No check on States squandering resources

The year 1991 is often referred to as a watershed when economic liberalisation led to newfound prosperity not just for Indians but also for Central and State Governments. The Union Budget (excluding internal and extra budgetary resources of public sector enterprises) that was at ₹1.25 lakh crore has grown exponentially to ₹30 lakh crore now. State government budgets which were a few thousand crore have jumped to more than ₹1 lakh crore in most States and to ₹2 lakh crore in larger States.

While the exponential increase in revenue resulted in and demands for accountability at the Centre, this was not so in the case of the States.

The combined subsidies of State governments amount to more than ₹2 lakh crore while the debt of State-owned discoms is approximately ₹4.5 lakh crore. Freebies are said to be tens of thousand crore.

If cutting red tape, privatising loss-making public sector organisations, eliminating subsidies and reducing corruption are required of the Centre, it must apply to State governments too. Their bureaucracies are bloated, too much taxpayer money goes to support loss-making State PSUs, there’s corruption in every transaction, and freebies are all-pervasive.

According to the NITI Aayog, a core of 26 departments is sufficient for good governance. But most States have anywhere between 40 and 75. Uttar Pradesh has departments of protocol, civil aviation, co-ordination and political pension. Karnataka has medical education, Kannada culture and information while Bihar has departments of building construction and sugarcane.

The Karnataka government owns about 75 companies and corporations, most of which are losing big money. Gujarat has more than 45 boards and corporations for which consolidated financials are unavailable. The Uttar Pradesh government lists 42 operational and 23 non-operational ones on its website. The government of Orissa manages 30 companies and corporations of which only the mining companies rake in large profits. Most State government-owned PSUs are inefficient, personal fiefdoms of ministers and loss-making. Hence they should be privatised or closed.

No State government is serious about fighting corruption. The Delhi government after storming into power on an anti-corruption platform passed the Lokpal Bill which activists describe as ‘Jokepal’. A few months ago, the Karnataka government created the controversial Anti-Corruption Bureau under the purview of the home ministry in order to curtail the powers of a well functioning Lokayukta. The Maharashtra Lokayukta is the weakest with no investigation agency attached to it. The Rajasthan Lokayukta has just 35 officials and cannot take action against the corrupt, it can only recommend legal action to the State government. To minimise corruption,States must strive to create an all powerful independent institution of Lokayukta.

As far as subsidies go, Tamil Nadu is the leader. Last year, the allocation for subsidies and grants was a whopping ₹49,000 crore. The budget speech itself acknowledges the distribution of free “laptop computers electric fans, mixies and grinders free of cost”.

The “Maa Mati Manush” election year budget of West Bengal sets aside more than ₹15,000 crore for distribution of free cycles and various stipends.

Power subsidies are the biggest drag costing anywhere between ₹3,000 crore and ₹15,000 crore with most of it spent on unmetered agriculture pumpsets.

For India to reap its demographic dividend, more than a million jobs must be created every year for the next decade and beyond. Even if the Centre carries out far-reaching reforms, India is unlikely to grow at a double-digit rate if State economies are mired in red tape and inefficiency. Along with the Centre, State governments also need to launch a reform process.

The writer is a Bengaluru-based money manager

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