Forget growth, there isn’t enough to pay the wages

MUMBAI: Of every Rs 100 it earns, the Maharashtra government spends Rs 82 on running its machinery and paying interest on old loans. Jayant Patil, the state finance minister, while presenting the Budget for the year 2006-07, had talked about bringing down the wage bill to 59%. This means that Rs 59 of every Rs 100 earned will go towards paying salary to government employees.

“The amount being spent on non-developmental heads is much higher,” pointed out Samarthan, an NGO that has been studying the state Budget for years. In 2006-07 the Maharashtra government will end up paying Rs 18,754 crore on salaries, Rs 3,867 crore on pension and Rs 17,506 crore towards interest on old debts. This is roughly 82% of its total revenue earnings in the year. More significantly, the state’s administrative costs have been going up — many newly created districts are yet to be provided with office buildings and other necessary mechanism. One such district HQ is Washim, in Vidarbha, an area reeling under agrarian crisis.

Many believe that the failure to bring down administrative costs and non-developmental expenditure affects the state’s budget planning, leaving just a very small amount for development activities. This is the reason the state’s capital expenditure has been showing a steady decline, the Samarthan study notes. In 2003-04 the state had 39.34% of its revenue earmarked for capital expenditure. According to Budget documents, it will be 20.84% in 2007-08. The allocation, the study notes, is falling at 5-6% a year. The allocation for infrastructure development too has shown a steady decline during the period. In the current year, ie 2006-07, the government had allocated 59.12% for infrastructure development, compared with 44.84% for 2007-08.

The study has also pointed out a growing discrepancy in budgetary estimates, revised estimates and an actual expenditure. In 2000-01, in the first Budget of the Democratic Front government, expenditure estimates were pegged at Rs 38,125 crore, it was then revised to Rs 51,233 crore, while the actual expenditure was Rs 47,102 crore. After five years, in 2005-06, the government presented an expenditure plan for Rs 60,539 crore, which was then raised to Rs 73,488 crore. Finally, the government spent only Rs 72,786 crore. In the past five years the actual expenditure has been 14.68% over the estimated figure. Earnings estimates too have gone awry.

In 2005-06, the state earned 20.13% more than it expected. “Any deviation plus or minus by more than 10% is bad budgeting,” says the study.