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C. Shivkumar

Bangalore , Sept. 25

THE Karnataka Government has reworked the fiscal targets after pruning borrowings, revenue expenditure and due to buoyant revenue receipts during the current year.

State Government officials said here that the consolidated fiscal deficit estimated for the current year was 4.66 per cent of the gross state domestic product (GSDP). The budget for the current fiscal had pegged the figure at 6.23 per cent of the GSDP. Consolidated fiscal deficit includes off budget borrowings, subsidy support to the power sector and contingent liabilities.

The officials said the main factor that helped the State Government to prune the deficit was reduction in the revenue expenditure. Two components in the revenue expenditure have been contained. These include, interest payments on borrowings. Interest payments have been reduced through a series of debt swaps, which have helped bring the average borrowing costs to under 8 per cent. Besides incremental borrowing costs are barely 6 per cent in view of surfeit of liquidity in the financial markets.

Besides, the officials said, the State Government has clamped down on off budget borrowings. Off budget borrowings, (mostly funds raised through State Government corporation and special purpose vehicles) estimated for the current year was Rs 1,270 crore. However, the net off budget borrowings projected for the year is estimated at less than Rs 500 crore, down from the previous year's figure of Rs 1,090 crore. The netting is done after meeting the redemption of some of the past borrowings. Consequently the gross borrowings are likely to be 1,900 crore. This was because complete elimination of borrowings was not possible since some of the development projects Krishna Bhagya Jala Nigam Ltd would continue to be large borrowers.

However, borrowing from financial institutions as the National Bank of Agriculture and Rural Development, HUDCO, Rural Electrification Corporation and the Power Finance Corporation have already been tightened. State Government Guarantees, both explicit and implicit ( letters of comfort ) for borrowings from the institutions would now have to be cleared by the Finance Department .

The outstanding guarantees provided by the State Government were in the region of Rs 21,000 crore, which was exclusive of letters of comfort. The officials explained that the purpose of the tightening was to contain some of the unfunded guarantees and bring about greater consistency in the accounting practices.

Besides, the officials said subsidies to the power sector itself have been brought in a bid to ensure better cost recover in the sector. The actual budgetary support to the power sector is unlikely to exceed Rs 1,654 crore during the year. Consequently the power utility, Karnataka power Transmission Corporation Ltd would have to rely exclusively on tariff adjustments, better revenue and loss reductions to off set the reduced subsidy flows.

The officials also said the revenue expenditure reduction was being brought down through a freeze in recruitment.

As a result, the expenditure on salaries and pensions have been contained at about 8.5 per cent of the GSDP. This is a slight reduction from the last financial year when it was 8.8 per cent of the GSDP. What is interesting is that the containing of establishment expenditure has been achieved despite assumption of the pension liabilities of the KPTCL.

However, the changed estimates for the current year are also on account of the optimism on revenue receipts flows. Revenue receipts this year, are estimated to be Rs 19,845 crore inclusive of central transfers.

However, the revenue buoyancy of the states internal tax receipts have improved indicative of the tax collection efficiency. The revenue buoyancy, which had dropped to 8 per cent in 1999-2000, is now estimated to be in the region of 9.6 per cent slightly above the national average.

Consequently, the officials expect to better the State's internal tax receipts this year, estimated at Rs 12,588 crore. Already some for the first months of the current fiscal, indications that about 40 per cent realisation has already been made of the budgeted targets, despite being a lean period for tax collections.

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Karnataka reworks fiscal target; deficit pegged at 4.66 pc

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