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

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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.

SPECIAL ARTICLE

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

Mukesh Anand

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 sector-specific taxes far exceeds estimated under-recovery. It also highlights the growing tendency of tax-based financing and lackadaisical approach towards pricing of public services.

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