.
6. The economic slowdown would have direct or indirect bearing on the sub-national economies. In
recent times several initiatives have been taken by the Government of India to improve
economic climate, spur investments, and bring back the economy to the high growth path.
However this needs to be sustained on a long term basis and supported by judicious mix of fiscal
consolidation policies and graduated easing of monetary stance by the Central Bank. Hence
continued policy reforms and concerted fiscal and monetary measures are necessary for
strengthening of investment sentiment and laying the road for long term inclusive growth. Some
of these measures including those recommended by PMEAC are as follows.
a) Integrated decision making on high impact infrastructure projects
b) Reducing non merit subsidies
c) Timely project clearances
d) Encouragement to investments by facilitating faster approval mechanisms
e) Containing inflation
f) Better coordination between Centre and States for pushing through policy changes
3
Growth risks in the State Economy
7. With the given risks as anticipated at the time of State budget making in February 2012,
Karnataka’s MTFP 2012-16 had assumed real GSDP to grow 7.5 per cent for the year 2012-13
and thereafter at 8 per cent until 2014-15 expecting the economy to recover. Also GSDP growth
rate as conveyed by the Ministry of Finance, Government of India was accepted by the State and
accordingly, the MTFP 2012-16 had assumed GSDP for the year 2012-13 to be at Rs. 5,20,766
crore (at current prices). These numbers had their basis in the growth projections recommended
by Thirteenth Finance Commission for Karnataka. For the financial year 2013-14, Government of
India has conveyed the GSDP figure for FY13-14 for Karnataka at Rs.601633 crore. This estimate
has its basis in the Central Statistical Office’s (CSO) estimate of GSDP for FY11-12 at Rs.458903
crore. On this GSDP figure, growth of 14.5 per cent has been given to arrive at GSDP for FY12-13
and thereafter another 14.5 per cent growth is given on GSDP for FY12-13 to arrive at GSDP for
FY13-14. State has adopted this figure of Rs.601633 crore as GSDP for FY13-14 for finalizing its
estimates.
8. In contrast to the above assumptions of GOI, the Advance Estimates of GSDP released by the
Directorate of Economics and Statistics (DES) in State Government for FY 12-13 place Karnataka’s
GSDP at Rs.5,27,492 crore (at current market prices). If the annual inflation is assumed to be
around 7.5 per cent and economy is expected to grow at around 6 per cent, then the GSDP for
FY13-14 would work out to around Rs.5,93,413 crore which is lesser than the GSDP estimate of
Rs.601633 as conveyed by Government of India. Table 1 shows the comparative position
between GSDP numbers conveyed by GOI and as estimated by DES.
Table1
GSDP at current market prices (Rs. In crore)
Year As conveyed by Ministry of Finance, Government
of India
As per Directorate of Economics and Statistics
(DES), Karnataka
(1) (2) (3)
2011-12 458903 4,63,242 (QE)
2012-13 525444 5,27,492 (AE)
2013-14 601633 N.A
*QE- Quick Estimate, AE-Advance Estimate, N.A – Not Available as yet.
9. While preparing the budget 2012-13, the annual change in the real GSDP growth of Karnataka
was assumed to be 7.5 percent over that of 2011-12. However the real GSDP growth rate as per
4
the Advanced Estimates has turned out to be much lower at 5.9 per cent. The growth has been
constrained by a significant slowing down of growth in Agriculture mainly due to adverse
weather conditions. Karnataka has witnessed serious drought situation on account of deficit
rainfall over the last two years. The condition has worsened on account of deficit rainfall from
south-west monsoon during June and July 2012. Total 123 taluks of 28 Districts were declared as
drought hit in the previous year i.e. 2011-12. On account of deficit rainfall in 2012-13, another
34 taluks were declared as drought hit subsequently. Hence a total of 157 taluks in 28 districts
were declared as drought hit in the last two years. Overall there was a shortfall of 30 per cent in
the south west monsoon rainfall this year. This has a significant impact on the primary sector
which constitutes 15 per cent of GSDP as a major part of agriculture in Karnataka is rain fed and
thus heavily dependent on these rainfalls.
10. Though the annual growth in agriculture has recovered to 1.8 per cent as per 2012-13 AE as
compared to the negative growth rate of (-) 2.2 per cent during 2011-12 at constant prices, the
overall growth in the primary sector has got constrained. However, like that of the national
economy, the long term economic fundamentals of the State economy in Industrial and Services
sectors being strong, there is a likelihood that the real growth in overall GSDP for the State will
come back to high growth path in the medium term.
Inflationary Trends
11. The MTFP 2012-16 had assumed an inflation rate of 6.5 per cent for FY12-13 and 6.0 per cent in
the medium term. As brought out in RBI’s 3rd Quarterly Review of Monetary Policy 12-13, from
the high inflationary trends seen at the beginning of this year, headline WPI inflation eased
significantly in the 3rd quarter of FY12-13 from 8.1 per cent in September to 7.2 per cent by
December. The momentum indicators suggest a moderation in headline as well as non-food
manufactured products inflation. Fuel group inflation moderated in December mainly reflecting
the tempering of inflation of non-administered petroleum products as well as the range-bound
exchange rate of the rupee. Food inflation, on the other hand, showed contrarian behaviour,
moving into double digits in December, reflecting both cyclical and structural factors. In contrast
to WPI inflation, CPI inflation rose to 10.6 per cent in December, largely reflecting the surge in
food inflation. Keeping in view the expected moderation in non-food manufactured products
inflation, domestic supply-demand balances and global trends in commodity prices, RBI has
revised downwards the baseline WPI inflation projection for March 2013 from 7.5 per cent to
6.8 per cent.
5
12. At the State level, the drought in the State leading to declining growth in Agriculture may also
have been a contributing factor to slow supply side response. The moderation in inflation would
provide more leeway to monetary and fiscal policy makers in coming days to bring in changes to
stimulate economic growth while ring fencing the impact of inflation. However since fiscal
consolidation seems to be a priority for the Government of India, steps like increase in
administered price of diesel, cutting down of subsidies etc would moderate any expectation of a
quick slide in inflationary pressures. Also the effect of new initiatives like direct cash transfer of
subsidy on inflation is uncertain.
13. RBI has kept key lending rates on the higher side to moderate money supply. This has
contributed to some extent in the slowing down of the economic growth. The high interest
policy regime had some bearing on the state finances as the Government needed to continue
various farmer friendly interventions like the concessional crop loan scheme, which are so
designed that the State Government absorbs a large part of the impact of high interest costs.
The State has also introduced a cooperative crop loan waiver scheme to protect farmers from
the impact of the severe drought condition in various taluks of the State. In this background the
monetary policy easing undertaken by RBI in its 3rd quarter review is welcome. A 25 basis
point repo rate reduction which is the first in nine months will reduce the cost of borrowing for
individuals and corporates and facilitate investment.
14. The Central Bank also cut the cash reserve ratio (CRR) by 25 basis points. The move is meant to
infuse Rs 18,000 crore more into the banking system making available funds for lending. For the
State, the hardening of interest rates with regard to SDLs in the third and fourth quarter of the
current year was becoming evident. For instance during first two quarters of FY 2012-13, the
cost of borrowings which were hovering around 8.60 to 8.75 per cent have gone up to 8.90 per
cent during the third quarter. Hence the CRR cut is a positive development for State too as there
is a possibility of funds now being available at relatively lower interest rates during the open
market borrowing operations.
6
Trends in growth rates:
Table - 2
Trends on Annual Growth Rates of India’s GDP and Karnataka’s GSDP (at Constant Prices)
2007-08 2008-09 2009-10 2010-11 2011-12 QE
India's GDP** 9.3 6.7 8.4 8.4 6.4
Karnataka's GSDP*
12.6 7.1 1.3 9.7 5.5
* QE: Quick Estimate as per DES for Karnataka ** CSO estimate
15. The above table shows the trends in the annual growth rate of India’s GDP and that of
Karnataka’s GSDP. During the period 2007-09 State’s growth rate has been higher than India’s.
During 2009-10, State’s growth dipped on account of drop in growth rates of industry and
services. In the year 2010-11, State grew faster and its GDP growth rate was higher than that of
India. However there is significant slowing down of growth both for the State and the country as
a whole in FY11-12. The moderated growth rates of the State and country as a whole reflect the
prevalent economic scenario. The following chapter discusses the growth prospects of economy
in detail.
b) Fiscal Situation of the State for the FY 2012-13 and Review of MTFP 2012-16
16. The Budget 2012-13 and the MTFP 2012-16 were presented when national economy was
expected to recover to high growth path. However, the performance of the state economy has
been in line with the national economy and has shown less than expected revival. The latest
GSDP estimates by Directorate of Economics and Statistics (DES) indicates that in 2012-13
Karnataka’s economy to grow at 5.9 per cent (at constant prices) only over that of the previous
year as against an anticipated growth rate of 7.5 per cent in the MTFP 2012-16. While the
primary sector has grown by only 1.8 per cent, the services sector growth at 8.9 per cent has
contributed a higher share to the overall economic growth of the State. The Industrial growth
has slipped to 2.4 per cent as against 4.0 per cent last year.
17. In view of this, the overall performance of the fiscal indicators in MTFP 2012-16 was expected to
be marginally lower. However with higher than anticipated tax and non tax revenues during the
year, the State would continue to maintain a revenue surplus of Rs.943 crore and fiscal deficit as
7
a percentage of GSDP would be kept at 2.93 per cent in the revised estimates for 2012-13. Thus
while revenue surplus is being maintained, on fiscal deficit as percentage of GSDP, State would
have marginally done better than in Budget Estimates for 2012-13.
Table – 3
Fiscal Performance
(` in Crore)
Item 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
BE 2012-13
RE
GSDP Nominal* 227854 271246 302146 335747 380871 434270 520766 520766
Fiscal Deficit 4688 5331 8732 10874 10688 12300 15312 15239
FD as % of GSDP 2.06% 1.97% 2.89% 3.24% 2.81% 2.83% 2.94% 2.93%
Revenue Surplus 4152 3776 1632 1619 4172 4691 931 943
* The GSDP figures have been revised from 2002-03 onwards due to change in base to 2004-05
18. Despite the slowing down of the economy, the sustained good performance of the State on fiscal
indicators as seen from the revised estimates for revenue surplus and fiscal deficit as compared
to budget estimates in 2011-12 is commendable. This has resulted due to the high tax effort of
the State and curtailing of lower priority revenue expenditure. The fiscal performance of the
State was influenced by a mix of expenditure management policies as well as revenue enhancing
interventions. The revenue surplus generated in RE 12-13 would be fully appropriated towards
financing capital expenditure thereby reducing the need for the State to borrow to that extent.
c) Fiscal Management Review Committee:
19. As required under the amended KFRA, State Government constituted the Fiscal Management
Review Committee (FMRC) headed by the Chief Secretary. The Committee would review fiscal
and debt position of the State and the State’s progress on the fiscal correction path and
thereafter advice on the corrective measures as may be required. FMRC has reviewed the fiscal
and debt position of the State and its progress on fiscal correction path as required under the
Karnataka Fiscal Responsibility Act (KFRA). The Committee has deliberated in detail on the mid-
year fiscal and debt parameters and thereafter advised the Finance Minister on the remedial
measures to be adopted to ensure adherence to the parameters stipulated in KFRA.
20. The FMRC during the mid-term review of the fiscal 2012-13 focussed broadly on the fiscal
challenges in the current year, resource and expenditure, prudent fiscal management, deficit
8
management and adherence to KFRA amongst others. After detailed deliberations the FMRC
resolved on the following issues:
i. Coordinate with neighbouring states in evolving non-competitive fiscal incentive
policy as decided in recent meeting of the South Zone Council.
ii. Relook into the issue of granting exemptions to State Road Transport
Corporations (SRTCs) keeping in view its impact on the State’s tax base.
iii. Follow up with departments for improving their non-tax revenues.
iv. Avoid and moderate inclusion of large expenditure commitments in
supplementary estimates.
v. Focus on consolidating existing institutions and improving their effectiveness.
vi. Control on starting new institutions and admitting private institutions to GIA.
vii. Regulation on creation of new posts, and filling up vacancies in non-core mandate
areas.
viii. Approvals for new initiatives and works requiring implementation over multiple
years to be based on fiscal sustainability of the total expenditure rather than
expenditure during the year of approval only and thereby avoid build up of fiscal
stress due to unfunded expenditure commitments.
ix. Advise the departments to base their proposals for new initiatives within their
respective 12th Five Year Plan allocations to be communicated by Planning
Department, instead of seeking additional funding on recurring basis.
x. Move over to medium term (3 to 5 years) appraisal and approval cycle for the
schemes from the currently practiced annual cycle.
xi. Revisit and control the preference for implementation of schemes and programmes through
society and SPV mode and managing funds through bank and personal deposit accounts
outside the Consolidated Fund.
21. FMRC reiterated these recommendations again when it met in February. The committee noted
the need for implementing these recommendations for enhancing robustness of fiscal position,
mobilizing more resources for capital formation and improving expenditure effectiveness during
the MTFP period. In view of this, the Committee resolved as follows:
9
i) A time bound action plan to be put in place by Finance Department and Planning
Department involving the Administrative Departments for implementation of these
recommendations.
ii) Cabinet approval for specific mandate to be obtained.
iii) Thereafter detailed guidelines to be issued to all Administrative Departments for
implementation of Action Plan.
22. The management of State Finances is broadly guided by the recommendations of the
FMRC. All these recommendations of FMRC are essentially aimed at increasing the
capital expenditure, minimizing lower priority revenue expenditure, increasing non-
tax revenue, ensuring fiscal sustainability and pursuing prudent planning and appraisal
mechanisms to improve outcomes. The Hon’ble Chief Minister who is also the Finance
Minister of the State has approved the above recommendations of FMRC. These have
been considered in the fiscal projections for the MTFP period.
Key Fiscal Challenges
23. The State has to balance the requirement of providing adequate funds to critical sectors
of the economy while adhering to fiscal prudence norms. The following are some key
challenges identified, which the State has to tackle in the ensuing years. Some of these
challenges have been identified earlier too but have continued to remain in focus during
the current year.
Low non tax revenues
24. While the State has one of the highest own taxes to GSDP ratio, the ratio of non-tax
revenue to total receipts has not been increasing over the years on anticipated lines. The
State’s own non tax revenue which was 0.94 per cent of GSDP in 2011-12 accounts was
projected to reduce to 0.61 per cent in 2012-13 (BE). The FMRC had also observed this
trend and suggested remedial measures like regular revision of user charges to check the
slide in growth of non tax revenues. Apart from enforcement and monitoring of own tax
efforts, special emphasis needs to be given for mobilizing non-tax revenues during the
coming years. However now it is anticipated that non tax revenues would exceed BE12-
13 to some extent and reach 0.73 per cent of GSDP in Revised Estimates 12-13.
Government is committed to rationalizing user charges and reviewing the same regularly.
In this regard, Government is also guided by the recommendations of Expenditure
Reforms Commission.
10
Limitations on use of borrowed funds for capital formation
25. In order to meet the competing needs of various priority sectors for investment in capital assets,
apart from reliance on its own resources and Central funds, State goes in for borrowings.
However borrowings are not open ended but are limited by the ceiling imposed by KFRA. While
borrowing, State has to ensure that the twin parameters of Fiscal Deficit and Total Liabilities as a
percentage of GSDP are both retained within permissible limits during the course of the year.
With fiscal consolidation being the main focus of Government of India, States’ borrowing is also
closely monitored by them. Also since the borrowing permission provided by Government of
India under Article 293(3) of the Indian Constitution is in phases during the course of the full
year, State is unable to schedule its borrowing with certainty. Further borrowings have to be
scheduled in a prudent manner so as to not burden future generations with high debt costs. All
these factors would mean that resources available on this front are limited and its usage needs
to be prioritised.
Fiscal impact of official pay committee recommendations
26. The Official Pay Committee (OPC) was mandated to make its recommendations on pay revision
keeping in view the resources of the State Government and government commitments for
various development programmes and schemes, statutory and regulatory functions, debt service
obligations and other non-development requirements within the overall mandate of the
Karnataka Fiscal Responsibility Management Act (KFRA). In view of the acceptance of the
recommendations regarding revision of pay and other allowances by the State Government, the
existing dearness allowances and installment due as on 1st January 2012 was merged in the
basic pay and pension along with 23.25 per cent increase. The additional outgo from the budget
during FY12-13 from the ensuing pay revision was estimated to be around Rs.4300 crore. The
large committed expenditure requirement for salary would mean that the State would have to
prudently manage its other plan and non plan commitments to maintain its revenue and fiscal
balance.
Financing the impact of the co-operative short term crop loan waiver scheme
27. In view of the prevailing drought situation, State Government to help reduce the loan burden
and mitigate stress of farmers, announced a Loan Waiver Scheme in July 2012 applicable to
short term loans to an extent of Rs.25,000 taken from Co-operative Credit Institutions. This
scheme is expected to benefit and provide relief to 15.24 lakh farmers across the State entailing
a cost of Rs.3630 Crore to State Government over a period of two years. While around Rs.1000
11
crore would be available from increase in the Commercial tax rates by 0.5 per cent for one year,
State has to finance the remaining Rs.2,500 crores by identifying the savings in the plan budget
in FY12-13 and the next.
Large budget size and supplementary requirements:
28. State presented rupees one lakh crore budget for the first time in FY12-13. Ample resources
were mobilised and with grants from Centre and borrowings within KFRA ceiling, resources were
found for financing the budget. However with additional plan commitments of more than
Rs.8000 crore during the year for which approval was obtained in two supplementary estimates,
additional resources need to be mobilised along with identifying savings in other plan schemes to
meet the enhanced requirement.
Ensuring effective targeting of the subsidy net:
29. In recent times there has been a large increase in the number of beneficiaries under various
subsidy schemes like Social Security Pensions and Bhagyalakshmi. Steps have been taken to
identify deserving beneficiaries to ensure effective targeting of the subsidies. Subsidies given to
power sector for consumption of electricity by farmers primarily for below 10 HP IP sets have
also been growing at a rapid pace. Unless this is estimated properly through separation of
feeders and metering of pump sets, subsidies may go towards meeting operational inefficiencies
of the power distributional utilities rather than meeting power consumption costs for IP sets.
Expenditure on subsidies hence needs to be moderated in the medium to long term to make
them fiscally sustainable. This, however, does not mean that merit subsidies would not reach the
really deserving. It only means weeding out the ineligible and bogus beneficiaries under various
subsidy schemes through better targeting and improvement in systems. The Resident Data Hub
Scheme, UID scheme and Direct Cash Transfer scheme would help in better identification of
beneficiaries and targeting of subsidies directly.
Plan commitments under XII Five Year Plan
30. 12th Five Year Plan outlay for Karnataka at Rs. 2,55,250 crore (current prices) is 87 per cent
higher than the 11th Five Year Plan expenditure at current price of Rs.1,36,052 crore. The per
capita plan outlay of Karnataka at Rs. 6,810 in FY 2012-13 is one of the highest among major
States. The Plan Size for FY12-13 at Rs.42030 and subsequent increases in the following years
would have to be met largely by improving the balance from current revenues (BCR). Hence
curbing non essential non plan expenditure and improving State’s Own Tax Revenue (SOTR)
12
would require sustained focus. In the revised estimates for FY12-13, State Plan achievement is
estimated to be Rs. 42100 crore.
Fourteenth Finance Commission:
31. Fourteenth Finance Commission has been set up by Government of India recently.
Constitutionally the primary role of the Finance Commission is to recommend the sharing of tax
proceeds between the Centre and the States. The 14th Finance Commission’s recommendations
would have a major bearing on devolution of Central Taxes to the State for a five-year period
beginning April 1, 2015. The five-member committee is to submit its report by October 31, 2014.
The State has been pressing in the past that a balanced approach to inter se allocations amongst
States should be adopted by the Finance Commission. This would require almost equal weights
for equity and efficiency considerations. While need factors like population, area and HDI
address the equity aspect, equal consideration needs to be given for efficiency imperatives like
tax effort and fiscal discipline. Also looking at the wide ranging terms of reference of the
Committee like pricing of public utilities such as electricity and water in an independent manner,
subsidies, GST compensation etc, and significant changes could also be expected in the fiscal
consolidation framework.
Efficient Management of Public Expenditure
32. Dr Rangarajan’s Committee on “Efficient Management of Public Expenditure” has given excellent
recommendations to reorient management of the public expenditure for improving the
development outcomes. The Union Government has been requested to take up definite
measures for implementation of the recommendation regarding accountability of the public
expenditure through a more granular and transparent system of government accounts. Also as
recommended by the Committee on Restructuring the Centrally Sponsored and Central Sector
Schemes headed by Sri. B.K Chaturvedi, the procedure for transfer of funds to the States should
be reformed to ensure full accountability of States. Currently fund transfers are taking place
directly at District level or to other independent bodies or societies making it difficult for the
States to monitor utilization of funds. For better accountability, all transfers by Government of
India should be routed through State Governments and not directly to the independent societies
at the State or District level.
13
Chapter 2
Macroeconomic Outlook
Karnataka’s Gross State Domestic Product (GSDP) and Forecast
33. The growth prospects of the State economy are closely intertwined with that of the national
economy, which are influenced mainly by the performance of private sector in agriculture,
industry and service sector. This year the embedded risks from global economic uncertainty
pose challenge to macro policy making and micro operations.
34. Advance Estimates of Karnataka GSDP released by the Directorate of Economics and Statistics
(DES) indicates a drop in the nominal growth rate of Karnataka in 2012-13 as compared to 2011-
12. The GSDP (current prices) growth rate in the year 2012-13 over 2011-12 is estimated to be
13.9 per cent as compared to 14.0 per cent in the previous year. Table–4 shows trends in sector
wise composition of Karnataka’s GSDP along with percentage share of different sectors and
GSDP growth rates at current prices. As has been the trend, Service Sector constituting almost
59 per cent of GSDP continues to drive economic growth of the State. However the year on year
(y-o-y) growth has been slower in FY12-13 at 17.7 per cent as compared to 18.8 per cent in the
previous year. As compared to this, both the agricultural sector and industrial sector growth
have shown higher y-o-y growth. However the increase in the agricultural sector has to be seen
in the light of a large drop in growth rate in this sector in 2011-12 over 2010-11.
Table - 4
Trends in Sector wise Composition of GSDP (Current Prices)
(` in Crore)
Industry 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Q.E 2012-13
A.E
Primary 42322 51478 54617 59282 76866 78357 84625
Secondary 69765 80733 91859 93579 107850 121488 132897
Tertiary 115150 138417 163836 184655 221754 263397 309971
Total GSDP 227237 270629 310312 337516 406470 463243 527492
Percentage share of different sectors
Primary 18.62 19.02 17.60 17.56 18.9 16.9 16.0
Secondary 30.70 29.83 29.60 27.73 26.5 26.2 25.2
Tertiary 50.67 51.15 52.80 54.71 54.6 56.9 58.8
Total 100 100 100 100 100.0 100.0 100.0
14
Table - 4
Trends in Sector wise Composition of GSDP (Current Prices)
(` in Crore)
Industry 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Q.E 2012-13
A.E
GSDP Annual Growth of different sectors
Agriculture 2.8 17.1 6.8 11.0 26.7 7.9 8.2
Industry 25.3 18.4 12.9 1.0 17.6 8.4 9.2
Services 15.7 20.2 18.4 12.7 20.1 18.8 17.7
Total 16.0 19.1 14.7 8.8 20.4 14.0 13.9
QE: Quick Estimate, AE: Advance Estimate
35. Table-5 shows sector wise trends in GSDP at Constant Prices. The real GSDP growth rate has
recorded only a moderate increase from 5.5 per cent in FY11-12 to 5.9 per cent in FY12-13. The
real growth at constant prices has been at the same level for the industrial sector. After
recording a negative growth in FY11-12, agricultural sector has seen a moderate increase in its
growth rate at 1.8 per cent in the current year. This could be attributed to some extent to the
concerted efforts by the State in pushing for farmer friendly policies and making agricultural
credit available at subsidised interest rates to agriculturalists. However the largest contributor to
GSDP, the services sector, has actually slipped to 8.9 per cent growth from 9.5 per cent growth
last year. This could be attributed to the global slowdown in economy. Software exports are
affected due to lesser global demand. Lower growth of agriculture sector combined with near
same growth in industrial sector and a moderate increase in services sector growth has
effectively pulled down the overall GSDP growth rate to below 6 per cent.
Table -5
(` in Crore)
Trends in Sector wise GSDP (Constant Prices 2004-05 Series)
Industry 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Q.E
2012-13
A.E
Primary Sector 35287 40244 40995 42285 46613 44451 45258
Secondary Sector
62066 68170 71917 71094 77225 80331 82243
Tertiary Sector 105307 119788 131509 134183 147647 161628 175943
Total 202660 228202 244421 247562 271485 286410 303444
15
Table -5
(` in Crore)
Trends in Sector wise GSDP (Constant Prices 2004-05 Series)
Industry 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Q.E
2012-13
A.E
Percentage share of different sectors
Primary Sector 17.41 17.64 16.77 17.08 17.2 15.5 14.9
Secondary Sector
30.63 29.87 29.42 28.72 28.4 28.0 27.1
Tertiary Sector 51.96 52.49 53.80 54.20 54.4 56.4 58.0
Total 100 100 100 100 100.0 100.0 100.0
GSDP Annual Growth of different sectors
Agriculture -2.8 12.4 2.3 4.1 11.0 -2.2 1.8
Industry 17.0 10.8 5.1 -1.5 8.3 2.4 2.4
Services 10.5 13.8 9.8 2.0 10.0 9.5 8.9
Total 10.0 12.6 7.1 1.3 9.7 5.5 5.9
QE: Quick Estimate, AE: Advance Estimate
Growth Prospects and the road ahead
36. The State is at cross roads where the twin challenges of fiscal consolidation and adequate
investment in core sectors are both equally important. Inclusive growth is an outcome of
focussed policy initiatives which target the priority sectors with large potential for creation of
opportunities, both social and economic. However the immediate challenge for the State is to
find steady source of revenues to provide for enhanced outlays in essential socio-economic
sectors. The proposed migration to GST regime which would bring in opportunities on one hand
for uniform and seamless market for goods and services across the country, would also pose
some threats to the governments’ ability to influence its fiscal policy stance and resource
mobilization mechanism.
37. From its initial estimate of 9 per cent growth, the Planning Commission has fixed a growth target
of 8.2 per cent for 12th FYP period with higher growth being back loaded i.e. 9 per cent for last
two years of the Plan period. In this, agriculture growth is targeted at 4 per cent during Plan
period. If the State has to achieve this, then it needs to emphasize more on methods to revive
the sector from the low growth cycle it is faced with. Overall the Commission has approved total
plan of Rs.255250 crore at current prices for Karnataka over the 12th FYP period. With such a
16
large plan allocation, the challenge for the State would be to moderate its non plan
commitments in the medium to long term so as to make resources available to finance Plan Size
of the State. Also State is in the process of proposing the inter sectoral allocation of plan funds
for 12th FYP period to Planning Commission for consideration.
38. During the last few years the government has taken major policy decisions to encourage private
investment and productivity for triggering growth in priority sectors of agriculture and industry.
With the introduction of the practice of laying a separate Agricultural budget in the Assembly,
State has brought to mainstream critical investment requirements related to farming sector. The
allocation in the Agriculture sector especially was substantially enhanced in 2011-12 primarily to
focus and re-direct investment in this sector. The effects of such policy interventions have
helped reverse the negative trend in real growth seen in FY11-12 at (-) 2.2 per cent to a positive
1.8 per cent in FY12-13 in the agricultural sector. Hence in the medium to long term, the growth
outlook seems stable. Policy focus on inclusive growth, particularly in addressing the sources of
imbalances between regions, between rural and urban economies, the gender differentials and
the quality of governance at sub-national level are going to drive the economic performance.
17
Chapter 3
Evaluation of Fiscal Performance
Fiscal Consolidation Roadmap and Status:
39. The State Government has been on the path of Fiscal Consolidation ever since the passing of
Fiscal Responsibility Legislations (FRLs) like Karnataka Fiscal Responsibility Act (KFRA), 2002 and
Karnataka Ceiling on Government Guarantee Act (KCGGA), 1999. It is to the State’s credit that
such FRLs were brought in much before Government of India had enacted the Fiscal
Responsibility and Budget Management Act (FRBM) 2003. Therefore State has chosen on its own
volition to bring in fiscal discipline in the management of its finances.
40. Based on the Thirteenth Finance Commission’s recommendations for following a time bound
fiscal road map, the State Government vide KFR (Amendment) Act, 2011 has incorporated
statutory year-wise ceilings for key fiscal and debt indicators like Fiscal Deficit, Revenue Deficit
and Outstanding Debt as percentage of GSDP for the years leading up to 2014-15. This was
necessary not only to instil fiscal discipline but also to comply with Government of India’s
directions. Necessary amendments indicating ceilings for key fiscal and debt parameters to the
State’s FRLs was made as a condition-precedent for release of state specific grants and debt
relief measures in future. The States were expected to maintain the fiscal targets within such
new statutory ceilings.
41. The particulars of the key fiscal and debt norms to be followed and the compliance by the State
are shown below in Table 6:
Table - 6
Particulars Statutory norm Compliance by State
Revenue Deficit (RD) Reduce RD to Nil by 31st
March, 2006 Achieved in FY04-05 itself. Maintained adequate Revenue Surplus thereafter.
Fiscal Deficit (FD) Reduce FD to not more than 3 per cent of estimated GSDP by 31
st March, 2006.
Maintained FD below 3% since FY04-05*
Total Liabilities to GSDP (TL/GSDP) To ensure that TL/GSDP does not exceed 25.2% of GSDP by 31
st March, 2015.
Already achieved this in FY10-11 much ahead of timeline prescribed.
Outstanding Guarantees (OG) OG on 1st
April of any year should not exceed 80% of Revenue Receipts of second preceding year.
Since enactment of Karnataka Guarantee of Ceiling Act, 1999 this limit has never been breached.
*Except in the FY 2008-11 where it was fixed based on the advice of the Central Government.
Adherence to fiscal prudence during challenging economic environment
42. As seen at Table 6 the State is well on track with respect to the Fiscal Consolidation roadmap. It
has consistently recorded Revenue Surpluses since 2004-05. It was only in the years 2008-09
and 2009-10, based on the advice of the Central Government, the Fiscal Deficit limit of 3 per
18
cent was enhanced to 3.5 per cent of GSDP in 2008-09 and to 4 per cent of GSDP in 2009-10 to
give a fillip to the public spending to tide over the prevailing economic slowdown. Further, for
the year 2010-11, recognising the difficulties faced by the State Government in compressing the
fiscal deficit by 1 per cent (to 3 per cent of GSDP) in one year itself, the Government of India had
advised the State Government to comply with the fiscal responsibility norms over a two year
period. As a result, for the year 2010-11, the State Government had been advised to incur a
fiscal deficit of up to 3.44 per cent and only from the FY11-12 onwards would Fiscal Deficit be
maintained below 3 per cent as per the KFRA.
43. However inspite of the fact that the Government of India had allowed the states to have higher
fiscal deficit and incur revenue deficit in those difficult years, the State reined in its Fiscal deficit
to below 3 per cent in FY10-11 itself and managed to maintain a Revenue Surplus throughout
the years 2008-11 thereby utilizing the increased borrowing space entirely towards capital
expenditure only.
Fiscal performance of the State in FY12-13 vis-à-vis 2011-12
44. Table 7 shows the State’s fiscal performance for previous year vis-a-vis the targets set then and
the likely performance of the current year (R.E) vis-à-vis the budgeted target (B.E).
Table - 7
(` in Crore)
2011-12 2012-13
Particulars B.E Accounts B.E R.E
Revenue Surplus 1279 3144 931 943
Fiscal Deficit as percentage of GSDP 2.87% 2.92% 2.94% 2.93%
Total Liabilities to GSDP 24.05% 23.62% 22.66% 22.59%
Outstanding Guarantees as percentage of revenue receipts of second preceding year
18.72% 13.51% 16.32% 16.32%
45. The performance on key fiscal and debt parameters of Revenue Surplus, Fiscal Deficit and Total
Liabilities as a percentage of GSDP in RE 12-13 has been commendable as compared to ceilings
prescribed in KFRA. The State continued to maintain a Revenue Surplus at a level slightly higher
than budgeted estimate, thereby ensuring that entire current expenditure of the State was being
met only from Revenue Receipts and the Revenue Surplus and Capital Receipts were employed
purely for capital expenditure. Revised estimate of Fiscal Deficit as a percentage of GSDP is also
expected to be kept within the BE limit of 2.94 per cent.
19
46. On the debt management side, State’s performance has been commendable. The 13th Finance
Commission had laid down the road map for reducing the debt to GSDP ratio for Karnataka to
25.2 percent by the year 2014-15. The year-wise ceiling of debt to GSDP ratio to be adhered to
for FY 12-13 being 25.7 per cent, actual debt to GSDP ratio is proposed to be kept well within
this at 22.66 per cent in BE12-13. This is being maintained in RE12-13 too by maintaining this
ratio at 22.59 per cent. Hence the State is ahead of the road map suggested by the 13th Finance
Commission and has met the norms with regard to debt management well before the prescribed
time line.
Performance of receipts, expenditures and fiscal indicators (FY09-10 to FY 12-13)
47. Rule 4 of The Karnataka Fiscal Responsibility Rules prescribe the form and contents of the MTFP.
As per Rule 4(e), analysis of various fiscal parameters are to be provided for the year before the
previous year (accounts), the previous year (budget estimates and accounts) and the current
year (budget estimates and revised estimates), the next year (budget estimates) and a projection
for three subsequent years. Table B and Chapter 7 contain these analysis. However for
descriptive analysis of trends in various receipts, expenditure and other fiscal indicators, revised
estimates of current year and three previous year accounts data are used in this chapter.
Revenue Receipts:
48. Revenue Receipts consists of four major components viz. Own tax revenues, non tax revenues,
Devolution from GOI and GIA & Contributions. A major source of Revenue receipts has been the
State’s Own Tax Revenue (SOTR) which constitutes almost 64 per cent of total revenue receipts
in Budget estimate 2012-13. Including the own non tax revenue, this share increases to more
than 67 per cent of revenue receipts. Thus the State substantially relies more on its own
resources rather than on devolution of central taxes or grants from Centre. Revenue receipts on
the whole are expected to increase by Rs.3423 crore over the budget estimate for FY12-13. Due
to the moderation of the growth in Central taxes, the devolution of Central taxes in the current
year is expected to fall short of the budgeted estimate of Rs.13094 crore to Rs.12,500 crore.
State Own Tax Revenues (SOTR):
49. SOTR comprises of the four major taxes of the State and all other taxes levied by the State.
Commercial taxes constitute the major part of own tax revenues i.e. about 60 per cent. SOTR
was estimated at Rs.51821 crore in budget estimate 12-13 which was 10 per cent more than the
20
actuals in 2011-12. The overall tax revenue is expected to exceed budget estimate by Rs.1672
Crore.
Non Tax Revenue:
50. The major single source of non tax revenues are receipts from mining and forest development
tax. However the entire forest development tax receipts are a pass through in the State Budget
since these are transferred to Forest Development Fund maintained in the Public Account and
the same is utilized thereafter for schemes of Forest Department. Mining receipts are basically
royalty on major and minor minerals. These receipts have been a steady source of income to the
State. Since the mining receipts were conservatively estimated at Rs.1500 crore in the current
year, it is expected to meet this target in the current year. The other sources of non tax revenues
include interest receipts and dividends. Non Tax Revenues have not been growing at the
anticipated rate and have been identified as one area which requires significant thrust. While
the BE 11-12 target could be achieved, it was largely due to interest receipts on account of
investment in GOI treasury bills. The FMRC’s advice on taking concerted action in improving non
tax revenues needs to be taken up.
21
Non Debt Capital Receipts (NDCR):
51. NDCR includes largely sale of assets and recoveries of loans and advances. In recent past, State
has been unable to realise the monetary potential out of the land available with it. Also due to
sluggish real estate market and various administrative hurdles, no additional revenue from such
land sale has been possible. Keeping this aspect in mind, the estimate under this head for FY13-
14 has been conservatively estimated at Rs.100 crore.
Expenditure pattern:
52. Public expenditure indicates the quantum of government spending on social and physical
infrastructure for the development of the State. The basic broad categorization of public
expenditure is into plan and non-plan. Chart below indicates the growth of Plan and Non Plan
expenditure over the years. While the Non Plan expenditure quantum is much more than the
Plan Expenditure, the Plan expenditure of the State has also steadily increased. Following chart
shows the plan – non plan expenditure comparison over the last four years.
22
53. While Non Plan expenditure in RE 12-13 has grown at a rate 21 per cent over the 2011-12
accounts, during the same period the Plan expenditure too has increased by over 21 per cent.
Thrust has been given to further improve the Plan expenditure while curbing the non essential
non plan expenditure. Also as detailed later in the MTFP, a large part of non plan expenditure of
State consists of development expenditure. Development expenditure is that expenditure which
is primarily spent on Social and Economic Services. The Government strategy is to effectively
control non-essential non developmental expenditure so as to enhance resource allocation for
development activities in various sectors.
Fiscal Indicators:
54. The two primary fiscal indicators that are carefully monitored and kept within the limits
specified in KFRA are the Revenue Balance and Fiscal Balance. State has continuously maintained
Revenue Surplus ever since 2004-05 ensuring that entire borrowings and revenue surplus are
made available for capital expenditure only and not for meeting current expenditure.
55. State has also strictly adhered to Fiscal Deficit limits prescribed by the 13th Finance Commission
in its Fiscal Consolidation Roadmap. Hence the FD mandatory limit of 3 per cent of GSDP was
maintained except during the years FY08-11, when special permission was given by GOI to
increase the fiscal space and borrow more to provide a fillip to the slowing economy. As seen
from the table 8 and following graph, Fiscal Deficit as a percentage of GSDP limit has not been
breached during the last three years. As against the FD limit of 2.94 per cent fixed for BE12-13, it
23
is expected to maintain FD as a percentage of GSDP to within 2.93 per cent in RE 12-13.
Table – 8
(in Percent)
Fiscal Deficit 2009-10 2010-11 2011-12 2012-13 RE
KFRA Ceiling 4.00% 3.44% 3.00% 3.00%
Achievement 3.24% 2.81% 2.83% 2.93%
Debt Sustainability Indicators:
56. The two primary indicators that the State Government adopts to monitor its debt stability and
sustainability are the ratios of Interest Payments to Revenue Receipts (IP/RR) and Total Liabilities
to GSDP (TL/GSDP). Both these indicators are prescribed by the 13th Finance Commission for
evaluation of debt sustainability of the State.
Interest Payments to Revenue Receipts (IP/RR):
57. 13th Finance Commission has mandated that the IP : RR ratio is kept within 15 per cent. As seen
below, due to buoyancy in revenue receipts, State has ensured that Interest Payments are kept
well within this ratio. Since 2009-10, this limit has not been in excess of 11 per cent. In 2012-13 it
is expected to further reduce and maintain this ratio at around 8.1 per cent in revised estimate.
24
Total Liabilities to GSDP:
58. The State includes liabilities under Off-budget borrowings under the definition of Total
Liabilities. Based on the 13th Finance Commission recommendations, the Karnataka Fiscal
Responsibility (Amendment) Act, 2011 has amended Section 4 of KFRA to incorporate ceiling for
Outstanding Debt as follows:
Year 2011-12 2012-13 2013-14 2014-15
OD/GSDP (%) Ceiling as provided under KFRA
26.0 25.7 25.4 25.2
59. The above ceilings have been strictly adhered to by the State. The fresh borrowings in any year
are opted for keeping in mind the above ceilings. In view of this, State has been ensuring that
Total Liabilities are kept within the limits as seen from the following graph.
25
26
Table - A Fiscal Performance (` in Crore)
Particulars 2009-10
BE
2009-10
A/c
2010-11
BE
2010-11
A/c
2011-12
BE
2011-12
A/c
2012-13
BE
2012-13
RE
1 Revenue Receipts 48389 49156 53638 58206 66313 69806 81461 84884
of which
(i) State Own Tax Revenues 32721 30579 36228 38473 43817 46476 51821 53492
(ii) Non Tax Revenues 2130 3334 2820 3358 3675 4087 3193 3796
(iii) Resources from the centre
of which
- Devolution 7645 7360 9060 9506 10419 11075 13094 12500
- Grants 5893 7883 5530 6869 8402 8168 13354 15095
2 Revenue Expenditure 47238 47537 53138 54034 65034 65115 80530 83941
of which
(i) Interest 5578 5213 6316 5641 6950 6062 7500 6852
(ii) Salaries 11305 10396 12577 11086 13854 11870 18299 17120
(iii) Pensions 4001 3408 4500 4070 5500 5436 6980 7500
(iv) Subsidies(Food, Transport 1704 1806 1723 1885 1956 2120 2484 4029
Housing, Industry & Others)
(v) Power Subsidy 2402 2341 2826 4442 4301 5303 5100 6350
(vi) Devolution to ULBs 2720 2474 2885 2978 4343 4344 5237 5011
(vii) O & M
of which
- Major O&M (Roads, Buildings & Irrigation)
763 676 676 712 700 681 556 581
- Other O&M (Edn,Health, RD,WS,Agr, Forest)
7805 8088 9989 5818 7534 7292 10621 10715
(viii) Administrative Expenditure
828 892 908 914 1010 1011 1251 1331
(ix) Other Revenue Expenditure
10132 12243 10738 16488 18886 20996 22502 24452
3 Revenue Surplus 1151 1619 500 4172 1279 4691 931 943
4 Capital Receipt (Non Debt) 1977 625 2903 233 2062 330 299 257
5 Expenditure on Capital Formation
11622 13118 13112 15093 15822 17321 16542 16439
6 Fiscal Deficit 8493 10874 9708 10688 12482 12300 15312 15239
7 Outstanding Debt 77797 83482 89607 91943 101196 103030 114745 114401
8 Debt Services 7782 7521 8779 8448 10062 9382 11170 10496
9 Off Budget Borrowings 2589 3249 3249 3249 3249 3249 3249 3249
10 Guarantee Stock 7203 7203 8200 6618 9200 6640 9500 9500
11 Total Liabilites 80386 86731 92856 95192 104445 106279 117994 117650
12 GSDP at current prices 294952 335747 328312 380871 434270 434270 520766 520766
13 Annual Inflation 4% 4% 5% 5% 6% 5.0% 6.5% 8%
14 GSDP Real Growth Rate 6% 6% 8% 8% 8% 8.0% 7.5% 6%
27
Table - A
Fiscal Performance ( in percentage)
Particulars 2009-10
BE
2009-10
A/c
2010-11
BE
2010-11
A/c
2011-12
BE
2011-12
A/c
2012-13
BE
2012-13
RE
ALL THE ITEMS AS PERCENTAGE OF GSDP
1 Revenue Receipts 16.41 14.64 16.34 15.28 15.27 16.07 15.64 16.30
of which
(i) State Own Tax Revenues 11.09 9.11 11.03 10.10 10.09 10.70 9.95 10.27
(ii) Non Tax Revenues 0.72 0.99 0.86 0.88 0.85 0.94 0.61 0.73
(iii) Resources from the centre
of which
- Devolution 2.59 2.19 2.76 2.50 2.40 2.55 2.51 2.40
- Grants 2.00 2.35 1.68 1.80 1.93 1.88 2.56 2.90
2 Revenue Expenditure 16.02 14.16 16.19 14.19 14.98 14.99 15.46 16.12
of which
(i) Interest 1.89 1.55 1.92 1.48 1.60 1.40 1.44 1.32
(ii) Salaries 3.83 3.10 3.83 2.91 3.19 2.73 3.51 3.29
(iii) Pensions 1.36 1.02 1.37 1.07 1.27 1.25 1.34 1.44
(iv) Subsidies(Food, Transport 0.58 0.54 0.52 0.49 0.45 0.49 0.48 0.77
Housing,Industry & Others)
(v) Power Subsidy 0.81 0.70 0.86 1.17 0.99 1.22 0.98 1.22
(vi) Devolution to ULBs 0.92 0.74 0.88 0.78 1.00 1.00 1.01 0.96
(vii) O & M
of which
- Major O&M (Roads, Buildings & Irrigation)
0.26 0.20 0.21 0.19 0.16 0.16 0.11 0.11
- Other O&M (Edn,Health, RD,WS,Agr, Forest)
2.65 2.41 3.04 1.53 1.73 1.68 2.04 2.06
(viii) Administrative Expenditure
0.28 0.27 0.28 0.24 0.23 0.23 0.24 0.26
(ix) Other Revenue Expenditure
3.44 3.65 3.27 4.33 4.35 4.83 4.32 4.70
3 Revenue Surplus 0.39 0.48 0.15 1.10 0.29 1.08 0.18 0.18
4 Capital Receipt (Non Debt) 0.67 0.19 0.88 0.06 0.47 0.08 0.06 0.05
5 Expenditure on Capital Formation
3.94 3.91 3.99 3.96 3.64 3.99 3.18 3.16
6 Fiscal Deficit 2.88 3.24 2.96 2.81 2.87 2.83 2.94 2.93
7 Outstanding Debt 26.38 24.86 27.29 24.14 23.30 23.72 22.03 21.97
8 Debt Services 2.64 2.24 2.67 2.22 2.32 2.16 2.14 2.02
9 Off Budget Borrowings 0.88 0.97 0.99 0.85 0.75 0.75 0.62 0.62
10 Guarantee Stock 2.44 2.15 2.50 1.74 2.12 1.53 1.82 1.82
11 Total Liabilites 27.25 25.83 28.28 24.99 24.05 24.47 22.66 22.59
28
Chapter 4
Revenue Performance & Reforms
Tax Policy and Strategy:
60. The taxation policy of the State continuously aims at streamlining the tax structure and
administration for better tax compliance with least effort. In these times of economic slowdown,
taxation policy become all the more important not purely as a tool for revenue generation but
also as a medium and long term measure to propel the economy back to a high growth
trajectory.
61. In recent times the State has been trying to simplify and rationalize its tax structure along with
simplification of process of filing tax returns to ensure effective mobilization of resources. The
reforms carried out in the tax departments like E-payment of taxes in Commercial Tax
Department and Anywhere registration in Stamps & Registration Department have benefitted
the tax payer at large.
62. MTFP 12-16 onwards State has been disclosing the compliance costs associated with different
types of taxes it imposes. While Government spends money on tax collection activities, some of
the costs like filling out forms, keeping records and other such tax related chores are borne by
individual or entity paying the tax. These are collectively called costs of compliance i.e. the cost
incurred by the tax payer in complying with the tax payment process. More complex tax systems
tend to have higher compliance costs and as a corollary, lower compliance cost is an indication
of tax simplification.
63. Taxation reforms in 2013-14 would continue to strive for improving tax compliance and
increasing tax base. MTFP 13-17 continues to disclose the compliance cost of four major taxes of
State Government from the tax payer’s perspective.
Tax Effort:
64. Karnataka has over the years consistently achieved the highest own tax revenue to GSDP ratio
(tax effort) amongst all other States. The graph below highlights the effort in the last four years.
29
65. Tax Effort during FY 2008 to 2010 declined slightly due to the global economic crisis. Tax effort of
Government of India too was affected during this period. During the period 2004-05 to 2009-10,
when the CAGR of GSDP was 15.1 per cent, the CAGR of State’s own tax revenue was only 13.7
percent. Thereafter, however, the economy rebounded to the high growth path in the latter half
of 2009-10. As seen above from 2010-11 onwards the tax effort has increased to above 10 per
cent. The enhanced tax receipts are attributed to the factors like different tax rates, widening
tax base and institutional efficiency in collection all of which improves tax compliance.
66. Though the State taxes have largely remained unaffected from the overall global economic
slowdown, there could be some moderation in tax effort in the coming years due base effect.
Any more substantial increase in the tax growth cannot be expected in the near future due to
the tough economic climate. The challenge for the State would be to ensure maintaining a high
tax effort in future to garner adequate resources to meet expenditure requirements of critical
sectors through the 12th FYP period.
67. The composition of major taxes as a percentage of GSDP since 2008-09 is shown in the graphs
below.
30
68. With the economy gaining steady momentum slowly from 2009-10 onwards, commercial taxes
and motor vehicle taxes have exceeded their pre-economic slowdown share and stand at 6.1
percent and 0.7 percent respectively. Stamps and registration revenues which used to comprise
1.4 per cent of GSDP in 2006-07 is at 1 per cent in 2011-12 RE. This is largely due to the weak
sentiments in the real estate market and the reduction of stamp duty to 5 per cent under
JnNURM reforms. Hence there is further scope to improve the tax collection here. Growth in
share of taxes in GSDP has been good in Excise as this has continuously increased from 1.8 per
cent in 2008-09 to over 2.2 per cent of GSDP in 2012-13 RE.
69. With incipient signs of easing of inflation in the coming days and also indications that RBI may go
in for further repo rate cuts, investment activity too would ideally pick up. The annual growth
rates and buoyancy of these taxes, individually for a 7 year period have been shown in the table
below. Tax buoyancy is a measure of the responsiveness of tax receipts to economic growth. A
tax which is buoyant is one whose revenues increase by more than one percent for a one
percent increase in national income or GSDP. Buoyancy however reflects both discretionary
changes and automatic revenue growth.
31
Table - 10
(` in Crore)
Commercial Tax Excise Duty
Year Actuals Growth
Rate Buoyancy Actuals
Growth Rate
Buoyancy
2006-07 13714 19% 1.2 4495 32% 2.0
2007-08 15552 13% 0.7 4767 6% 0.3
2008-09 16645 7% 0.6 5750 21% 1.8
2009-10 17960 8% 0.7 6946 21% 1.9
2010-11 23266 30% 2.2 8285 19% 1.4
2011-12 28000 20% 1.5 9775 18% 1.3
2012-13
RE 32000 14% 3.0 11300 16% 3.3
CAGR 15.17% 1.16* 16.60% 1.18*
Motor Vehicle Tax Stamps & Registration Duty
Year Actuals Growth
Rate Buoyancy Actuals
Growth Rate
Buoyancy
2006-07 1374 24% 1.5 3206 45% 2.7
2007-08 1650 20% 1.1 3409 6% 0.3
2008-09 1681 2% 0.2 2927 -14% -1.2
2009-10 1962 17% 1.5 2628 -10% -0.9
2010-11 2550 30% 2.2 3531 34% 2.6
2011-12 2957 16% 1.1 4623 31% 2.2
2012-13
RE 3500 18% 3.9 5300 15% 3.1
CAGR 16.86% 1.17* 8.74% 1.09*
* Buoyancy over 7 year period is based on Logarithmic Regression
Performance of Major Own Taxes:
a) Commercial Taxes
70. Commercial Taxes constitute more than 60 per cent of the State’s own tax revenues. Being a
major contributor to the SOTR, collections here have a bearing over the overall resources
available. For the FY12-13, BE 12-13 of Commercial Taxes is Rs.31100 crore. In order to meet a
part of the expenditure on account of cooperative crop loan waiver, VAT was increased by 0.5
per cent for one year i.e. from 01.08.2012 to 31.07.2013. It is anticipated that additionally
Rs.1000 crore could be mopped up by this increase over this period. During the year, the
quarterly collections and quarterly growth over corresponding period in previous year for
Commercial taxes is as shown below:
32
Table - 11
(` in Crore)
Taxes Q1 Growth Q2 Growth Q3 Growth Anticipated collections
in Q4 RE 12-13
Overall growth
over previous
year
Commercial Taxes
8011 27% 7434 14% 7796 11% 8759 32000 14%
71. During the first quarter of FY 2012-13, the commercial taxes grew at the rate of almost 27 per
cent and thereafter moderated to around 14 per cent in the second quarter. By the third
quarter, the growth had slowed down to 11 per cent. A part of the decline in quarterly growth
rate of taxes could be attributed to slowdown in general economic activity. While RE12-13 has
been estimated at Rs.32000 crore i.e. an increase of Rs.900 crore, if the collections do not pick
up as anticipated in the final quarter, there would be scope for some downward correction in
estimates.
72. However despite the slowdown in growth of taxes, the budget estimate would be exceeded. The
good growth in tax revenue over the last few years is primarily attributable to the positive
response of the tax payers to the extensive computerization programme embarked upon by the
Commercial Taxes Department. All the dealers are now filing returns online and more than 80%
of the revenue is coming through the electronic mode. A large number of services are being
provided electronically at the doorsteps of the tax payer. As a result the tax compliance is much
better.
GST Issues
73. The State has considered the Report of Committee on GST and is in broad agreement with it.
Proposed GST subsumes Value Added Tax (VAT), Sales Tax on Sugarcane, Luxury Tax,
Entertainment Tax, Betting Tax and CST. State has specifically requested that Entry Tax in lieu of
Octroi, Entertainment Tax levied for Local Bodies and Salex Tax on Petroleum Products be
retained in the State List. Recently in the meeting of the Empowered Committee of State Finance
Ministers held in Odisha during January 2013, State supported the provision relating to the GST
Council providing for it to recommend floor rates of GST with a band giving certain fiscal
autonomy to States to raise resources, if required.
74. The State also broadly agrees with their estimations of Revenue Neutral Rate by National
Institute of Public Finance and Policy (NIPFP). The NIPFP taking CST at 4% has estimated the
33
Revenue Neutral Rate without addition to tax base by way of IT related services at 17.10 for the
entire country. This would be acceptable to the State. Also the standard rate of State GST should
not be kept lower than the national Revenue Neutral Rate.
75. Another crucial aspect for the States is having in place a robust and independent mechanism to
compensate the loss that the States are likely to suffer after implementation of GST. The level of
losses by the loser states need to be assessed. While the 14th Finance Commission Terms of
Reference includes the assessment of the likely impact of the proposed goods and services tax
(GST) on central and state finances and devise a mechanism for GST compensation, State has
suggested that the proposed new provision in the Constitution regarding setting up of GST
Council should be modified suitably to mandate that the GST Council suggests the broad
contours and mode of such compensation.
76. On the whole, State Government stands by its commitment to support introduction of GST that
would reform the current complex taxation system of commodities and services. GST would
require a robust IT Infrastructure to achieve its aim of widening of tax base and increase in
revenue through better tax compliance along with removal of cascading effect of taxes leading
to lower prices. The current IT infrastructure and network could be retained but designed to
provide any information to other States and Centre from its data base under Application
Protocol Interface (API) Model.
b) State Excise
77. State Excise Revenue has shown a steady increase since 2008-09. It is the second largest
contributor amongst State’s own tax revenue. The budget estimate for FY12-13 for State Excise
is Rs.10775 crore. The quarterly collections and quarterly growth over corresponding period in
previous year for State Excise is as shown below:
Table - 12
(` in Crore)
Taxes Q1 Growth Q2 Growth Q3 Growth Anticipated collections
in Q4
RE 12-13
Overall growth
over previous
year
State Excise 3101 23% 2457 22% 2741 22% 3001 11300 16%
34
78. As seen in table 12, there has been a steady growth in excise revenues for each of the three
quarters at around 22 to 23 per cent. The quarterly growth in excise has picked up in the last
two quarters. Going by this trend it is expected that excise revenues would exceed the budget
estimate by Rs.525 crore by the end of the 4th quarter.
79. Excise department being a major tax source of revenue for State, the enforcement of excise law
has to be strict to ensure compliance. The department has increased its intensive patrolling and
surveillance on manufacturing and selling units. As a result of these measures, there is healthy
growth in revenue from sale of IMFL. The department proposes to take up reform measures like
Computerisation up to the range level offices, provision of wireless, GPS sets, fire arms and
modern vehicles to the departmental officers for effective enforcement.
c) Stamps and Registration:
80. Revenue from Stamps and Registration has been budgeted at Rs.5200 crore in FY12-13. These
receipts have shown less than anticipated quarterly growth as compared to the previous year.
Under the JnNURM reforms, there was a commitment by the State to decrease stamp duty to 5
per cent. The decreased revenue on account of this move was expected to be made up by
increased compliance in registering documents and also by the upward revision of guidance
values in November 2011. However the impact of higher registrations translating into better
revenues may be seen only in the medium to long term. The other reason for the slow growth in
taxes could be attributed to the still recovering real estate sector.
81. During the year, the quarterly collections and quarterly growth over corresponding period in
previous year for Stamps and Registration is as shown below. Since growth rate has been less
this year, it is anticipated that the receipts may exceed the budget estimates by only Rs.100
crore.
Table - 13
(` in Crore)
Taxes Q1 Growth Q2 Growth Q3 Growth Anticipated collections
in Q4 RE 12-13
Overall growth
over previous
year
Stamps & Registration Fees
1246 12% 1297 3% 1355 9% 1402 5300 15%
35
82. The Department has recently introduced the anywhere registration where a citizen can register
his document with any Sub Registrar Office within a district. In the future too, efforts need to be
made to better align the guidance value and the market value of the properties to increase tax
realization. The Department would be provided with better staffing. A dedicated cell on the lines
existing in Maharashtra is proposed to be created within the Department to advise regularly on
guidance value revision. A system of periodic and automatic revision of guidance values indexed
to average market rates is desirable.
d) Motor Vehicle Taxes
83. Budget Estimates for Motor Vehicle Taxes in FY12-13 is estimated at Rs.3350 crore. The rate of
growth of taxes in the first two quarters has been very good. The major share of tax is collected
from cars and two wheelers which constitute more than 75 per cent of the total strength of
motor vehicles in the State. While growth in the 3rd quarter has slowed down a bit, the overall
growth is expected to be around 18 per cent. Commensurate with the growth of the vehicles,
the tax revenue too has grown significantly and it is expected that during 2012-13 the revenue
collection would be around Rs.150 crore more than the budgeted estimate. During the year, the
quarterly collections and quarterly growth over corresponding period in previous year for Motor
Vehicles taxes is as shown below
Table - 14
(` in Crore)
Taxes Q1 Growth Q2 Growth Q3 Growth Anticipated collections
in Q4 RE 12-13
Over all growth
over previous
year
Motor Vehicles 842 20% 892 31% 886 12% 880 3500 18%
84. Computerization and issue of smart card driving licenses and registration certificate has been
implemented in all RTO/ARTOs offices in the State through PPP model. The Collection of fees
and tax, issue of driving licenses, vehicle registration, issue of permits have all been
computerized. The department is considering the collection of tax and fees also through e-
payment for better compliance of tax payments and transparency.
Cess Receipts:
85. A Cess is a tax on tax which is appropriated towards a specific purpose as opposed to tax which
is a general purpose levy. Levy and collection of a cess by the State creates an obligation on its
36
part to use the cess receipts for the specific purpose for which it is levied. The two main cesses
that the State imposes are:
a. Infrastructure Cess
b. Urban Transport Cess
86. Infrastructure Cess is imposed on all of the State’s three major own taxes except Commercial
Taxes i.e. on Excise License Fee, Motor Vehicles Tax and Stamp Duty. These cesses were imposed
primarily for augmenting the Infrastructure Initiative Funds (IIF) maintained in Public Account of
the State. The cess transfers to the IIFs are utilised towards meeting the expenditure for
undertaking vital infrastructure works like Bangalore Metro, Rail Projects, Airports, Rural roads
etc. The rates of cess imposed statutorily on these taxes are as follows.
10% on Motor Vehicles Tax
10% on Stamp Duty
15% on Excise License Fee
87. Apart from the above, there is also a 1 per cent cess imposed on Motor Vehicle Tax for
contribution to the State Urban Transport Fund (SUTF) which was set up as part of the JnNURM
reforms. SUTF is used to largely fund urban transport schemes implemented and overseen by
the Directorate of Urban Land Transport.
88. Cess collections were estimated at Rs.725 crore for transfer to IIFs and Rs.30 crore for transfer to
SUTF in BE 12-13. Due to the less buoyant tax collection this year, the cess receipts are proposed
to be more or less at the same level in RE12-13.
Non Tax Revenues:
a) Royalty on Major and Minor Minerals:
89. The major revenue in the Department of Mines and Geology is royalty on major & minor
minerals. The banning of extraction and export of iron ore while positively checking illegal
mining in the State has on the other hand adversely affected revenue mobilization of the State.
However due to e-auction of seized iron ore, there has been faster realisation of proceeds and
hence it is anticipated that mining receipts would meet the budget estimate of Rs.1500 crore.
37
b) Interest Receipts:
90. Apart from the regular source of interest receipts on account of repayment of loans, the other
major source is interest proceeds out of investment of surplus cash balance of the State. As per
RBI’s regulations, the cash balance maintained by the State is invested in GOI’s 14 day Treasury
Bills (T-Bills). However the average interest rate on these T-Bills is around 5-6%. RBI and even the
Accountant General have advised the State against piling up of huge cash reserves and thereby
keeping cash idle. To improve cash management, it has advised States to invest their excess cash
balance (beyond the immediate requirement) to be investment in GOI’s 91 day T Bill. In view of
this, like in FY11-12, this year too State has decided to invest in GOI’s 91 day T Bill. There may be
an increase in Interest Receipts by at least Rs.200 crore in the current year on account of such
investment in GOI’s 91 day T-Bills.
c) Other Non-Debt Capital Receipts:
91. Unlike in earlier years, Non Debt Capital Receipts on account of land sale has been estimated
realistically in BE12-13 at Rs.125 crore and further reduced to Rs.100 crore as opposed to the
large estimates considered in earlier years. With sign of inflation decreasing and cheaper credit
being made available, the real estate market could look up in the medium term. Government
would explore possibility of monetisation of its assets by selling lands owned by it in strategic
locations.
Accounting of direct releases of Central government:
92. The Central Government transfers some funds to State implementing agencies outside the State
budget for implementation of various schemes in the socio-economic service sectors. The C&AG
in his report on the State Finances for the year ending 31st March 2010 has observed that as
these funds are not routed through the State budget, Finance Accounts do not capture the flow
of these funds and to that extent State’s receipts and expenditure as well as other fiscal
variables/parameters derived from these are understated. Some of these schemes are Flagship
schemes like National Rural Employment Guarantee Scheme, National Rural Health Mission and
National Horticulture Mission. The report has suggested that a system be put in place to ensure
proper accounting of these funds and the updated information should thereafter be validated by
the State Government as well as the Accountant General (Accounts & Entitlement)
93. In view of this observation, State started the practice of accounting for such direct releases in
the State budget. Both receipts and expenditures are being accounted through the budget.
Administrative Departments under which the implementing agencies function have been
38
authorised to issue adjustment orders on expenditure of directly released funds. It is felt that
this would enable proper documentation and reporting of expenditure for such schemes at least
for the time being. It is learnt that Planning Commission has advised Government of India to
route all its releases to States through their budgets and not bypass them. If this comes through
soon then the necessity of accounting such direct releases would not be felt as all funds would
anyway flow through the budget. However till such time, State would continue with this interim
arrangement of accounting for such direct releases in its budget.
39
Chapter 5 Expenditure Management
94. Expenditure priorities of the State Government can be evaluated by the outlays on general,
social and economic services. It is desirable that the outlays should be enhanced for social and
economic services because of the developmental impact while the expenditure on general
services should be moderated. Another indicator of quality of expenditure is the share of plan
expenditure out of the total expenditure. Further an increase in the proportion of capital
expenditure to total expenditure indicates more asset creation than current consumption
expenditure.
95. The expenditure outlays on general, social and economic services for the current year and past
three years are shown in Table 15. Expenditure is further broken down into revenue, capital and
loan to give a better understanding of the nature of expenditure.
Table – 15
Expenditure on Services
( ` in Crore)
Services 2009-10 2010-11 2011-12 2012-13
RE
General Services
Revenue 12762 14055 16445 21127
Capital 490 465 625 659
Loan - - - -
Total 13252 14520 17071 21786
Social Services
Revenue 19119 22108 25172 32762
Capital 2651 2617 2695 2926
Loan 805 1490 1546 732
Total 22575 26215 29413 36420
Economic Services
Revenue 13182 14892 19154 25041
Capital 8996 10273 12185 11292
Loan 176 248 269 830
Total 22354 25413 31608 37163
40
`
96. The Government expenditure on various services over the last four years has been shown above.
The State has come a long way from the year 2003-04 when General services expenditure was
higher than social and economic services expenditure. However during the last three years and
the current year, while the share of General Services continues to reduce as a percentage of
GSDP, the rate of growth in social and economic services is almost similar. During the current
year, expenditure on economic services and social services accounts for 39 per cent and 38 per
cent of total expenditure respectively. During 2012-13, State has substantially invested more in
social sector than in the previous years. As per Revised Estimates the growth of social sector
expenditure has increased by almost 24 per cent in 2012-13 over the previous year. This is
primarily on account of higher expenditure in critical sectors like education, medical and public
health, welfare of SC/ST/OBCs, expenditure on women and child welfare schemes. The higher
investment in socio-economic sectors is expected to improve the development indicators of the
State.
Plan and Non Plan Expenditure:
97. While economy orders are still in place to moderate the non-plan expenditure, it has been
clarified recently that such economy orders would not apply to filling up of posts through
promotion or if it entails filling up of a backlog post. The share of plan expenditure in total
expenditure has also shown an increasing trend continuously. From 37 per cent in FY08-09, it
has improved to 41 per cent in 2012-13 (RE). In addition to this, the share of capital expenditure
in total expenditure has reached almost 16 per cent during the same period. Although there is
improvement in terms of allocation and also the quality of expenditure outlays, the major
41
challenge before the State will be to continuously focus on improving the outcomes of the
expenditure so that the impact is visible in improvement of Human Development Indicators
(HDI) for the State and overall socio-economic growth of the State.
Development and Non-Development Expenditure:
98. Another way of classifying expenditure would be categorising it based on expenditure on
development and non-development schemes / programmes. While the notion of what
development expenditure comprises of and what it does not could be a subject of debate, the
State classifies expenditure as development or non – development based on the classification
available in Finance Accounts and thereafter as reflected in the RBI’s Study of States’ Budgets.
Even as the Non Plan expenditure rises in absolute terms every year, it is to be noted that the
State’s development expenditure is much more than the non-development expenditure. For
RE12-13, the development expenditure is more than 54 per cent of total expenditure. This is a
healthy trend and needs to be sustained throughout the MTFP 13-17 period.
Sector wise Outlays:
99. The State Plan Size which is Rs.42030 crore in 2012-13 BE is anticipated to increase to Rs.42100
crore in revised estimates. In order to provide adequately for all the major sectors of the State,
the outlays have increased across all the sectors in BE13-14 over 2011-12 allocations. The
outlays of some of the major developmental sectors for the last four years and FY13-14 and
corresponding growth over previous year are detailed in the Table 16.
42
Table - 16
Outlay under major development sectors
(` in Crore)
Years Agri & Horti Growth Rural Dev Growth Health Growth Education Growth
2009-10 1348
3362
1547
8576
2010-11 1659 23% 3580 6% 1941 25% 10998 28%
2011-12 2578 55% 5404 51% 2367 22% 12399 13%
2012-13
(RE) 3699 43% 8079 49% 3207 35% 15927 28%
2013-14
(BE) 4402 19% 6354 -21% 4027 26% 18666 17%
Beneficiary oriented schemes:
100. The State implements various beneficiary oriented schemes whose allocations have steadily
increased over the years. These schemes being largely financial support based or subsidy based
schemes, large expenditure here impacts the revenue balance of the State. With the scope and
ambit of these schemes increasing to cover more beneficiaries, there are demands for
allocations beyond what is provided for in the budget, most of which have to be accommodated
regularly in Supplementary Estimates during the course of the year. The allocation for such
beneficiary oriented schemes benefitting over 201 lakh beneficiaries is Rs.10928 crore in RE
2012-13. As brought out earlier in this document better targeting of subsidies is the need of the
hour as scope for raising revenue to meet this expense is limited.
The scheme-wise details of allocations with estimated beneficiaries may be seen in the following
Table 17:
Table - 17
Sl. No.
Scheme RE 12-13 (Rs. Crore)
Estimated Beneficiaries* (in Lakh)
1 Bhagyalakshmi 805 4
2 Food Subsidy 950 95
3 Milk Subsidy 369 9
4 Bicycle to School Children 156 5
5 Social Security Pensions 2336 34
6 Free Electricity to IP Sets 5800 16
7 Seed Subsidy 120 23
8 Crop Loan Subsidy 392 15
9 Transport 296 -
Total 11224 201
*Some beneficiaries may be drawing benefit from more than one scheme
43
Resource Transfer to Local Bodies:
101. As per State Finance Commission’s recommendations, State is committed to transfer a
part of its Non Loan Net Own Revenue Receipts (NLNORR) to local bodies. Such transfers to
ULBs and PRIs have been consistently increasing as see in the graph. The State has accepted
the recommendations of the Third State Finance Commission’s recommendations with
modifications to be applicable from FY 2011-12 to FY 2015-16. Total funds to be devolved to
local bodies have been increased from the current 40 per cent to 42 per cent of the Non
Loan Net Own Revenue Receipts (NLNORR) of the State. Out of this, 32 per cent of NLNORR
would be assigned to Panchayat Raj Institutions, inclusive of their salary expenditure and 10
per cent to Urban Local Bodies (ULBs) from the present 8 per cent which would be achieved
gradually by the year 2014-15.
102. For the year 2012-13, the total budgeted transfers to ULBs were Rs. 4800 crore and to
PRIs were Rs.17849 crore. On an estimated NLNORR of Rs.53482 crore, the transfers to ULBs
stand at 9 per cent and transfers to PRIs at more than 33 per cent. In FY13-14, the transfers
to ULBs would be increased to 9.5 per cent of NLNORR.
44
Capital Expenditure to GSDP:
103. Since the State maintains adequate revenue surplus, it has additional resource to meet its
capital expenditure needs. Between 2008-09 & 2011-12 the capital expenditure to GSDP ratio
increased from 3.5 per cent to 4.0 per cent. Since during this period, Government of India
permitted State Government to incur fiscal deficit beyond 3 per cent of GSDP, this additional
borrowing space was used to push for more capital expenditure. However during 2011-12, the
fiscal deficit limit for the State was pegged back to 3 per cent of GSDP. This explains the slight
moderation in capital expenditure to GSDP ratio in 2011-12.
104. During 2012-13, capital expenditure has come down on account on higher revenue
expenditure and lower revenue surplus. The primary reasons for the increase in revenue
expenditure are the salary increase for State Government employees on account of pay
committee report and the cooperative crop loan waiver for farmers. The reduced revenue
surplus on this account meant that capital expenditure had to be met largely out of capital
receipts including borrowings which are regulated and permitted only by GOI. However the State
is geared to raising its non-debt capital receipts and reducing its consumptive revenue
expenditure and thereby spending more on creation of capital assets.
45
Delegation of Fund release powers to Administrative Departments
105. With a view to improve the pace of implementation of schemes and thereby improve plan
expenditure, Finance Department has delegated powers of release of funds to concerned
Administrative Secretaries for the first two quarters up to 50 per cent of the budget provision for
almost all the major schemes of departments (except for a few schemes). With this the Plan
expenditure of Rs.12025 crore incurred during April-September 2012 accounted for 34 per cent
of B.E 2012-13 and reflected a growth of 17 per cent over the expenditure during the same
period in the previous year. This achievement of plan expenditure was much more than the five
year average of 29 per cent. To further give a fillip to speed up expenditure, Finance Department
has delegated powers of release to Administrative Secretaries even for the third quarter up to
75 per cent of the budget provision. With this delegation, the plan expenditure is expected to
pick up in the last two quarters of the current year and reach the budgeted figure of Rs.40,240
crore (inclusive of direct releases of Rs 4706 crore).
46
Chapter 6
Public Finance Management & Systemic Reforms
106. After pursuing an expansionary fiscal policy to address the slowdown in the economy in the
aftermath of the global crisis, the challenge before the State government in the subsequent
years was to revert to the fiscal consolidation path. With the passing of the KFRA 2002 and
subsequent amendments, State has also committed itself to follow the fiscal consolidation
roadmap with clear timelines for achieving fiscal and debt indicators. The debt indicators under
Karnataka’s fiscal consolidation roadmap are in line with that prescribed by the Thirteenth
Finance Commission.
Overall Debt Scenario:
107. The Public Debt of State includes the Internal Debt and Loans and Advances from
Government of India. Internal Debt is further broken down into Market Borrowings, Loans for
Financial Institutions and Special securities issued to National Small Savings Fund (NSSF) of
Central Government. State has endeavoured to maintain its Gross Public Debt at prudent levels
as required under the fiscal management principles of KFRA. As seen in earlier chapters of this
document, Karnataka’s debt scenario has undergone significant improvement since FY04-05 due
to strict adherence to a time bound fiscal consolidation roadmap. On key debt indicators, the
State would meet its targets well ahead of the timeline indicated by Thirteenth Finance
Commission. KFRA has also been amended to fix the ceiling for the Total Liabilities as a
percentage of GSDP up to FY14-15.
Composition of Debt:
108. The composition of Gross Public Debt for the year ending FY09-10 to FY12-13 may be seen in
shown in Table 18 below:
Table – 18
(` in Crore)
Type of Borrowing 2009-10 % of Total
debt 2010-11
% to
Total
debt
2011-12
% of
Total
debt
2012-13
RE
% of
Total
debt
Market Borrowings 23527 42% 24564 41% 32064 48% 43991 53% Loans from Financial Institutions 2343 4% 2762 5% 3353 5% 4103 5% Special Securities issued to National Small Savings Fund (NSSF) 19598 35% 21436 36% 21436 30% 21436 26%
47
Table – 18
(` in Crore)
Type of Borrowing 2009-10 % of Total
debt 2010-11
% to
Total
debt
2011-12
% of
Total
debt
2012-13
RE
% of
Total
debt
GOI Loans 9902 18% 10515 18% 11782 17% 13751 17%
Total 55370 100% 59277 100% 68635 100% 83280 100%
*Source: Finance Accounts for the FYs 2009-10, 2010-11, 2011-12 & for 2012-13RE as per 2013-14 BE
109. In recent years, the borrowing profile of the State has shown an increasing trend towards
more reliance on open market borrowings, while share of NSSF loans has reduced considerably.
The Committee for comprehensive review of NSSF has recommended that the mandatory
component of investment of net small savings collections in State Government Securities be
reduced from 80 per cent to 50 per cent. Government of India while accepting this
recommendation has sought the States’ option of either 80 per cent or 50 per cent for the
mandatory borrowing. In view of the higher cost of borrowing from NSSF loans, State
Government has opted for 50 per cent share of net collections during FY12-13. Hence the share
of NSSF loans in borrowings is expected to come down in the medium term.
Management of borrowings:
110. In any development oriented State, borrowings are essential to supplement the State’s own
resources. Apart from Open Market borrowings, others sources of borrowings include GOI loans,
NSSF loans, loans from Financial Institutions and public account. All borrowings of the State
Government are with the permission of Government of India under Article 293(3) of the
Constitution. Permission by Government of India for Open Market Borrowings is also accorded in
phases taking into account other available sources of borrowings. The onus is on the State to
ensure that overall borrowings of the State from all sources including public account is kept
within the Total Liabilities to GSDP target fixed by the 13th Finance Commission. State is well
ahead on the debt consolidation roadmap and has achieved its target much before the timeline
indicated by 13th Finance Commission.
Maturity Profile of State Government Securities:
111. Since 2005-06, all issuances of State Development Loans (SDLs) have a maturity of 10 years.
A significant shift in this trend took place in FY12-13 where the State strategically went in for
issuances of SDLs of varying tenures. On RBI’s advice, State undertook to flatten its redemption
profile by spacing out the SDL maturity year, by floating short term bonds of 4 or 5 years tenure
48
in addition to the regular 10 year SDL. State also explored the market with both fresh issue and
re-issue of earlier bond issuances. Much to the State’s advantage, short maturity issuances have
led to availing funds at much lower interest rates with a discount of close to 20-25 basis points
over the 10 year SDLs of other States.
112. The State has also ensured that its borrowings are kept within the annual fiscal space
available. However during FY08-11, State was allowed to incur fiscal deficits in excess of 3 per
cent. By ensuring that adequate revenue surplus was maintained, the State utilised a larger part
of this additional fiscal space during this period to borrow for meeting only its capital
expenditure. As a result, it is anticipated that repayment obligations would be slightly on the
higher side from FY2017-18 onwards.
113. As seen in the chart below, the maturity profile of the outstanding stock of SDLs as at the
end March 2012 shows that the majority were in the maturity bucket of 7 years and above only
reflecting that there are no short term redemption pressures on State’s resources.
Maturity profile of Outstanding State Government Securities
*Source: RBI’s State Finances- A study of Budgets of 2012-13
Creation of Consolidated Sinking Fund (CSF)
114. Karnataka was one of the few States in the country which had not yet set up the CSF. RBI
had been persistently advocating the need for creating a fund specifically to provide cushion to
meet its repayment obligations during times of fiscal stress and enables market borrowing at
49
reasonable cost. The CSF corpus has to be built out of annual transfers from general sources of
revenue from the budget. CSF corpus of the States is thereafter invested in GOI Securities.
Working Group of RBI has recommended that there is a necessity for States to build up a
minimum CSF corpus of 3-5 per cent of State liabilities within the next five years and thereafter
maintain it on a rolling basis. Karnataka’s Total Outstanding Liabilities (TOL) had exceeded Rs. 1
lakh crore in FY11-12. Hence State has decided to set up a Consolidated Sinking Fund and
contribute 1 per cent of the TOL i.e. Rs.1000 crore to this Fund by making provision in
Supplementary Estimates – II of FY12-13. For the current year, this entire expenditure would be
met from the Fiscal Management Fund (FMF). FMF was created in the Public Account of the
State in the year 2007 to discharge any large liabilities arising during the course of the year
which could not be met from that year’s budget; and this Fund was to be financed out of the
General Revenues of the State. In view of using FMF reserves for transfer to CSF, such transfer
would be revenue neutral in the current year. However in the future, annual contributions to
CSF have to be out of general revenues in that year.
Contingent Liabilities:
Off budget borrowings
115. Off budget borrowings are borrowings availed by State agencies like Public Sector
Undertakings, Special Purpose Vehicles and other equivalent bodies but where the liability for
principal and interest repayment is on the State Government. Thus the debt servicing is through
the budget. For ensuring transparent accounting of debt and fiscal prudence, State Government
considers it’s off budget borrowings as part of its own liabilities while working out Total
Outstanding Debt. The ratio of this total outstanding debt to GSDP is closely monitored and kept
within the 13th FC targets. State is committed to maintain and to not exceed the level of Off-
budget borrowings as at the end of the financial year 2009-10 i.e. Rs.3249 crore. MTFP 13-17
also proposes to follow this ceiling on off-budget borrowings. During the current year, State has
taken over the long term loan debt from KPTCL on to its account. The total loan outstanding was
Rs.1050.19 crore, of which PFC loan was Rs.750.22 crores and REC loan was Rs.271.34 crore.
State is expected to repay all the dues of KPTCL by 2016-17.
Guarantees:
116. Government guarantees are contingent liabilities which the State has to take onto its books
in case of default by any borrower covered by guarantee and if the guarantee is invoked by the
lender. The Karnataka Ceiling of Government Guarantee Act (KCGGA), 1999 provides for a cap
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on outstanding guarantees extended by the Government as at the end of any year at 80 per cent
of the State’s revenue receipts of the second preceding year. The outstanding guarantees at the
end of all financial years between 2008 & 2011 have all been well within the prescribed limit as
seen at Table-19.
Table - 19
(` in Crore)
Parameter 2008-09 2009-10 2010-11 2011-12
Maximum amount guaranteed 18.732 18,420 19,150 13,262
Outstanding amount of guarantees (including interest) 8,693 7,203 6,618 6,640
Percentage of outstanding amount guaranteed to total
revenue receipts of the second preceding year 23% 18% 15% 14%
117. Since guarantees result in increase in contingent liability they should be examined in the
same manner as a proposal for a loan, taking into account, inter alia, the credit-worthiness of
the borrower, the amount and risks sought to be covered by a sovereign guarantee, the terms of
the borrowing, the justification and public purpose to be served, probabilities that various
commitments will become due and possible costs of such liabilities, etc. Presently there is no
Government Guarantee Policy in place to guide departments while recommending for
guarantees. Hence it is desirable to evolve a State Government Guarantee Policy on lines of that
brought out by Government of India.
Cash Management:
118. Cash management is an integral part of the public finance management. The cash balance of
the State is maintained by Central Accounts Section (CAS) of RBI in Nagpur. State has not availed
of any Special Ways and Means Advances (SWMA) or Normal Ways and Means Advances
(NWMA) from RBI since the year 2007-08. Even in the current year, there may not be any
necessity to operate SWMA / NWMA due to reasonably comfortable cash position. Presently
cash surpluses above the minimum prescribed limit by RBI are automatically invested in
Government of India 14-day Treasury Bills. However these have very low yields varying from 5-6
per cent. Hence as advised by RBI and recommended by 13th Finance Commission and the C&AG
of India, additional cash balance available over and above anticipated requirement, is not kept
idle and is being invested in 91 day Government of India Treasury Bills.
119. However it is acknowledged that efforts need to go in for better forecasting of exact
requirement of funds and timely release of funds so as to maintain prudent level of cash
51
balance. The State goes in only for need based borrowings and maintains only basic minimum
cash surplus as buffer.
Adoption of Advance Indicative Calendar for borrowings
120. Based on RBI’s request, State has been estimating the timing of its Open Market Borrowing
by communicating an advance indicative calendar for borrowings. This enables the market to
arrange for funds in advance while subscribing to SDLs. State in turn gets the benefit of better
interest rates. There is also a review of borrowing requirement after the 2nd and 3rd quarter to
re-assess the exact requirement of funds. If it necessitates, State has been drawing down on its
cash balance rather than borrowing more.
Public Disclosure of Fiscal Situation on Quarterly basis
121. State is committed to transparency in its disclosures on fiscal situation. Information on fiscal
situation is being hosted on the official website of Finance Department www.kar.nic.in/finance
on a quarterly basis.
Systemic Reforms
National Pension System (NPS)
122. Government of Karnataka has introduced the New Pension System (now renamed as
National Pension System – NPS) for all State Government employees joining government service
on or after 01.04.2006. The scheme was operationalised fully from 29.03.2010. A dedicated NPS
Cell was created under Directorate of Treasuries (DoT) to implement and operationalise NPS in
the State. State Government has adopted NPS architecture designed by Pension Fund Regulatory
and Development Authority (PFRDA) and has appointed NSDL as the Central Record Keeping
Agency (CRA) for NPS. Bank of India is the Trustee Bank in charge of pension funds. NPS Trust
oversees the investment of pension funds by Pension Fund Managers (PFMs) SBI, UTI & LIC so as
to ensure that the subscriber employee gets the best returns on his or her investment. The
security of investment of pension corpus is also given primacy by mandating that 85 per cent of
corpus is investment in bonds and fixed maturity investments.
123. Even though NPS was introduced from 01.04.2006, it was operationalised only from
29.03.2010. While employees were given an option to pay their backlog either in lumpsum
outside salary or in multiple installments through salary deductions, State Government paid its
backlog contribution at one shot with 8 per cent interest. As on date, 1,09,714 State
Government employees are registered under NPS with CRA and have been allotted Permanent
52
Retirement Account numbers (PRANs). Government has paid Rs.142 crore as government
backlog and Rs.332 crore as its matching regular contribution.
Reforms in Stamps and Registration Department:
124. State has been taking steps to ensure that reforms are pushed through in the Stamps and
Registration Department which is one of the major revenue earners for the Government.
Following initiatives have been taken up by the Stamps and Registration Department:
i) Online booking of Appointments for Registration of Documents / Marriage / Partnership
Firms / Societies along with provision for capturing of pre-registration data from citizens
through the portal to avoid data entry errors and reduce the registration time.
ii) E-Payment facility to citizens for Stamp Duty and other fees through online payment
gateway.
iii) Electronic transmission of J-forms to BHOOMI (Record of Rights software) to avoid delay and
errors in manual transmission. Details such as Survey No., extent of the land and name of
the seller captured from BHOOMI in KAVERI (Registration software) during registration to
avoid duplicate and fraudulent transactions.
iv) Kaveri integrated with SAKALA (Citizen Services Delivery Act) for ‘Document Registration’
service to ensure service delivery to citizens within guaranteed time period of one working
day. Issue of ‘Encumbrance Certificate’ (where computerized data is available post
1/04/2004) within guaranteed time period of two working days.
v) Online Grievance Redressal System for citizens to record complaints and track the progress.
vi) Integration with Urban Local Bodies, Gram Panchayats and Mojani (Survey software) to
prevent duplicate and fraudulent transactions.
E-governance initiatives of Commercial Taxes Department:
125. The Commercial Taxes Department has adopted several innovative e-governance initiatives
during the past few years for providing convenience to tax payers and thereby improving tax
compliance. The prominent among these are as follows:
(i) Facility for applying for Registration online.
(ii) Facility of filing returns electronically online.
(iii) Facility for making electronic payment of taxes and reconciliation of such payments.
(iv) Facility of declaring electronically details of goods movement from and to the State
online.
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(v) Facility of declaring electronically details of transit of goods through the State online.
(vi) Facility of filing of Profession Tax returns through internet.
126. In addition to the above, during this financial year, the following initiatives have been put in
place to further strengthen internal control mechanism to ensure effective and transparent tax
administration.
i. e-CAS (Comprehensive Audit System):
This provides for electronic trail of all the stages of audit of self assessments made by the
dealer right from the stage of allotment of returns for scrutiny to other stages like assignment
of cases for audit, passing of final assessment orders by the audit officers & the outcome of
any appeal filed against such orders. The audit officers are required to keep log of each stage
on the system, upload orders for which unique numbers are generated to bring total
accountability and make the entire process tamper proof.
ii. e-DCB (Demand, Collection and Balance) module:
This facility ensures correct and prompt recording of demands raised in each case, its
collection and balance so that it could be monitored for timely revenue realization.
iii. e-Enforcement module:
This enables correct recording of the functions carried out by the enforcement officers and
monitors the outcome to bring in accountability of the process.
iv. e-Grievance Redressal system:
This enables registered dealer to raise grievances electronically and track the status of their
redressal.
v. e-GRAHAK:
This enables a citizen to complain or provide information to the Commercial Taxes Department
about tax evasion by a dealer through SMS and online track the status of action taken.
vi. Facility of Automatic generation of ‘C’ form:
The dealers have been now enabled to download CST forms electronically after furnishing
relevant information without the need of the approval of any departmental authority. By this
there is no scope for any delay and there is total transparency in service delivery.
54
vii. Facility for electronic Payment of other taxes :
Tax payers under Luxury Tax, Entertainment Tax and Betting Tax Acts will also now be given
the facility of electronic payment of taxes so as to reduce their cost of compliance and reduce
mistakes in reconciliation of payments made through other modes.
viii. Facility of electronic Returns and other taxes:
Luxury Tax and Entertainment Tax payers are also now in the process of being provided facility
of filing the returns electronically.
Implementation of Expenditure Reforms Commission (ERC) recommendations:
127. The Expenditure Reforms Commission was constituted by the State Government in 2009.
The Commission submitted its report in four volumes along with summary of recommendations
containing gist of 292 recommendations. Of the 292 recommendations 214 are on 17 Selected
Departments, 15 were common to all departments and 63 are recommendations on Generic
issues. The State Government has by and large accepted a number of recommendations made in
the reports. Many of them have been implemented; some are under consideration of the
Government while a few departments are in the process of implementing the remaining
recommendations. Status of implementation of various recommendations is as listed below:
Horticulture Department has commenced transferring Cash Subsidies through ECS.
In Social Welfare Department the scholarship schemes are being implemented on an online
system and transfer of money is through electronic means.
Impact analysis is being conducted by Planning Department through ISEC and ISST regarding
the “Monograph on Status of Women”.
Regular review meetings of progress under Karnataka Mahila Abhivriddhi Yojane (KMAY) for
254 schemes of 25 departments are being conducted by Women & Child Development
Department and Gender Budget Cell of Finance Department.
Sunset clauses have been introduced in some projects in Infrastructure Development
Department. For eg. Airport projects have a completion time of 24 months from the date of
signing of PDA with the developer.
To ensure transparency and achieve economy in procurements e-procurement has been
introduced in all departments with effect from 3-12-2012 by the e-Governance Department.
In Public Works Department Section 19-A (1) of the Karnataka Highways Act 1964 has been
amended to empower the State Government to collect the Toll on roads developed under
annuity schemes. There is a provision for collection of toll on roads and bridges in the
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Karnataka Highways Act-1964. Accordingly, the toll fixation for various categories of vehicles
has been done in line with the National Toll Policy. After a number of roads come under toll
system, the proposal for setting up a “State Road Regulatory Authority” can be taken up for
consideration.
KRDCL is now taking up the projects on BOT, DBOT, Annuity, PPP etc; and even the
maintenance of the roads already developed is being considered on Operate, Maintain and
Transfer (OMT) basis.
The social auditing of different schemes identified by the Planning Department is taken up
every year. Independent Directorate of Social Audit has been established.
The Karnataka State Evaluation Policy and Karnataka Evaluation Authority has been
constituted in July 2011 to streamline and support the internal evaluations of the line
Departments. So far about 10 studies have been given technical support and they are at
various stages of progress. KEA also takes up external evaluation of some of the flagship
programmes of the Government in consultation with the line Department concerned. So far
3 such external evaluations (Secondary Education Sector, NRHM, JnNURM) were taken up
and the first one is completed. In addition, KEA also supports compilation of District and
State Human Development Reports of the Planning Department.
Global Positioning System is contemplated under MGNREGS for identification of works in the
Gram panchayats. Biometric system is also introduced in 7 districts of Karnataka State on
Pilot basis for payment of wages to the labourers at door step through smart cards. The
project taken up in 7 districts is called as EBT (Electronic Benefit Transfer) project.
e-Procurement:
128. The State Government has ushered in 100% transparency in procurement through
implementation of e-Procurement project. The project started with 6 departments in 2007, now
encompasses 227 departments and organisations and in the last 4 years procurements worth
Rs.1,61,300 Crore have been made using this platform. Use of the platform has increased the
bidder participation by 2-5 times and has resulted in average reduction of about 10 per cent in
the bid amount leading to savings to the departments. This platform is currently being used by
33,000 suppliers and contractors. Considering the impact of the platform in ushering
transparency and savings to Government, the Government of Karnataka has made it mandatory
for all its departments and organisations to procure goods and services and undertake
construction works exceeding Rs.5 lakh on the e-Procurement portal.
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Karnataka Resident Data Hub (KRDH) and UID Enabling Service Delivery
129. Improving efficiency in service delivery has been a key aim of the Government. In order to
do this, the State Government is setting up the KRDH, which is a repository of the UID of all the
residents of Karnataka linked to the various Government services being availed by them. The
Government has started the UID based delivery of services through seeding of Aadhaar numbers
into nearly 15 services offered by Government in the districts of Mysore, Tumkur and Dharwad.
This will enable the Government to prevent the pilferages in the system and ensure better
targeting of benefits to residents of Karnataka.
Khajane II
130. Khajane II is a comprehensive Integrated Financial Management System, a computerization
project of the Finance Department, which is an advanced and expanded initiative to replace the
present “Khajane” the treasury automation application. With the idea of overcoming the
constraints in the present system and envisioning wider reach in terms of functionality, user
access and turnaround results the system is intended to bring in groundbreaking practices in
financial management of Government. It is envisioned that this system will improve efficiency,
and help the users particularly decision making entities make effective, transparent and
accountable and informed financial decisions with ease.
131. This single platform of financial comprehensiveness on which all players within Government
and its stakeholders will perform their financial business will result in a total view of the finance
inflow and outflow of the Government, on a near real-time basis. With such reliable and ready
information availability, the Finance Department is confident that there will be a deep impact on
the quality and speed in implementation of Government policies that will in turn make
responsive governance a reality. Departmental Heads will be aware of the trend of the scheme
implementation and the assured knowledge of the financial status of each scheme will give
them the flexibility not only to monitor effectively, but will allow them room for juggling their
finances to achieve best results.
132. To achieve the above, the project is architectured to have an online system of release of
funds, preparation of bills, and have customized MIS of expenditure incurred along with trending
facilities and calculate the cash balance position. From the citizen’s perspective, the benefits
would be 90% payments through electronic mode, facility to pay Government taxes, fees & fines
57
online, a centralized pension payment facility and routing public grievances online with status
updates to their e-mail ids, and mobile phones.
133. The project awarded to M/s. Tata Consultancy Limited as a conclusion to a three stage
tendering process includes, application development, hardware deployment and maintenance
for a period of 7 years. The total cost of the project that includes civil infrastructure up-gradation
of 218 treasuries, and project related cost inclusive of TPA fee, consultancy fee and Project
Monitoring Unit expenses is Rs.91 crore. The system requirement solution documents are being
written for 12 of the 24 modules that relate to core treasury activities. Meetings and discussions
with the external stakeholders on the modalities and technical feasibility of integration is on. It
is expected that the pilot will be on during October 2013 in two treasuries and their related sub-
treasuries.
134. Provision for a Third Party Auditor (TPA) to test the system and ensure that it meets the
technical and functional requirements as detailed in the RFP is made. M/s. KPMG has been
appointed the TPA.
Results Framework Document (RFD)
135. The Government has adopted Results Framework Document (RFD) as a tool to measure
department wise performance. Based on the experiment of using RFD in 2011-12 the Cabinet
has decided to use RFD across several spending departments in 2012-13, with Planning
Department as the nodal department, while the Fiscal Policy Institute (FPI) under the Finance
Department provides technical support.
136. RFD was designed by Cabinet secretariat, Government of India and uses customised
software -Results Framework Management System (RFMS). The structured document, in six
sections, interalia indicates departmental weighted priorities in pursuit of the stated objectives,
and lists out the activities to be undertaken during the year as per the mandate flowing from
budgetary allocations, annual plan priorities and business allocated to the department. The end
of the year performance using RFD is measured against verifiable indicators, as defined by the
department at the beginning of the year. Unlike the conventional monitoring systems, such
indicators are validated by teams of independent experts and other non-government
stakeholders for enhanced credibility. The involvement of such experts is intended to prevent
likely bias on the part of departments in favour of overdesigning or under designing of the
success indicators.
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137. End of the year review too is done with the help of such experts and stake holders. The RFD
design captures and reflects not only the quantifiable success indicators, but also the constraints
in inter- departmental coordination for successful implementation of department mandate.
Further the RFD also discloses medium term indicators, which if internalised would reflect the
expenditure priorities within a department, over a period of following two years.
138. Thus, the introduction of RFD is intended to institutionalise the system of measuring value
for money in accordance with the objectives of a department. While the results for the year
2012-13 are yet to be reviewed, like any reforms the RFD may take 2-3 years to stabilise. Going
forward the aggregated values from RFDs have potential to be used as forward looking
expenditure priorities and synchronize the same with MTFP.
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Chapter 7
Medium Term Fiscal Plan Projections 2013-17
Brief assessment of sustainability of certain fiscal parameters
139. Section 3(3) of KFRA, 2002 mandates that in particular the MTFP shall include an assessment
of sustainability relating to –
i) The balance between revenue receipts and revenue expenditures
ii) The use of capital receipts including borrowings for generating productive assets
140. The State has continuously maintained a revenue surplus since FY04-05 as brought out
earlier in this document. This meant that all current and consumptive expenditure has been met
well within the revenue receipts of the State. As a result, the revenue surplus has been fully
available to meet capital expenditure needs of the State.
141. Since MTFP requires that sustainability of revenue surplus and use of capital receipts for
generating productive assets have to be brought out, these two aspects are discussed below:
The balance between Revenue Receipts and Revenue Expenditures
142. State has always maintained fiscal prudence as one of its policy goals. It is to the credit of
the State that even during the economic slowdown period (FY08-10), revenue surplus was
continuously maintained. Despite the short term stress on the revenue balance on account of
salary and pension expenditure increase, the State continues to maintain revenue surplus in
FY13-17. For the FY13-14, one major item of revenue stress would be to finance the balance
commitment under cooperative crop loan waiver. Apart from this, there are large non plan
requirements and subsidy schemes which require enhanced allocations for the ensuing three
years. By weeding out non-essential schemes, limiting non-development revenue expenditure
and streamlining revenue collections, the State hopes to build up adequate revenue surplus for
use in capital formation and productive expenditure for FY 13-14 and the ensuing three years.
143. The pay and pension revision impact, cooperative crop loan waiver and other Non plan
revenue schemes would also require judicious use of resources for financing State Plan during
the 12th FYP period through prioritisation of expenditure. Despite the above concern, except for
slight moderation in FY13-14, the revenue surplus growth in the medium term is steady as seen
in the following graph.
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The use of Capital Receipts including borrowings for generating productive assets
144. Capital receipts include non-debt capital receipts like revenue earned from sale of
government assets, recoveries of loans and advances etc and net borrowings. Since the State has
a favourable revenue surplus, it may be noted that the capital expenditure is being financed by
both capital receipts and the revenue surplus. Graph below shows the expenditure on Capital
Outlay by using both the Capital Receipts (including borrowings) and revenue surplus.
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145. The sustainability of higher expenditure on capital outlay looks good in the medium to long
term as there are no major stresses on revenue receipts and hence maintaining a sustainable
adequate revenue surplus in these years is possible subject to curtailing non essential revenue
expenditure. By virtue of its definition, any balance revenue receipts for the year after meeting
all revenue expenditure, is directly utilised for capital expenditure.
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Table - B Medium Term Fiscal Plan Projections 2012-16
(` in Crore)
Particulars 2011-12 Ac
2012-13 BE
2012-13 RE
2013-14 BE
2014-15 Proj.
2015-16 Proj.
2016-17 Proj
1 Revenue Receipts 69806 81461 84884 94216 108540 124639 141931
of which
(i) State Own Tax Revenues 46476 51821 53492 61012 70717 81976 94058
(ii) Non Tax Revenues 4087 3193 3796 3838 4092 4277 4459
(iii) Resources from the centre
of which
- Devolution 11075 13094 12500 14375 16626 19231 22019
- Grants 8168 13354 15095 14991 17105 19155 21395
2 Revenue Expenditure 65115 80530 83941 93631 102931 114574 126897
of which
(i) Interest 6062 7500 6852 8500 9430 10495 11714
(ii) Salaries 11543 18299 17120 20843 22704 25586 28519
(iii) Pensions 5436 6980 7500 8500 9259 10434 11630
(iv) Subsidies(Food, Transport 2120 2484 4029 3564 3856 4184 4534
Housing,Industry & Others)
(v) Power Subsidy 5307 5100 6350 5750 6325 6958 7653
(vi) Devolution to ULBs 4344 5237 5011 6185 7169 8310 9535
(vii) O & M
of which
- Major O&M (Roads, Buildings & Irrigation)
791 556 581 716 823 906 996
- Other O&M (Edn,Health, RD,WS,Agr, Forest)
7292 10621 10715 12195 13415 14756 16232
(viii) Administrative Expenditure 1011 1251 1331 1430 1537 1691 1860
(ix) Other Revenue Expenditure 21208 22502 24452 25948 28413 31254 34224
3 Revenue Surplus 4691 931 943 585 5609 10066 15033
4 Capital Receipt (Non Debt) 330 299 257 235 258 284 312
5 Expenditure on Capital Formation
17321 16542 16439 17534 26533 34012 42439
6 Fiscal Deficit 12300 15312 15239 16714 20666 23663 27094
7 Outstanding Debt 103030 114745 114401 131223 151889 175551 202645
8 Debt Services 9382 11170 10496 12340 13654 15142 16826
9 Off Budget Borrowings 3249 3249 3249 3249 3249 3249 3249
10 Guarantee Stock 6640 9500 9500 9800 10290 10805 11345
11 Total Liabilites 106279 117994 117650 134472 155138 178800 205894
12 GSDP at current prices 434270 520766 520766 601633 688870 788756 903125
13 Annual Inflation 5.0% 6.5% 8.0% 7.5% 6.5% 6.0% 5.5%
14 GSDP Real Growth Rate 8.0% 7.5% 6.0% 6.5% 7.5% 8.0% 8.5%
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Table - B Medium Term Fiscal Plan Projections 2012-16
(in Percentage)
Particulars 2011-12 Ac
2012-13 BE
2012-13 RE
2013-14 BE
2014-15 Proj.
2015-16 Proj.
2016-17 Proj
ALL THE ITEMS AS PERCENTAGE OF GSDP
1 Revenue Receipts 16.07 15.64 16.30 15.66 15.76 15.80 15.72
of which
(i) State Own Tax Revenues 10.70 9.95 10.27 10.14 10.27 10.39 10.41
(ii) Non Tax Revenues 0.94 0.61 0.73 0.64 0.59 0.54 0.49
(iii) Resources from the centre
of which
- Devolution 2.55 2.51 2.40 2.39 2.41 2.44 2.44
- Grants 1.88 2.56 2.90 2.49 2.48 2.43 2.37
2 Revenue Expenditure 14.99 15.46 16.12 15.56 14.94 14.53 14.05
of which
(i) Interest 1.40 1.44 1.32 1.41 1.37 1.33 1.30
(ii) Salaries 2.66 3.51 3.29 3.46 3.30 3.24 3.16
(iii) Pensions 1.25 1.34 1.44 1.41 1.34 1.32 1.29
(iv) Subsidies(Food, Transport 0.49 0.48 0.77 0.59 0.56 0.53 0.50
Housing,Industry & Others)
(v) Power Subsidy 1.22 0.98 1.22 0.96 0.92 0.88 0.85
(vi) Devolution to ULBs 1.00 1.01 0.96 1.03 1.04 1.05 1.06
(vii) O & M
of which
- Major O&M (Roads, Buildings & Irrigation)
0.18 0.11 0.11 0.12 0.12 0.11 0.11
- Other O&M (Edn,Health, RD,WS,Agr, Forest)
1.68 2.04 2.06 2.03 1.95 1.87 1.80
(viii) Administrative Expenditure 0.23 0.24 0.26 0.24 0.22 0.21 0.21
(ix) Other Revenue Expenditure 4.88 4.32 4.70 4.31 4.12 3.96 3.79
3 Revenue Surplus 1.08 0.18 0.18 0.10 0.81 1.28 1.66
4 Capital Receipt (Non Debt) 0.08 0.06 0.05 0.04 0.04 0.04 0.03
5 Expenditure on Capital Formation
3.99 3.18 3.16 2.91 3.85 4.31 4.70
6 Fiscal Deficit 2.83 2.94 2.93 2.78 3.00 3.00 3.00
7 Outstanding Debt 23.72 22.03 21.97 21.81 22.05 22.26 22.44
8 Debt Services 2.16 2.14 2.02 2.05 1.98 1.92 1.86
9 Off Budget Borrowings 0.75 0.62 0.62 0.54 0.47 0.41 0.36
10 Guarantee Stock 1.53 1.82 1.82 1.63 1.49 1.37 1.26
11 Total Liabilites 24.47 22.66 22.59 22.35 22.52 22.67 22.80
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The underlying assumptions for the projections made for the
Medium Term Fiscal Plan 2013-17:
Revenue Receipts
146. With the existing ratio State Own Tax Revenues (SOTR) to GSDP ratio of 10.14 percent in
2013-14 BE, the SOTR to GSDP is projected to be 10.27 percent, 10.39 percent and 10.41 percent
overall for 2014-15, 2015-16 and 2016-17. The above translates into a year on year growth rate
of 15.91 percent, 15.92 percent and 14.74 percent for the years 2014-15, 2015-16 and 2016-17.
147. The Non Tax Receipts as a percentage of GSDP are projected to grow at a much lower rate of
around 5.4 percent.
148. The devolution from the Centre is projected to grow at the rate of growth of Nominal GSDP
i.e 15.66 percent for years 2014-15 & 2015-16 and at 14.5 per cent for 2016-17.
149. The Grants from the Centre are projected to grow at an average 12.6 percent for the
projected years.
Revenue Expenditure
150. The Interest Expenditure is projected to grow in accordance with the fiscal deficit incurred
for each year. To arrive at the interest expense average cost of funds at 8 per cent has been
assumed.
151. The expenditure towards salaries and expenditure and pensions are projected to grow at a
rate of 11 per cent for percent for the projected years.
152. The Expenditure on Subsidies (food, transport, housing and industry, others) are projected
to grow at rate of 7.5 percent for 2014-15 and 8.52 percent for 2015-16 and 8.36 per cent for
2016-17.
153. Expenditure for power subsidies are projected to grow at rate of 10 percent every year for
the years 2014-15, 2015-16 and 2016-17.
154. The devolution to Urban Local Bodies is projected to grow at the same rate as growth of
taxes keeping in mind the recommendations of the 3rd State Finance Commission.
155. Expenditure for Major O&M (Roads, Buildings and Irrigation) is projected to grow at rate of
15 percent for year 2014-15 and 10 percent thereafter for years 2015-16 and 2016-17.
65
156. The Expenditure for Other O&M (Education, Health, Rural Development, Water Supply,
Agriculture, Forest) is projected to grow at 10 percent every year for years 2014-15, 2015-16 and
2016-17.
157. The Administrative Expenditure and other revenue expenditure is projected to grow at rate
of 7.5 percent for the year 2014-15 and 10 per cent for 2015-16 and 2016-17.
158. The other revenue expenditure is projected to grow at the rate of 9.5 percent for the years
2014-15, 2015-16 and 2016-17.
Capital Receipts and Borrowings
159. The Non Debt Capital Receipts have been is projected to grow at the rate of 10 percent for
the years 2014-15, 2015-16 and 2016-17.
160. Full fiscal space of 3 per cent of GSDP has been adopted for the borrowings for the projected
years.
Inflation and GSDP
161. Inflation rate has been projected to come down from 7.5 per cent from FY13-14 to 6.5 per
cent in 2014-15, 6 per cent in 2015-16 and 5.5 per cent in 2016-17.
162. The Nominal GSDP is projected to grow at rate of 14.5 per cent every year for 2014-15,
2015-16 and 2016-17, based on the estimates of the Thirteenth Finance Commission.
Disclosures as required under Sec 5(2)(c) of KFRA
66
Statement - 1
Tax Expenditure/Revenue Foregone under Deferment of Purchase Tax on Sugarcane
pertaining to FY 11-12 & first three quarters of FY 12-13
(in Rs. lakhs)
Sl. No.
Name of the Sugar Unit
Value of Exemption/ Concession in FY 11-12
Value of Exemption/
Concession in first three
quarters of FY 12-13
Remarks
1 2 3 4 5
DVO, Belgaum
1 Krishna SSKN, Athani, Belgaum Dist.
140.00 - Interest free loan
2 Venkateshwar Power Project, Bedakihal, Chikodi Taluk, Belgaum Dist
149.00 - Interest free loan
3 Satish Sugars, Hunashyal Tal. Gokak Dist, Belgaum
568.00 121.00
Interest free loan (the purchase tax is conversable into IFL only after 19-11-2011 & that to only on expanded capacity)
4 Shivashakti Sugars Ltd., Soundatti, Tal: Raibag, Dist: Belgaum
- 19.00 Interest free loan
5 Dyanayogi Shree Shivakumar Swamiji Sugars Factory, Hirebenur
231.00 18.00 Interest free loan
6 Godavari Biorefinaries sugar Factory Ltd., Sameerawadi
463.00 - Interest free loan
7 Nirani Sugars Ltd., Mudhol 660.00 - Interest free loan
DVO, Gulbarga
1 Mahatma Gandhi Sahakari Sakkare Karkhane (N) Bhalki, Dist: Bidar
238.00 -
DVO, Davanagere
1 NSL Ltd., Desanur, Siruguppa - 20.00
TOTAL 2449.00 178.00
67
Statement 1-A
Information on Tax Expenditure/Revenue Foregone pertaining to first two
quarters of FY 2012-13 (in Rs. lakhs)
Div. No
Sl. No
Name and address of the industry with TIN Amount
(in Rs. lakhs) Remarks
1 2 3 4 5
I DVO-1 Bangalore - II DVO-2 Bangalore -
1 Toyota Kirloskar Motors Pvt, Ltd, Bidadi, Ramanagar Dist. 29430074805
412.14 VAT Exemption
14197.06 CST deferment
10936.74 VAT Deferment
III DVO-3, Bangalore - IV DVO-4, Bangalore -
1 TVS Motor Co Ltd, Kadakola, Mysore 29880058504 1903.00 VAT Deferment
V DVO-5 Bangalore - VI DVO-6, Bangalore - VII DVO, Mysore
1
J.K.Tyres and Industries Ltd, KRS Road, Metagalli, Mysore 29140116820
782.46 VAT Deferment
2 Shivashakthi Industries, Tadya Industrial Area, Nanjanagud taluk 29060573152
0.97 KTEG exemption
VIII DVO, Shimoga
1 Shanthala Ferrocast ,Shimoga 29940000465 0.52 KTEG exemption
2 Annapoorneshwari Alloy Castings Pvt Ltd, Shimoga 29480570690
0.20 KTEG exemption
3 Focus Diacast Pvt Ltd, Shimoga 29790791836 1.55 KTEG exemption
4 C.M. Hydrosystem Project Ltd, Shimoga 29510802261 0.06 KTEG exemption
5 Pragathi Steel Castings Pvt Ltd, Shimoga 2912000431 2.06 KTEG exemption
6 Vijay Technocrats Pvt Ltd , Shomoga 29200012706 1.00 KTEG exemption
VAT deferment 11.87
7 Shimoga Piston Rings, Shimoga 29380016487 2.93 VAT deferment
8 Santhosh Enterprises, Anandapuram , Sagar Taluk 29320013125
0.50 KTEG exemption
9 Chandan Granites, Hassan 29390621907 0.04 KTEG exemption
10 Asin Granites, H.P Pura, Hassan TIN 29530661794 0.16 KTEG exemption
11 Manish Trade Links, Mallikere Village, Arakalgud Tq. 29530667129
0.35 KTEG exemption
12 Srivema, H.N pura Road, Hassan 2903065436 0.18 KTEG exemption
IX DVO, Dharwad
1
West Coast Paper Mills Ltd, Dandeli, Uttara Kannada 29380045781
734.49 CST deferment
649.87 VAT deferment
2 M/s N.B. Hiremath, Civil contractor, Hubli 29850123850 25.99 KTEG exemption
X DVO Mangalore
1 Mangalore Refinery & Petrochemicals Limited, Mangalore 29960081394
7039.50 CST exemption
17743.80 KTEG exemption
68
Div. No
Sl. No
Name and address of the industry with TIN Amount
(in Rs. lakhs) Remarks
1 2 3 4 5
XI DVO Davangere
1
Basaveshwara Rice Industries, Malebennur,Harihar Tq 29780047889
0.32 KTEG exemption
2 Shankar Rice Mill, Honnali 29390361559 0.38 KTEG exemption
3
Veerabhadreshwara Rice & Flower Mills, Malebennur 29480046114
0.23 KTEG exemption
4
Channeshwara Rice Industies , Malebennur 29090047153
1.17 KTEG exemption
5 Akash Rice Industries, Mittalkatti, Davangere Taluk 0.29 KTEG exemption
6 Parshvamani Cotton Mills, Bellary 2958062078 2.71 KTEG exemption
7
Sree Sai Nandi Cotton Ginning and pressing Factory, Mundargi, Bellary-TIN 29780669368
2.31 KTEG exemption
8
Suryakath Environment Technologies, Haragirion Village, Bellary TIN 29740620017
1.02 KTEG exemption
9
Vishwa Structurals Engineering Pvt. Litd. Bellary TIN 29020811212
6.50 KTEG exemption
10 Janki Corporation Ltd. Sidaginmola 57.02 KTEG exemption
11 Sri Sugureshwar Riuce Mill Bellary TIN 2928001371 0.61 KTEG exemption
12 Galaxy Chemicals,Mundargi, Bellary ITN 2903067862 3.24 KTEG exemption
13 Krishna Industries, Bellary TIN 29480817361 0.40 KTEG exemption
14
Shivaganga Agro Oil Refineries Pvt Ltd., Siruguppa TIN 29450634678
4.20 KTEG exemption
15
Sree Lakshmi Narayan Rice Industries, Siruguppa TIN 29590012055
0.70 KTEG exemption
16 Sri Devi Rice Industries Siruguppa TIN 2923002359 0.40 KTEG exemption
17
Sri Lashmi Balaji Oil Industries, Siruguppa TIN 29480684655
0.94 KTEG exemption
18 ILC Iron & Steel Pvt Ltd.Hospet 29650598969 4.36 KTEG exemption
19 Padmavathi Ferrous Ltd. 29920142775 6.34 KTEG exemption
20 Kartagi Refineries Pvt Ltd Hospet 291460597832 4.14 KTEG exemption
21 JSW Projects Ltd Trg. 29470607701 186.93 KTEG exemption
22 Seetharama Rice Industries, Kampala 29120842003 0.03 KTEG exemption
23
M/s. SrilaxmiSrinivasa Modern Industries, Gangavathi TIN 29080657337
0.66 KTEG exemption
24 M/s Indian Cane Power Limited, Davanagere 38.20 VAT deferment
25 M/s Mukund Ltd., Ginigera 1157.54 VAT exemption
XII DVO, Gulbarga
1 Shree Metal Products, Haladkeri, Bidar 29890828630 0.24 KTEG exemption
2 Talampally Rubbers Pvt Ltd, Bidar 29060496037 1.33 KTEG exemption
3 Wohler Laboratories Pvt Ltd Bidar 29060854355 0.22 KTEG exemption
4
Laxmidurga Drugs and Intermediates Pvt Ltd, Humnabad 29630870192
2.61 KTEG exemption
5 Vikat Sagar Cements, Chincholi 29220870466 225.00 KTEG exemption
6 Gulbarga Power, Chincholi 29760605456 87.00 KTEG exemption
69
Div. No
Sl. No
Name and address of the industry with TIN Amount
(in Rs. lakhs) Remarks
1 2 3 4 5
7
Chincholi Sugar and Bio Industries, Chincholi-29580749115
52.00 KTEG exemption
8 Balaji Briguetting Plant, Chincholi taluk 29380581124 40.00 KTEG exemption
9 Kabra Industries , Sedam 29650573167 61.00 KTEG exemption
10 Channaveer Enterprises, Raichur 2960613400 0.30 KTEG exemption
11 Sugureshwara Enterprises, Raichur 29390678943 0.30 KTEG exemption
12 Devashree Ginning Factory, Raichur 29310579853 0.53 KTEG exemption
13 Laxmi Srinivas Industries, Raichur 29950050463 1.41 KTEG exemption
14
Sri Laxmi Srinivas High Tech Industries, Raichur 29450634484
9.00 KTEG exemption
15 Meenakshi Rice Mill Industries, Raichur 29810630600 0.41 KTEG exemption
16 Mahur Food Braveries Industries, Gulbarga 29300592323 2.03 KTEG exemption
17 Bhawaal Spinners Private Limited, Raichur 29240042657 3.23 KTEG exemption
18
Core Green Sugar & Fuels , Shahpur Tq Yadgir Dist. 29690847170
30.00 KTEG exemption
XIII DVO, Belgaum
1 Krishna Granites , Ilkal 29340683966 0.86 KTEG exemption
2 Vinayak Granites 29600894992 0.23 KTEG exemption
3 Jyoti tiles 29360852444 0.05 KTEG exemption
4 P.N. Stones, 29750876625 0.03 KTEG exemption
5 M.H. Granites 29820668764 0.63 KTEG exemption
6 Akshta Granites 2970755361 0.13 KTEG exemption
7 Tulja Steels Private Ltd, Belgaum 51.35 KTEG exemption
8 Phoenix Components, Belgaum 34.99 KTEG exemption
9 K. S. Engineering, Belgaum 29740657750 4.84 KTEG exemption
10 Laksh Industries,Ilkal 29610589970 0.14 KTEG exemption
11 Riddi Siddi Gluco Biols Ltd, Gokak 29980008979 535.25 VAT exemption
12 Mocro Valves Private Limited, Belgaum 29740608862 41.83 KTEG exemption
13 KPR Sugar Mills (p) Ltd, Almel, Sindagi Taluk 29180735367 197.96 KTEG exemption
14
Manali Sugars Limited, Malaghan, Sindhagi taluk 29580823320
47.09 KTEG exemption
15 Athani Farmers Sugar Factory Ltd, Athani 29300007025 19.92 KTEG exemption
16
Rajguru Foods, Aliyabad Industrial Area, Bijapur 29120636460
0.49 KTEG exemption
17 The Krishna SSKN, Athani 29690007150 3.07 KTEG exemption
18 Shirguppi Sugar Works Ltd, Kagwad 2913075642 11.31 KTEG exemption
19 Millenium Stars India Private Ltd, Athani 11.32 KTEG exemption
Total 57407.00
70
Statement 1-B
Abstract of Statement 1-A
(Rs. in lakhs)
Sl. No Type of details of concession 2012-13
No. of units Value
1 2 3 4
1 Exemption of CST 1 7,040.00
2 Exemption of VAT 2 1,570.00
3 Exemption of KTEG 73 19,005.00
4 Deferment of CST 2 14,932.00
5 Deferment of VAT 8 14,860.00
Total 86 57,407.00
71
Statement 1-C
Tax Waivers by State Government through the
Reimbursement route / Loan route
a) Reimbursement of State Taxes
(in Rs. lakhs)
Sl.No. Particulars 2011-12 2012-13 Total
1 Cashew dealers
Tax 239.64 - 239.64
Interest due 35.36 146.47 181.83
Penalty - - -
Total 275.00 146.47 421.47
2 Arecanut dealers
Tax - 734.33 734.33
Interest due - 498.42 498.42
Penalty - 35.18 35.18
Total - 1267.92 1267.92
3 Utensil Dealers
Tax 49.99 - 49.99
Interest due - 29.23 29.23
Penalty 5.09 - 5.09
Total 55.08 29.23 84.31
4
Bangalore Metro
Rail Corporation
Ltd
Tax and Duties
10000.00 12700.00 22700.00
5 BEML CST (for supply
to DMRCL) 6031.00 947.00 6978.00
6 BEML VAT (for supply
to BMRCL) 3146.00 1463.00 4609.00
b) As VAT Loan to J K Cement Works
(in Rs. lakhs)
Sl.No. Year Amount Released
1 2011-12 1492.00
2 2012-13 601.00
Total 2093.00
72
Statement-2
Compliance Cost of Major State Taxes
A. Commercial Taxes
Class of Dealers Nature of work relating
to compliance
Total Cost per tax payer per
annum (in Rs.)
1) VAT DEALERS WITH TURNOVER OF:
(a) 0 to 10 Lakhs Dealer maintains accounts & files returns themselves 1000
(b) 10 to 50 Lakhs Dealer maintain accounts & returns filed by STPs 3000
(c) 50 to 100 Lakhs Employee maintains accounts & files returns 7000
(Re-Assessment of 4% of Dealers) 5000
(d) 100 to 500 Lakhs Employee maintains accounts & files returns 19000
(Re-Assessment of 4% of Dealers) 10000
(e) > 500 Lakhs Employee maintains accounts & files returns 31000
(Re-Assessment of 4% of Dealers) 10000
2) HOTELIERS Dealer maintain accounts & returns filed by STPs 3000
(Re-Assessment of 4% of Dealers) 1500
3) CONTRACTORS Employee maintains accounts & files returns. 8500
(Re-Assessment of 4% of Dealers) 10000
4) LUXURY TAX ASSESSEES Employee maintains accounts & files returns. 11000
5) ENTERTAINMENT TAX ASSESSEES
Employee maintains accounts & files returns. 19000
6) PROFESSION TAX - EMPLOYERS
Employee maintains accounts & files returns. 8000
7) BETTING TAX PAYERS Employee maintains accounts & files returns. 11000
8) AIT ASSESSEES Employee maintains accounts & files returns. 15000
B. Stamp Duty – Stamps and Registration Department
1 Registerable documents Cost
a) Stamp duty payment through e-stamping (amount
of below Rs. 5000/-)
E-stamping service charge of Rs. 11/- and
processing charges of Rs. 280/-
b) Stamp duty payment through treasury/ e-stamping
where amount is more than of Rs. 5000/- Processing charges of Rs. 280/-
c) Stamp duty payment through DD/Pay order Commission of Rs. 250/- and processing
charges of Rs. 280/-
d) Registration Fee payment through DD/Pay order Commission of Rs. 100/-
2 Un-registerable documents Cost
a) Stamp duty payment through DD/Pay order Commission of Rs. 250/-
b) Stamp duty payment through Franking machine Service Charge of Rs. 5/- per sheet
c) Stamp duty payment through e-stamping where
amount is Rs. 5000/- and below E-stamping service charge of Rs. 11/-
d) Stamp duty payment through treasury/e-stamping
where amount is more than of Rs. 5000/- Nil
73
C. Motor Vehicle Tax – Transport Department ( in Rs.)
Type of Tax/Fees Average Annual compliance cost for Tax Payer /
Entity
DD / Bank Charges Postal Charges
1 Life Time Tax 40 25
2 Quarterly Tax 160 25
3 Driving & Renewal of
License - 25
Note: a. Forms for payment of TAX / FEE is being supplied by department to public free of cost. b. Vehicle tax less than Rs.3,500/- being collected by cash, hence no expenditure is incurred by
individual. c. E-payment will be introduced from 1-1-2013 to reduce the expenditure on D.D / Bank
charges.
D. Excise
Sl No
Type Cost of Compliance (average annual expenditure per tax payer/entity in Rs )
1.
The office accommodation provided to the supervisory staff within the premises of the Distillery/Brewery/Winery
Rs 5.34 lakh per annum (89 varied types of manufactories, taking into consideration a standard prototype of 200 sq feet office accommodation at the rate of Rs 30/- sq ft) The average annual expenditure per tax payer/entity is Rs 6000/-
2. The cost of the Security Excise Adhesive Labels (EAL) affixed on the IMFL/Wine bottles presently borne by the Distillers/Vintners (at the rate of 17 paise per label + VAT)
The cost of Security Excise Adhesive Labels (EAL) borne by the licensee works out to Rs 38.72 crore for the period April-2012 to December- 2012. The average annual expenditure per tax payer/entity is Rs 79,02,051/- (total: 49 licensees as per sales figure furnished by M/s Marketing Consultants & Agencies)
74
Statement 3: Revenue Consequences of Capital Expenditure and physical assets of major departments
A. Education Department
Description
Class Rooms Existing
upto 2011-12
Class Rooms constructed
during 2012-13 Total Rooms
Normative Maintenance Cost
per School per annum (in Rs)
Primary Education 208644 5770 214414 18,000
Secondary Education 20892 546 21438 28,000
PU Buildings - 252 252 30,000
B. Health Department
Description
Existing
upto
2011-12
Added in
2012-13
Total
number of
assets
Normative
Maintenance Cost
per building per
annum (in Rs.)
ANM Sub-Centre (SC) 5743 255 5998 6,000.00
Primary Health Centre (PHC) 1640 150 1790 31,000.00
Community Health Centre (CHC) 125 30 155 71,000.00
Taluk Hospitals (TLH) 99 14 113 71,000.00
District Hospital 16 1 17 2,00,000.00
75
C. Water Resources Department
Details of Assets & Potential creation
( In Rs. crore)
Assets created till 31/3/2012:
Krishna Bhagya Jala Nigam Limited 11784.00
Karnataka Neeravari Nigam Limited 11833.93
Cauvery Neeravari Nigam Limited 11633.22
Total 35251.15
Addition during 2012-13 : (ie capital work in progress)
Karnataka Neeravari Nigam Limited 1499.11
Krishna Bhagya Jala Nigam Limited 94.09
Cauvery Neeravari Nigam Limited 734.61
Total 2327.81
Total Assets till 30/9/2012 is 37578.96
Water Resources Department has created irrigation potential till 31/3/2012 ( in Ha.)
2556146
Water Resources Department has created irrigation potential during 2012-13 (upto Nov 2012) (in Ha.)
15915
Total Potential 2572061
Note: O & M cost of Rs.900/ hectare is being considered as Maintenance Cost for the year 2013-14 onwards. Requisite budgetary provisions have been made.
76
D. Public Works Department:
Sl
no. Assets
Total assets
up to March
2012
Assets
added in
FY 12-13
Total
assets
(3+4)
Annual
normative
maintenance
cost for FY 12-13
(in Rs. lakhs)
1 2 3 4 5 6
1 Roads: (in kms.)
a NH 3047.54 - 3047.54 3000.00
b SH 20774.37 17.50 20791.87 22500.00
C MDR 49905.56 - 49905.56 11500.00
2 Bridges (nos.)
a SH 35362 - 35362 2500.00
b MDR 79859 - 79859 1000.00
3 Buildings (nos.)
a Non-Residential 4957 - 4957 22500.00
b Residential 4369 - 4369 10000.00
4 Ports (nos.) 10 - 10 1500.00
77
E. Social Welfare Department
Description (Type of hostels)
Existing up to
2011-12
Hostels added in 2012-13
Total hostels
Normative maintenance cost
per hostel per annum for
(in Rs lakhs)
Pre -Matric hostels 1272 -28 1244 7.50
Post -Matric hostels 415 +63 478 10.00
Scheduled Tribes Welfare
Description (Type of
Hostels)
Existing up to
2011-12
Hostels added in 2012-13
Total
Hostels
Normative
Maintenance Cost
per hostel per
annum (in Rs. lakhs)
Pre- Matric Boys Hostels 94 02 96 14.49
Pre- Matric Girls Hostels 39 01 40 15.78
Post- Matric Boys Hostels 32 - 32 11.03
Post- Matric Girls Hostels 18 02 20 12.35
Karnataka Residential Educational Institutions Society (KREIS)
Sl. No.
Description
Existing MDRS/KRCRS/ PU College Complexes
New School complexes/
Colleges added in 2012-13
Total school/ College
Complexes
Normative Maintenance
cost per school
complex per Annum
1 Morarji Desai Residential School complexes
a) SC MDR School Complexes
100 10 110 A sum of Rs. 10 lakhs per Annum /per
school is required. b)
ST MDR School complexes
10 7 17
Total 110 17 127
78
Statement -4
Government Land Details*
Division Districts Extent (in acres)
BELGAUM
BAGALKOTE 14,127.36
BIJAPUR 33,785.22
HAVERI 18,001.27
UTTAR KANNADA 2,449.02
GADAG 2,366
DHARWAD 1,352
72,081.11
GULBARGA
BELLARY 65,916.15
YADGIR 44,988.01
KOPPAL 14,639.21
GULBARGA 78,935.05
BIDAR 19,180.13
223,658.55
MYSORE
UDUPI 624.39
HAASAN 59,812.34
DAKSHIN KANNADA 217.32
KODAGU 15,121.32
MYSORE 1475.29
77,250.66
BANGALORE
CHIKKABALLAPUR 98,861.34
DAVANGERE 47,231.12
CHITRADURGA 79,916.29
SHIMOGA 1,78,258.02
2,26,008.75
TOTAL (Incl. Other Districts) 7,77,263.09
*Details of other districts are still in the process of being compiled by Karnataka Public Land Corporation
79
Statement 5
Future Expenditure Commitments of major policy changes during FY 12-13*
(In Rs. Crores)
Sl no
Major Policy Stance Scheme 2012-13 2013-14 2014-15 2015-16
1 Additional Outgo on account of Pay Revision for State Government and GIA Employees
- 4000 4500 5100 5700
2 Availability of cheaper credit for farmers through Interest Subvention
Concessional Crop Loan Scheme
500 550 525 500
3 Providing relief to farmers Cooperative Crop Loan waiver
1140 2000 490 -
4 Buffer Stocking of Fertilizers - 90 100 120 135
5 Goal of Hutless State Basava Vasati Yojane
600 750 800 -
6 Improving State Highways SHDP 1000 1000 800 -
7 Support to Municipalities other than Corporation
CMSMTDP Phase -II
265 340 195 -
8 Improving road connectivity in rural areas
30 km road per Constituency
398 500 500 600
9 Improving village infrastructure Suvarna Grama 350 400 425 475
10 Ettina hole project - 300 500 750 750
11 UKP-III Project - 500 1000 1250 1500
12 Providing GIA support to more schools & colleges
- 60 105 115 150
13 Implementation of Right to Education Act
- 300 400 500 600
14 Industrial Promotion Policies - 100 200 250 300
15 Bangalore Metro Phase-II - 400 600 1000 1500
16 New Medical Colleges - 50 100 200 300
*The above list covers only major policy stances which involve future expenditure commitments. However this list
is not exhaustive. Also the Planning Commission has indicated the inter sectoral allocations for Karnataka over the
12th
FYP period. In the recent National Development Council (NDC) meeting State Government had taken the
stance that it would reprioritize the sectoral outlays from that as indicated by Planning Commission. Since the
process of identifying the priorities is still underway, the 12th
FYP sectoral allocations as proposed by the State
Government to Planning Commission would be brought out in the Mid Year Review 2013-14.
80
Statement - 6
Liabilities in Public Private Partnership*
Viability Gap Funding PPP projects:
(In Rs. crores)
Annuity supported PPP projects:
Sl. No
. Project Name
District Name
Estimated Proj Cost
Sponsoring Authority
Stage Name
Annuity Payments for
2012-2013
Total Annuity
Amount
No of Years
1 Four Laning Of Bangalore-Mysore Road(Bangalore-Maddur)
Mandya 188.5 Karnataka Road Development Corporation Limited
Operation
59.4 8 475.20
2 Hubli - Lakhsmeshwara Road (SH- 73) (Mangsuli - Lakshmenshwara Raod)
Dharwad 103.50
Karnataka Road Development Corporation Limited
Completed, COD
declared on 28-03-2011
33.34 8 266.72
List of PPP projects is as available with Infrastructure Development Department and hence is not exhaustive
Sl.
No. Name of the Project
Viability Gap Funding (VGF) VGF required for
2012-13
From
GOI
From
GOK
Total
VGF
From
GOI
From
GOK
1. Waghdari Ribbon Pally Road 47.71 42.95 90.66 46.36 9.49
2. Dharwad Allnawar Ramnagar Road 46.05 36.85 82.90 35.66 -
3. Chikanayakahalli Tiptur Hassan Road 47.70 45.30 93.00 - -
4. Development of road from NH-63 near Ginigere - Gangavathi to
Sindhanoor
38.03 33.01 71.04 - -
5. Development of road (SH-20, SH-13) Devasugur -Chikkasuguru -
Raichur.
55.17 6.84 62.01 - -
6. Development of road from Shimoga - Honnalli to Harihara 34.35 24.05 58.40 - -
7. Development of SH-19 road from Sindanur to Lingasugur Km
421+800 to 473+800
37.93 28.45 66.38 - -
8. SH-05 connecting Bangarpet with Bagepalli via Kolar and
Chintamani
47.69 45.90 93.59 - -
9. Gotur – Kagewad Sections (SH-12) 35.20 17.76 52.96 - -
10. Improvement to Jath - Jamboti from Ch. 25+000 to 101+000 60.59 - 60.59 - -
11. SH-96 connecting Devanahalli with Kolar via Vijayapura Vemgal 29.60 - 29.60 - -
