ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Mukesh AnandSubscribe to Mukesh Anand

Budgetary Implications of Costs of and Recovery from Select Public Services in Rajasthan

One reason for growth in deficits has been the pursuit of subsidy-oriented policies. Subsidies are believed to be ubiquitous in public expenditure. Estimates of sectoral/service-level subsidy, however, are based on a notion of unrecovered cost. This paper discusses the estimates of the annualised budgetary cost of and recovery from four public services, namely, drinking water, irrigation, power and road transport in Rajasthan between 1990-91 and 2006-07. An aggregate under-recovery in these (four) public services, as a proportion of gross state domestic product, appears to be ratcheting up gradually. Irrigation and power, constituting more than 80% of aggregate under-recovery, depict wider inequity in spread of benefits from public expenditure. Further, sectors constituting a relatively small proportion of aggregate under-recovery, namely, drinking water and road transport, are biased against the relatively poor. Worse, in the case of road transport, revenue from such taxes far exceeds estimated under-recovery. It also highlights the growing tendency of tax-based financing and lackadaisical approach towards pricing of public services.

Pay Commission: Missing the Wood, Missing the Trees

The Sixth Central Pay Commission's recommendations have pleased none and displeased many. A critical examination of some of the main recommendations, which have largely been accepted by the central government, is offered here.

Demographic and Social Changes: Issues for the Sixth Central Pay Commission

Inadequate synchronisation of central government service and superannuation rules with a favourable demographic structure and social developments may adversely affect labour and effort of government employees. A slowdown in fresh recruitment has had a negative impact on the system-dependency ratio and the improvement in age-dependency has not resulted in economic benefits. Some recent decisions may exacerbate both inter- and intra-generational equity concerns in employees' compensation. These may have implications for the cost and quality of public services.

Government Employment and Employees' Compensation

By 2004-05, as compared to 1950-51, the compensation structure of central government employees had gravitated substantially towards deferred payments. Though the average wage compensation of a central government worker is higher than the per worker gross domestic product, the latter has grown at a faster rate in the past few years. The number of central government workers has been declining and the aggregate expenditure towards employee compensation as a proportion of net non-debt revenue receipts has also fallen. Hence, at the aggregate level, there is no grave concern regarding the fiscal implications of wage and retirement benefits

Budgetary Subsidies and Fiscal Deficit

This paper focuses on the fundamental question of whether the government's budgetary subsidies, estimated as unrecovered costs, can exceed the gross fiscal deficit. It explores the reasons for the wide gaps in the measure of fiscal deficit and the estimate of aggregate subsidy, and suggests an improvement in methodology for the latter, using the example of Maharashtra to tally the aggregate unrecovered costs. The paper shows that the subsidy estimated as unrecovered costs of the present consumption programme should not exceed the budgetary fiscal deficit.

Government Pensions

The central government expenditure on pensions has increased sixfold between 1990-91 and 1999-2000. Various bodies have estimated the extent of the pension liability over the coming decades and proposed reforms. This essay examines the assumptions made in these estimates and points to the additional considerations that merit attention while judging the viability of reforms.
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