Punjab budget: high on development, low on taxation!

Thanks to the soaring revenues from the Federal divisible pool, Punjab governments coffers seem to be overflowing. Perhaps, that is why a nearly 20 percent hike has been budgeted in the provincial expenditures, which tallies Rs.782.85 billion, for the next financial year 2012-13. According to the 7th NFC Award, Punjabs share in the divisible pool stands at 51.74 percent. The Federal transfer to the province is budgeted at Rs.650.73 billion for FY13, 21.89 percent more than the FY12 estimates. This major increase is expected on account of growth in income tax and sales tax in the divisible pool, as the two taxes collectively contribute 83.6 percent of Punjabs share in the pool. Official documents show that the Punjab budget for FY13 has a nominal deficit. The general revenue receipts are estimated at Rs.780.67 billion, a growth of 17 percent possible only due to major increase in Punjabs revenue share from the Federation. On the other hand, the provincial revenue receipts are budgeted at Rs.129.93 billion, three percent less than the FY12 estimates. With no significant taxation measures, the provincial tax receipts are budgeted at Rs.95 billion, mainly on account of indirect taxes like provincial GST (Rs.40.49 billion), stamps duty (Rs.12.16 billion) and motor vehicles tax (Rs.8.97 billion). Direct taxes are budgeted at Rs.25.31 billion only, mostly from land revenue (mutation fee) and property tax. Two-third of the budgeted expenditure is on account of current expenditures whose allocations have been increased by 13.86 percent. Simply put, for every hundred rupees allocated for current expenditures, Rs.57.3 are budgeted for general public service (including local governments), Rs.15.3 for public order and safety, Rs.13 for economic affairs, Rs.6.6 for health services and Rs.5.8 for educational affairs. The provincial budget has major allocations for development projects in FY13. At Rs.250 billion, the development outlays are 13.63 percent more than FY12 budgetary estimates and 51 percent greater than the FY12 revised estimates. Rather than mentioning big numbers, Punjabs development expenditures are explained here in simple terms to help understand the provinces development priorities. For every hundred rupees of the FY13 development budget, Rs.12 would be spent each on road infrastructure, agriculture and irrigation works, and public office buildings; Rs.9.3 would be spent on secondary education projects; Rs.8.5 on district development programmes; Rs.7.7 on general hospital services; Rs.7.4 on urban housing development and Rs.4 on water and sewerage. Nearly a sixth of the development outlay, or Rs.40 billion, has been set aside for programmes that are hailed as the Chief Minister Punjabs flagship projects during his second term in office. Programmes like the Aashiana Housing Scheme, Danish School System and Punjab Education Endowment Fund will get Rs.2 billion each. The Punjab Education Fund has been allocated Rs.6.5 billion. In addition, population welfare and self-employment schemes have been allocated Rs.3 billion each. An amount of Rs.1.5 billion has been earmarked for internship programmes. Moreover, Punjab MDG Programme has been allocated Rs.5.5 billion. It is quite apparent that the Punjab governments budgetary approach too has not been different from that of the Federal Government, as both largely neglected two pressing needs-revenue mobilisation and rationalising overheads. However, the Punjab governments development portfolio seems rather ambitious and broad-based, whose effectiveness would depend on efficient utilisation of resources.