FEBRUARY 2008 by Epilogue Press

Baba Ghulam Shah Badshah University, Rajouri 185131 (J&K) Announces Admission for Academics Session 2008-09

Epilogue because there is more to know

THE MONEY MOVEMENT THE MONEY MOVEMENT MOVEMENT THE MONEY MOVEMENT THE MONEY MOVEMENT THE MONEY MOVEMENT THE MONEY MOVEMENT THE MONEY MOVEMENT Letters to the editor THE MONEY MOVEMENT THE MONEY MOVEMENT Editor in Chief THE MONEY MOVEMENT THE MONEY MOVEMENT Zafar Choudhary THE MONEY MOVEMENT THE MONEY MOVEMENT Prologue THE MONEY MOVEMENT THE MONEY MOVEMENT Consulting Editor THE MONEY MOVEMENT THE MONEY MOVEMENT Dialogue D. Suba Chandran THE MONEY MOVEMENT THE MONEY MOVEMENT Haseeb A Drabu THE MONEY MOVEMENT THE MONEY MOVEMENT Associate Editor THE MONEY MOVEMENT THE MONEY MOVEMENT Irm Amin Baig THE MONEY MOVEMENT THE MONEY MOVEMENT Special Reports Executive Director THE MONEY MOVEMENT THE MONEYZafar MOVEMENT Choudhary Mohammad Yasmeen THE MONEY MOVEMENT THE MONEY MOVEMENT www.epilogue.in THE MONEY

THE MONEY MOVEMENT

CONTENTS

Phones & email Editorial: +91 94194-80762 Administration:+91 9419631610 editor.epilogue@gmail.com info.epilogue@gmail.com subscription.epilogue@gmail.com

Anmol Sharma

Kashmir Politics Separatist Unity : Alliances of Compulsion

Report Situation in J&K and Contours of Future Strategy

Dr Ashok Bhan Volume 2, Issue 2, February 2008

11 13 16 18

2008-09 (Projections)

2002-03

Mailing Address PO Box 50, HO Gandhi Nagar, Jammu

Pawan Bali

IN FOCUS THE MONEY MOVEMENT

Budget 2008-09 : Political Courage Sans Innovation ?

Edited, Printed and Published by Zafar Choudhary for CMRD Publications and Communications Published from ‘Ibadat’, Madrasa Lane, Bhatindi Top, Jammu, J&K

‘Figures Fuged, Statistics Faked’

‘We Have Brought Turn Around In Economy’

Printed at Dee Dee Reprographix, Jammu

‘J&K Is Headed For A Severe Debt Trap’

Disputes, if any, subject to jurisdiction of courts and competitive tribunals in Jammu only.

Columns Tareekh Jest Ponder

45 47

Review Movie

Price : Rs 40 Epilogue From the Consulting Editor

Epilogue Ø 1× January 2008

M A I L

B O X

LETTERS TO THE EDITOR

Letters Mail your letters to editor.epilogue@gmail.com

Army Chief appreciates Epilogue

Add monthly chronology

The Chief of the Army Staff has gone through the Epilogue magazine and has conveyed his appreciations to you for bringing out such quality magazine. Sincere effort BRIG SK CHATTERJI Deputy Director General, Public Information, DGoMI

Keep the mission alive I got an opportunity to have a look at Epilogue magazine and found it up to the mark, I hope you will keep up your mission and come forward for the rescue of he people, who are reeling under the cruel feet of the present government. ASLAM KHAN Via email

Resume column on travel Your regular column on travel has been missing for last three months. Named as Travelogue, the regular column served as a good source of information on the destinations in Jammu and Kashmir. We are told that every place in your state is worth visiting. Could you please think of resuming the column with some additional information on mode of transport and stay options. NAZIR KA Kochi, Kerala

I have been reading Epilogue magazine regularly. I appreciate the sincerity of efforts that go into making of this magazine. Sachin Pilot MP, Lok Sabha

Expand area of coverage to entire J&K We are greatly appreciative of your magazine which has provided an alternative to mainstream coverage of events in Jammu and Kashmir. We, however, feel that to garner greater readership, your articles should cover all regions of Jammu and Kashmir including the Pakistan occupied Kashmir, Gilgit and Balochistan and also the adjoining Pakistan. This would meet aspirations of region specific readers and also provide an over-arching compendium to interested analysts.

BRIG ABHIJIT GUHA BGS (IW) Northern Command (Now GoC, Third Division, Leh)

I have been reading Epilogue very keenly ever since it was launched January last. In a short span of time, the magazine has established itself as a reputed and credible source of information which has been missing in the mainstream media. I would appreciate if you consider a couple of suggestion –one that it is a monthly journal and therefore it should carry a chronology of the main events of the preceding month and second the magazine should have a regular section on economy of Jammu and Kashmir.

ANU GUPTA University of Jammu

Why rural reports missing I saw a letter to editor in your magazine some three months back which suggested doing some more work on rural reporting. Your editorial stuff is yet to include reports from the margins. Please consider doing this lest the magazine is seen addressed an elite audience.

AATIF SHEIKH Kishtwar

Invaluable source on J&K Epilogue Magazine is excellent. It is indeed an invaluable source of information on our state –Jammu and Kashmir Pervez Dewan, IAS Chairman and Managing Director, ITDC

Epilogue Ø 2× January 2008

P R O L O G U E FROM THE EDITOR

An Elegy To Transparency Zafar Choudhary January was literally a month of political upheaval in Jammu and Kashmir. An expansion of state cabinet was followed by the last budget session of the state legislature. State is headed for general elections later this year. The government had obviously wanted to showcase its achievements of past five years to consolidate the public mood in its favour. The opposition which appeared at a weak footing, despite strong in numbers, also came up with a renewed strategy to take on the government. In fact, the opposition National Conference had little to actually behave as a strong opposition all these years when the ruling alliance partners –the Congress and the Peoples Democratic Party –continued to be drawn into murky battles within. With the alliance partners washing their linen in the public, the National Conference probably was waiting to cash in the opportunity to see fall of the coalition government and then enter into a possible alliance with the Congress to regain the lost power. This apparently was the reason that the National Conference for over two years behaved more or less like a friendly ally of the Congress. However, in first week of December last year, the Congress and the Peoples Democratic Party decided to bury their differences and resolved to strengthen their ties and work towards a renewed alliance for forthcoming elections. It is unwise to predict as what political situation emerges later this year but as of now none of the major political parties –the Congress, the PDP or the National Conference –are in any position to form the government at their own. There has

to be some alliance. This has National Conference exasperated and requiring it to built an aggressive posture against the government. There was hardly any day when the opposition allowed smooth proceedings of the assembly which met for its last budget session January 7 onwards. The Finance Minister was not allowed to make a reply to the discussion on budget as opposition demanded his resignation for his alleged involvement in the irregularities in Forest department. Discussions on the budgetary allocations of more than 25 departments were not allowed to be held and the assembly had to be adjourned sine die ten days ahead of its schedule. It will be misplaced to conclude here that what National Conference did was just for the sake of it. There was a definite cause of action. There were allegations of corruption against many functionaries of the government including Ministers. Eradication of corruption, it may be mentioned here, has remained one single top most agenda of the coalition government ever since it took over in November 2002. Ironically, the end of the day the allegation are against government itself. The most unfortunate part of the story, however, remains that instead of coming clear on the allegations, the government has chosen to level counter allegations against the National Conference for what they did before 2002. Probes may bring the truth to fore in due course of time but in the meanwhile the message going to the public reads, we are corrupt but lesser than National Conference.

Epilogue Ø 3× January 2008

Epilogue because there is more to know

EPILOGUE aims at providing a platform where a meaningful exchange of ideas, opinion and thoughts can take place among the people and about the people of Jammu & Kashmir. The attempt is to research, investigate, communicate and disseminate information, ideas and alternatives for the resolution of common problems facing the state and society of Jammu & Kashmir and in the context of their significance to South Asia as a whole. We welcome contributions from academics, journalists, researches, economists and strategic thinkers. We would also like to encourage first-time writers with the only requirements being a concern for and the desire to understand the prevailing issues and themes of life in Jammu & Kashmir Contributions may be investigate, descriptive, analytical or theorectical. They may be in the form of original articles or in the form of a comment on current events. All contributions have to be neatly types in double space and may be sent to the address given alongside or e-mailed to the editor. While the editor accepts responsibility for the selection of the material published, individual authors are responsible for the facts, figures and viess ithe tier articles.

HEAR AND HEAR

WHO SAID WHAT At 24 p laces, K undal report s ays the wrongs of Fore st Offic ers had approva l of Min ister... .... still the gov ernmen maintai t ns that there is no dire ct invol vement of any min ister

der n u e f i l s Cm’ ner, d r a G . t a thre or in t a r e p o e telephon n with collusio s militant Various TV News Channel

Ali Mohammad Sagar National Conference

“We cannot lower our guard, whether on the borders or in the interior'” Lt. General (Retd) S K Sinha (During his speech on 59th Republic Day)

“Every single person in the State is under debt of Rs 10655” Dr Mehboob Beg, NC leader, reacting to the State Budgt

“Gun is not solution - be it in the hands of the troops or the militants” Mufti Mohammad Sayeed, People's Democratic Party (PDP) patron and former Chief Minister of J&K, during a meeting in Samba

“I was forced to pay Rs 40,000 to a Special Assistant of a Cabinet Minister to get my sister's genuine work done in the Civil Secretariat” Shoaib Lone, MLA during his speech at the Legislative Assembly

“We are at a crucial stage of the freedom movement. We swim together, or we sink together” Shabir Shah on his return to the Hurriyat Conference led by the Mirwaiz

“Pakistan cannot arrest me. I live on my own soil” Syed Salahuddin leader of the United Jehad Council

Epilogue Ø 4× January 2008

C H R O N O L O G Y J&K JANUARY 2008

January 1:

January 15:

Chief Minister Ghulam Nabi Azad expands his Council of Ministers by inducting four more Ministers –all from Congress. Mula Ram and Abdul Ghani Vakil are inducted as Cabinet Ministers while Ghulam Mohammad Saroori and Chowdhary Gharu Ram are inducted as Ministers of State.

Minister for School Education and President of state unit of Congress Peerzada Mohammad Sayeed is sacked following allegations from a legislator that he paid Rs 40,000 to Minister's personal staff for getting a work done from his department.

January 2 : Union Minister of State for Commerce Jai Ram Ramesh says that A. V. Thomas, world's largest wallet making company has desired to set up at leather wallet making unit in Kashmir

January 25: Security forces gunned down Bashir Ahmed alias Sabba Hajia, of Harkat-ulJehad Islami (HUJI) outfit, in Kishtwar, He was believed to be behind the serial blasts in Uttar Pradesh in 2007.

January 10:

January 11 :

January 12: Security forces gunned down three militants of Lashkar-e-Toiba (LeT) in Doda district January 14 : Shabir Shah, chief of the Democratic Freedom Party (DFP) returned to the All Parties Hurriyat Conference (APHC) led by Mirwaiz Umar Farooq.

The Legislative Assembly passed a bill to set up Shri Shiv Khori Shrine Board (SSKSB). According to the Bill, 20 per cent of the shrine funds is likely to be spent for development of Reasi and areas surrounding it. January 21:

January 7:

Jammu-Srinagar National Highway was reopened for the traffic after being closed for three days due to landslide at Panthyal

January 18:

At Mandigam village near Handwara in Kupwara district, three militants of Lashkar-e-Toiba have been killed at the residence of two activists of the ruling People's Democratic Party (PDP).

State Legislative Assembly meets for its advanced budget session which began at a noisy note amidst boycott of joint sitting by the opposition National Conference and protests in the Central Hall by Panthers Party.

Mangat Ram Sharma, Minister for Health and Medical Education announced in the Legislative Assembly that the coalition partners are committed to the Delimitation Commission, which is a part of the Common Minimum Programme and they would introduce the bill in this session itself.

in the State Legislative Assembly said, during 2007, 148 persons lost lives in 476 militancy incidents.

Sacked: Peerzada Sayeed

January 16: Finance Minister Tariq Hameed Karra presented annual Rs 18443 Crore budget for the financial year 2008-09 January 17: As many as 66 passengers of Karvan-eAman bus crossed sides at Kaman, the last Indian military post on the Line of Control (LoC) in Uri sector in north Kashmir. January 17: Deputy CM Muzaffar Hussain Baig says that he State Government has proposed to establish a residential and technical University in the State to offer Islamic, scientific , technical and other education as also utilization of finances of Jamiyate-Ahalihadees, Salfiya Muslim Education Trust and Wakf Tanzeem Trust January 18: Taj Mohiudin, while answering a question

Epilogue Ø 5× January 2008

January 26: Justice Adarsh Sen Anand, former Chief Justice of India and former chairman of National Human Rights Commission, Mian Bashir Ahmed, veteran Gujjar spiritual and political leader, Prof Amitabh Matto, Vice Chancellor of the Jammu University and Mohammad Yousuf Taing, MLC and former Secretary Culture Academy were given Padma awards. Justice A S Anand has been awarded Padma Vibhushan, Mian Bashir Ahmed Padma Bhushan while Prof Mattoo and Mr Taing have been awarded Padma Shri. January 30: The Speaker of State Legislative Assembly Tara Chand adjourns the session sine die, ten days ahead of the schedule, following unprecedented protests from the Opposition National Conference seeking resignation of two Ministers for their alleged role in the Forest scams.

D I A L O G U E HASEEB A DRABU

J&K is a Rich State Run by a Poor Government Interview with Dr Haseeb A Drabu Dr HASEEB A DRABU, the Chairman of Jammu and Kashmir Bank and Economic Advisor to the State Government, is a perceptive economist and a meticulous planner. In a freewheeling discussion with ZAFAR CHOUDHARY, Editor-in-Chief Epilogue Magazine, he shares his ideas on J&K’s economic scenario and explains growth story of his bank. You joined Jammu and Kashmir government as economic advisor in January 2003. Can you please recall your assessment of state's economic position at that point of time? We heard from the present government that there was a fiscal crisis in 2003. However, in June same year, the government presented a Zero Deficit budget. How do you explain this journey? My first experience was quite disappointing at the state of affairs. On January 4, 2003, the Finance Minister Muzaffar Hussain Baig called me to his office chambers in civil secretariat for a meeting. When I went in, the Minister had with him Finance Secretary and Planning Secretary. The issue being discussed was debt servicing of Baglihar hydro-electric project. The state was heading for a default on January 6. On Baglihar project, it was a complete off budget borrowing. This set me off with thinking that there is something wrong with the whole fiscal mechanism. The deeper we looked, the messier the situation emerged. There was a complete adhocism in the system. The approach of the predecessors, as I gathered from my initial look at the system, was completely adhoc and unprofessional. I could gather that there was no application of mind. It was an entirely loosely knit system where estimates would crop from the bottom while there should have been a formulation of estimates from the top. It was more like a fiction. The budget

numbers had to sanctity and lacked credibility. Can you imagine that in the preceding five years (before 2003) there was no discussion on the plan? There was total lack of information. The Finance Minister would give a figure of Rs 5000 Crores and revised estimates would suggest Rs 2000 Crores. It was a fiction. I wonder how things used to move without having an advance meeting with the Planning Commission. The system was in disarray. Therefore I suggested the Finance Minister (Muzaffar Hussain Baig) that instead of presenting budget we should look out for a Vote on Account for three months till we arrive at a complete understanding of the system and fix the problem areas. It made no sense to present a budget with a budget deficit of Rs 1,600 crore or a fiscal deficit of over Rs 2,000 crore. The Finance Minister got the point; we both met the Chief Minister over the issue. As expected, the Chief Minister asked that why to postpone the budget and seek Vote on Account. I quickly gave him the outline of the problem as I saw it. The plan size hadn't been finalised and that meant we would have a fictitious number in the budget. And once the plan size was assumed in the budget without resources in sight, it was bound to be financed by higher borrowings from institutions and that

Epilogue Ø 6× January 2008

would vitiate fiscal balance. There were large information gaps that needed to be plugged in before a complete fiscal position could be worked out. The government, for instance, had no estimates of the off-budget borrowing and guarantees given by it. Therefore, we could have faced a default. There might have been borrowings that weren't provided for in the budget. My proposal was agreed to and we started working on new scheme of things. After five years of Zero Deficit budget, now we hear that the brain behind this innovation was yours. Please share with us the inside account of this budgetary balance and innovative term which was hitherto unknown to Jammu and Kashmir. See the problem is very simple to understand. There are three types of deficits. Fiscal deficit reflects borrowing. Revenue deficit means short on revenue and what exactly budget deficit means is your total expenditure minus total receipts. This shortfall is called the budget deficit which can be mopped up only by printing notes and nothing else. States can not have budget deficits because they do not print notes. If you can not print notes and your budget still shows deficits this means that the part of the budget corresponding to the deficit is unfunded. This reflects mismanagement. Therefore, the budget should have zero deficits.

D I A L O G U E HASEEB A DRABU

It is been five years that you have been advising Jammu and Kashmir government on economy. How much, do you think, the state has benefited from your advices. Can you please enlist the major reforms? My influence is peripheral and limited. I generally sit outside the system. But I can claim credit for few things. One, that we brought professionalism in the system and ensured a complete transparency. The level of information shared with the public is larger than what was there e a r l i e r. T h e P r i m e M i n i s t e r ' s Reconstruction Plan is another area where I feel that I played definite role. The separation of power budget from the main budget is another area where my inputs brought discipline in the system. How do look at the debt burden problem of Jammu and Kashmir. Is it fiscal or macro-economic? It is growing by ever year. Your assessment of the problem please. Well, debt burden is a problem of slower growth. If you grow fast, the burden will come down. There is a wrong impression that Jammu and Kashmir has a huge debt burden. Your debt has to be seen in relation to SDP of the state. Compared to other states in the country our position is far better. How do you look at the overall economic scenario of Jammu and Kashmir? Jammu and Kashmir is a resource rich state but still it is seen as poor in outlook. What are your suggestions for making this state economically vibrant? Jammu and Kashmir is a rich state run by a poor government. The natural resources of the state are rich but finances of government are poor. There are obvious gaps in the system. People

are not paying for what they get. Take the power budget out and there are no taxes on anything else. For example agriculture and horticulture sectors are not taxed and industry is enjoying a slew of exemptions. Sooner or later these gaps will have to be filled up to support finances of the government. Suggestions… See, there are some important areas which need rethink. For example planning has to be totally based on more understanding of the whole structure. The Finance Minister needs to have some more flexibility. Unfortunately, in an era of centralized financial management, the State Finance Ministers will soon be reduced to the 12th man in the cricket team. Therefore, the Finance Minister should get some more flexibility. A relook at the plan methodology is essential. We should plan in a different manner –say to have sub plans etc. The government should also focus at putting in place a strong institutional capacity for implementing the economic policy. The economic policy too needs to be restructured to have a special emphasis on social infrastructure. Another most important thing –the government should look at corporatising a large part of its operations. In this direction a beginning c a n b e m a d e w i t h t h e Po w e r Development Corporation and I am sure this will yield tremendous results. The Jammu and Kashmir Bank has been growing with enormous pace. Please explain the growth story of your bank. The growth story of Jammu and Kashmir Bank goes back to history when this bank came up in 1938. The major phase of growth, however, was in 1970s when the Bank moved out in the state and elsewhere in the country. The second phase of growth was in the 1990s. The civil strife had pushed most of the banks

Epilogue Ø 7× January 2008

to wall and many of them closed down their branches. The Jammu and Kashmir Bank stayed back and served the people. There was a huge business growth. The third phase was the phase of consolidation and it coincided with my arrival at the helm of affairs. See, the story of 1990s was quite simple –we benefited by exit of other banks and got business in huge volumes. The latest phase involved a strategy of consolidation and improvement in quality of service. The strategy was not of only lending but also investing in government schemes at low interest rates. My coming in at this position was marked by three things: *

Interest revision

Rise in interest rates and

People going back to other banks

Looking at the prevailing scenario, we did a quick change in strategy. Instead of lending endlessly we tried to consolidate. Our growth in 10 years had been quite explosive so we gave a pause and worked out improvements in the internal system. We were provided for 40 per cent NPAs which we revised to 75 per c e n t . We b r o u g h t a c o m p l e t e transparency in the system. You may note that first time in the history of any bank, our balance sheets for two consecutive years had no qualification alters. This speaks of transparency in the system. At what position do you rank your bank in terms of public trust and growth in the country? Jammu and Kashmir Bank has been rated as one among the 150 most valuable companied in India. Our public trust is enormous and growth stupendous. What is your Bank's role in microenterprise in Jammu and Kashmir. Can

D I A L O G U E HASEEB A DRABU

we expect you taking some lessons from the Grameen Bank of Bangladesh which earned Dr Muhammad Younis Nobel Prize.

sheer accident. And then coming to Jammu and Kashmir was rather a bigger accident and not a decision by careful design.

See, what Grameen Bank did has always been a part of our operations. What all we have in Jammu and Kashmir is small and tiny enterprises and financing them is a part of our portfolio. However, we can not exclusively devote ourselves to this sector alone and we need to look at the big enterprises as well.

Going back to my school days, I was poor at sciences. In my higher secondary examination, I failed in Chemistry. This made me to change the choice of my subjects. I shifted to Amar Singh College in Srinagar and took up Arts stream –with Economics as one of the subjects. Meanwhile, I developed keen interest in Economics. I continued with Economics at University of Kashmir and topped in my MA degree. Then I shifted to Mumbai and joined the Center for Development Studies, then headed by Mr KN Raj. The environment there changes my way of life. Meanwhile, I got a job in the Planning Commission during VP Singh's regime where I became of member of a high powered group and wrote a paper on employment. I was taken as a member of Economic Advisory Committee to the Prime Minister, headed by Mr Bimal Jalan. Later, I met Mr C Rangarajan, who was then Deputy Governor of the Reserve Bank of India and I was made a member of the Finance Commission. When Rangarajan retired from the RBI as Governor, he recommended me to Mr KC Pant for a role in the Planning Commission.

Right or wrong, but there is a general perception that the growth story of Jammu and Kashmir Bank is directly linked with poverty of Jammu and Kashmir government. Some people feel that the government is your biggest borrower and the interests you earn thereupon make your bank rich. Comment… (Laughs) This reflects a total lack of information and understanding. Our total lendings are of more than Rs 23,000 crores while what all Jammu and Kashmir government owes is something around Rs 2000 crores. Therefore, it is only eight per cent of the total interest which we get from the government. 92 per cent of our interest earnings are from outside the government. So where is the question of linking bank's growth to the poverty of government? What would the J&K Bank look like two years later? Regional in origin National in profile

Sometimes later, I realized that I was sick and tired of the government jobs and then I moved to the newspaper (Business Standard) Some experiences from Business Standard…?

International in quality of operations Can you please share with us something about the making of Dr Haseeb Drabu –the economist? People don't know much about you. Well there is not much about me which people should be keen to know but my becoming an economist was a matter of

Well, that was the stint I enjoyed most in my life. I was sitting at a powerful position and my writings wielded a lot of impact. The Corporate world sometimes appeared worried. My regular column in the Business Standard would often come under discussions in Parliament. That was most satisfying experience.

Epilogue Ø 8× January 2008

As we know that you were brought into Jammu and Kashmir government as Economic Advisor by then Chief Minister Mufti Mohammad Sayeed. Some people say that somewhere in early 1990s you were speaking at a Seminar in Delhi where you disapproved of land reforms policy of Sheikh Mohammad Abdullah and Mufti spotted you there as the right person suited to his ideology. I don't know any such thing but let me say that I have deep appreciations for Sheikh Mohammad Abdullah's economic policies. Mufti might have heard me at some seminar but let me tell you that my first entry to Jammu and Kashmir was in 1996. In fact, Dr Farooq Abdullah's Chief Secretary Ashok Jaitly knew about me and I was made a member of Madhav Godbole Committee on Economic Reforms. My association with Jammu and Kashmir government dates back to 1996. In 2002-03 two persons had suggested me to work with Jammu and Kashmir government –KC Pant and Dr Manmohan Singh. In fact, I had settled down in Mumbai when Dr Manmohan Singh called me in Delhi and asked to go to Kashmir. What role do you aspire to take up after your term with the state government and the Jammu and Kashmir Bank is over. Can it be a role with World Bank, IMF or Planning Commission? I have already worked with the organizations you have named. Honestly speaking I want to retire after my present assignment. I am saying this from the core of my heart. Can we see you performing a larger role in Jammu and Kashmir politics? No, I am happy with what I am doing. Even otherwise I believe one can perform better being outside the politics.

The Journey to a Friend’s House

IS NEVER TOO LONG

This Month Remind Your Friends, That You Care! That, You Care for Their Intellectual Growth

Jammu and Kashmir’s Monthly Magazine

Epilogue because there is more to know

Makes The Journey To Your Friend’s House Easy

Instead of blindly focusing on sales, Epilogue seeks to reach out to quality readers - who have the quest for knowing more. Therefore, we want you to suggest us some sharp minds. Please fill in names and addresses of your 10 friends and relatives in the columns overleaf. Fill in your address as well and send this form to us. Your friends will get a free copy of Epilogue magazine on your behalf and you will get much more : *

The pleasure of gifting a quality magazine to as many as 10 friends/relatives.

50% concession on Epilogue annual subscription and a lasting relation with a growing knowledge bank

Fill in the form overleaf and mail this to : General Manager, Epilogue Magazine, ‘Ibadat’ Madrasa Lane, Bathindi Top, Jammu

My Name :__________________________________________________

One Little Step Towards

Age :_________ Address :______________________________________ ____________________________________________________________

A Shared Values Community

Town :______________________ Pin :____________ Tel. :___________ E-Mail :_____________________________________________________ Occupation : Salaried Business Professional Student Housewife PLEASE TICK HERE IF ALREADY SUBSCRIBER

Please send a copy of Epilogue to following addresses on my behalf

Name :_____________________________________________________ Name :_____________________________________________________ Age :_________ Address :______________________________________ Age :_________ Address :______________________________________ ____________________________________________________________ ____________________________________________________________ Town :______________________ Pin :____________ Tel. :___________ Town :______________________ Pin :____________ Tel. :___________ E-Mail :_____________________________________________________ E-Mail :_____________________________________________________ Occupation : Salaried Business Professional Student Housewife

Occupation : Salaried Business Professional Student Housewife

S P E C I A L

R E P O RT S

TRANSPARENCY

Tackling Corruption : Trends Reversed? Zafar Choudhary All pervasive if this does not describe the menace of corruption in Jammu and Kashmir, the recent fuss does say so. On a daily average each sitting of Jammu and Kashmir legislative assembly costs the state exchequer rupees one crore, claims Deputy Chief Minister Muzaffer Hussain Beig. By a modest estimate Rs. 20 Crore must have been lost till the speaker Tara Chand adjourned the House sine die on January 30, ten days ahead of schedule amidst a pandemonium and ruckus in the house. Unprecedented indeed, demands on grants of all departments worth Rs. 1911336.19 lakhs sand many bills were passed without any discussion. Reason : the main opposition National Conference continuously stalled proceedings of the House demanding resignation of two ministers on corruption charges even though one senior cabinet minister had been sacked earlier this month after a legislator stunned the house with revelations that he had to pays Rs. 40,000 to the M i n i s t e r s ' ( Pe e r z a d a M o h a m m a d Sayeed) driver to get a work in secretariat done.

It is natural for the opposition to take on the government in a bid to convince the electorate that the choices should be reconsidered. To that extent, the National Conference played it well. But the coalition government, which had listed corruption as it top agenda, will eventually become so weak in defence was least expected. The government did have a number of things to list in defence, but in the dominant din the ruling regime was caught on the wrong foot.

Conference got the necessary impetus to push the government to wall. Pressure was mounted and chief Minister was literally compelled by NC Legislators, Particularly Abdul Rahim Rahter and Ali Mohammad Sagar to table the (BR) Kundal Report on irregularities in Forest Department. Agreeing to table the report in the House, the Chief Minster sought to assure the members in the Legislative Assembly that no minister has been indicted by the probe panel.

After compulsive resignation or sacking of Education Minister Peerzada Mohammad Sayeed, the government suffered a severe blow to its public image. The opposition National

This clarification came from the Chief Minister at a time when opposition had yet not cast any aspersion on role of Minister(s) even though the media reports had earlier indicated this.

This was the last budged session of the present legislature and one had expected some landmark legislations and debates in the assembly as later this year the state heads for fresh assembly elections. 'Corruption' was perhaps the one big word and one big issue which dominated the proceedings since January 7, when the legislature met. Politics takes a different turn during the election year there is nothing new in it.

NC MLAâ&#x20AC;&#x2122;s protesting against corruption in legislative assembly

Epilogue Ă&#x2DC; 11 Ă&#x2014; January 2008

S P E C I A L

R E P O RT S

TRANSPARENCY

Interestingly, while the government all along goes on defending the ministers, even a cursory glance at the Kundal Committee report would reveal that the Forest Minister (Qazi Mohammd Afzal and his predecessor Tariq Hameed Karra, though not identified by name) have been nailed 24 times for approvals to the wrongs for which the officers had been indicted and severe strictures passed against them. It makes one to doubt on whether head of the probe panel compiled his report sparingly or the government is turning blind to all those paragraphs (in the report) which conclude that the scams had approval of the Ministers. The Ministers, however, continue to stick to the chair and government refuses to read those lines. The Paradox : Remember the first session of the present assembly and first promise the government made. It was in November 2002 that Mufti Mohammed Sayeed took over a Chief Minister and declared war against corruption. Recalls the senior Peoples Democratic Party leader and Deputy Chief Minister Muzaffar Hussain Baig, “I asked Mufti saheb that I want to do something big for common good, please suggest me what it should be... he asked me to work on a legislation for setting up of State Accountability Commission (SAC).” With powers and status of the High Court, the Accountability Commission was supposed to be the highest anticorruption ombudsman empowered to probe complaints and try public men including the Chief Minister and Ministers. This underlines the priority which the present government has been claiming from the day one. The Commission was set up after an inordinate delay, however, a year later its chairman resigned after going public with the allegations that the government was interfering in

The most high profile case of Mufti regime against corruption was the one which involved a top IAS officer Ajit Kumar.

Defensive : Azad in assembly

Commission's affairs. It has been lying headless for close to two years now. The SAC did receive an overwhelming public response against corruption. More then 1700 application have so far have been received and many decisions delivered against senior Ministers, top bureaucrats and other functionaries in cases of corruption and misuse of official authority. Ironically there are some missing links. All such decisions have been stayed by the High Court. Besides SAC, the State vigilance organization was re-energised to weed out corruption from public life. Radha Vinod Raju, a police officer of high integrity, was brought in by Mufti regime to wield the tough baton of war against corruption. During Mufti's tenure as Chief Minister (Nov 2002 to Nov 2005) some 60 officers were terminated from the services as government, claimed established cases of corruption against them. The most high profile case of Mufti's regime against corruption was the one which involved a top IAS officer Ajit Kumar. In fact this reiterated before public the government's seriousness of an unsparing was against corruption. When Ghulam Nabi Azad took over as Chief Minister in 2005, he renewed and

Epilogue Ø 12 × January 2008

In August 2006 Azad sacked 15 officials for established case of corruptions against then. Most of them were small fishes. The high profile name in Azad lists was of Sayeed Asghar, then director rural development, Kashmir The crusade against corruption was renewed with more vigour and resolve when Azad took over as CM in Nov 2005. Interestingly, among its first few cabinet decisions, the Azad led government reinstated Ajit Kumar suspend by Mufti government on corruption charges. Not only this, Kumar was given an honourable posting, though he is yet to come clear from the courts. And no wonder that Syed Asghar Hussain, sacked by Azad government in 2006 is now the state secretary of Mufti's Peoples Democratic Party. The message here is loud and clear. Slogans are for public consumption.

S P E C I A L

R E P O RT S

TRANSPARENCY

refreshed the war against corruption. Azad often described corruption as more serious challenge before Jammu and Kashmir than militancy. Like Mufti (who convened a special session of assembly to pass legislation on SAC) Azad too convened a special session in December 2005 to get amendments in the anticorruption law passed in assembly to make it the most stringent in the country. On August 15, 2006 the Azad led government announced termination of the services of 15 government officers for established cases of corruption against them. The high profile name in the list was that of Syed Asghar Hussain, Director Rural Development, Kashmir. Infact, Asghar and the then Minister for Rural Development Peerzada Mohammad Sayeed both were indicted by the SAC for their involvement in the Rural Electrification scam. Asghar was sacked but Peerzada was spared on the grounds that allegations were yet to be proved. The SAC chairman had said that “the Minister is neck deep in corruption”. However he managed to stay on till January 2008 when a legislator made allegations against him.

‘It is coercion at bottom, Collusion at Top’ Interview with Dr Ashok Bhan, Commissioner SVO Since past few years there has been a tremendous hype that Jammu and Kashmir is the second most corrupt state in India. In this backdrop, the state government has always reiterated that weeding out corruption is at the top of its agenda. In fact the present Chief Minister Mr Ghulam Nabi Azad declared in his first press conference in November 2005 (immediately after taking over as CM) that eradication of corruption makes his priority number one. An all pervasive and intensified war against this deadly menace followed. Two years down the line, where does Jammu and Kashmir stand today in terms of transparency in public life?

and by our own monitoring. And the level of success has been reasonable. From January 2005 to December 2007, as many as 117 trap cases were registered. Interestingly, from the trap cases one can make a fair idea of where the corruption takes place most. Out of these trap cases, the highest (26) were reported from the Revenue department, 22 from Police, 17 from Engineering departments and 12 from Finance and allied departments. Information about many cases was generated through the whistle blowers. Unfortunately, we observed that the level of information generated through different sources was coming down. Perhaps they were no more ready to come forward with information fearing a shabby treatment from the immediate system for taking lid off the rot. This matter was discussed at appropriate levels. Now the government (also through the speech of the Chief Minister) has send a clear message that whistle blowers deserve due honour. This is likely to further encourage the genuine information generation system.

Interestingly, among its first few cabinet decisions, the Azad led government reinstated Ajit Kumar suspend by Mufti government on corruption charges. Not only this, Kumar was given an honourable posting, though he is yet to come clear from the courts. And no wonder that Syed Asghar Hussain, sacked by Azad government in 2006 is now the state secretary of Mufti's Peoples Democratic Party. The message here is loud and clear. Slogans are for public consumption.

They (Transparency International) talked about petty corruption. They visited some ten or eleven departments and did some sample testing as how much a common man has to pay for the basic services. Though I am not in full agreement with the scheme of their testing and choice of samples but they did a great job in bringing this (corruption) menace to focus. The government was seized of the challenge and an increased attention came in against the corruption. The Transparency International sparked a cause of action for all –for the government and for the public.

Apart from the political rhetoric and obvious blame game, there is also a feeling that conflict situation also had a lot to do with promotion of corruption. Your analysis please…

Again going back to the first session of present assembly one recollects the scathing attack of coalition government against National Conference for 'institutionalizing' corruption. And now as last session is adjourned sine die, one finds the coalition at loss of words when talk of corruption is all pervasive.

In our working methodology, we too have tried to target the petty corruption. In fact one has to understand the pyramid corruption as a coercion at bottom becomes a collusion at the top. Under this regime of increased focus against corruption we have tried to nip the targets both ways –by public mobilization

Your analysis is true. In fact the conflict situation weakens machinery of the government in keeping a check on all its arms. Conflict situation has definitely influenced un upward trend in corruption. Figures explain this well. From 1990 to 1996, Jammu region recorded 76 per cent of the total cases

Epilogue Ø 13 × January 2008

S P E C I A L

R E P O RT S

TRANSPARENCY

registered. This implies that people were not ready to come forward. And when the popular government returned in 1996, the scenario changes. From 1997 to 2007, Kashmir region accounted for 65 per cent of the total cases registered. The corruption is often described by many in a very technical term –institutionalized. Do you think that corruption has really been institutionalized and, if yes, how difficult it is to break down this institutional mechanism? Instead of calling institutionalized, I would rather say that corruption here is deep rooted. Take (for example) the case of Social Welfare Department. We unearthed some five to six cases pertaining to old age or widow pensions or other relief schemes. There was a huge but silent scandal. The amount due to the beneficiaries ranged from Rs 200 to Rs 500. They (the poor beneficiaries) would be happy to get this amount but no loud cries if this did not reach them. So, some officials considered the second option. They (officials) did not send money to a large number of beneficiaries. The amount was swindled. Now you see (for example) SICOP or Super Bazaars. They are supposed to supply materials to the government departments and run their affairs out of the earnings on sales. But in connivance with traders they overcharge the items. The booty is shared between the buyer (government departments), the supplier (private traders) and officials of these corporations/societies. Same is the case with Cooperative Housing Society who has the government as their counterguarantor. Same is also the case with idle purchases in various departments, particularly the Engineering departments. What is your opinion about political corruption in Jammu and Kashmir? There have been many allegations but

no move of your organization has been seen on this front. See, corruption is widespread in country and world and no part of society can be said to be totally free of it and honest. (However) a professional organization like State Vigilance Organisation has to base its investigations on available evidence. (Moreover) investigations have to convince the courts also. Therefore, we would not like to be drawn into hearsay or wild allegations. (But) all cases with concrete evidence will be looked into on merits (and) irrespective of the status (of the persons involved). Your proceedings are normally initiated when there are specific complaints or any case has been referred to you by courts or government. Do you also initiate suo motto proceedings based on your in-house research? We generate information at different levels. There are very few people who would approach me directly. But they meet our officers and share information. Another way is through written complaints. However, the written complaints have not proved very productive. Proceedings are initiated after we are convinced (to a certain) level that prima facie there becomes a case. And what about anonymous complaints…there may be chances of witch-hunting and settling personal scores among parties. Yes, that is what I have tried to explain. In fact, on getting such complaints we ask our officers to first check reputation of the person against whom a complaint has come. If our test check reveals that the person bears a good reputation then some caution has to be exercised. How many complaints of corruption do

Epilogue Ø 14 × January 2008

you receive at an annual average? And what is disposal mechanism and success rate –filing charge-sheets, disposals etc. On an annual average we receive around 5,000 complaints. On perusal, it comes out that 50 per cent are in duplicate (means filed before many agencies with a copy to us). Out of the 50 per cent considered by us, 35 per cent are (normally) referred to the Departmental Vigilance Officers (Heads of departments, DCs etc), therefore, we deal (directly) with 15 per cent of cases –which means around 750 inquiries a year. In fact we are particular about quality (and not quantity). If we go after the volumes, cases are not proved at the end of the day. If we look at the statistics of past few years, of the total cases registered between 1990 and 1996, 64 per cent could not be proved; between 1997 and 2002, 66 per cent could not be proved. The trend improved post 2002. 73 per cent of the total cases registered between 2003 and 2005 were proved. As we compile the figures of cases registered between 2005 and 2007, it will emerge that as many as 90 per cent have been proved. I am happy to inform you that out of 65 cases registered in 2005 there is only one case which is still under investigation –all others have been filed. Out of 84 cases registered in 2006, 44 have been challaned. In 2001, 81 cases were registered and 44 are under investigations. Vigilance proceedings, as we see, take too long to reach a conclusion. We have often seen cases taking 15 to 25 years and in many such cases the accused is acquitted –sometimes with court observations that your probes failed to establish a case. I hope you understand in such long proceedings the damage to the reputation of an

S P E C I A L

R E P O RT S

TRANSPARENCY

accused has already been done before the courts confirm that a case could not be made out. The accused also suffers a humiliation and obvious harassment for a long. Isn't there something wrong with the system? We are seized of the issue and are concerned about this slow pace. (In fact) this is a loss to us also. For last ten years the average conviction rate has been 12.5 per cent. Because of delays people loose interest in cases and they generally forget (what had happened). Slow pace is detrimental to the success in rate of conviction. (Not surprising in this scenario) that 400 cases are still pending before courts. This may take another few years to clear these cases and during this time you get new cases also, thus, pendency is carried on. You may know, the Chief Minister has already announced that there will be two more special anticorruption judges â&#x20AC;&#x201C;one each at Jammu and Srinagar. But at the level of investigations we are trying to move fast. Your reputation of an honest and efficient officer has very few parallels in Jammu and Kashmir. The fact that you were chosen for this challenging assignment speaks about your credibility. But your people down the line are also part of the same system which is loudly condemned as corrupt. In the interest of public trust, can you please explain the system of in-house checks in your organization? (I must assure you) there is a definite system of checks. But let me say that whatever we have achieved today, the credit for all this goes to our investigators for the courage (they have demonstrated in being above board). I would again say that there may not be many people who can approach me but you must appreciate that our investigators are locals (they come from the same segment), in such scenario any one can

be prone to pressures. But I am happy to say that they have been able to work against pressures (to bring home credibility). Still, we have a system of monitoring and in-house checks at several levels. The moment we feel that investigation is going in wrong direction, the person (investigator) is immediately changed and action is initiated. Not many people know that the appointments in Vigilance Organisation are clearly by a high powered committee headed by the Chief Secretary (DGP is also a member) and many things are taken into account while making selections. We also keep on shifting people. Another thing (which I would like to mention here) that we have done away with the system of having specialists for particular nature of cases. This has been done to ward off the risk of breeding vested interests. There is a general perception gathering ground that the people targeted by the Vigilance Organisation are usually from the middle and lower rungs of the system, of course, barring a few exceptions. As I explained at the very outset that corruption at the bottom is coercion and when you walk the ladder upstairs it turns into collusion. I also pointed out earlier (in this interview) that the petty corruption has to be targeted first. See, (what happens) the collection takes place at the bottom and then the booty share goes up. Unfortunately, the complainants at the top level are not forthcoming, there is also problem of obtaining credible evidences but in case of bottom you have many complainants. (Simplifying further) in fact, the bottom is the collection terminal. But this not a matter of policy for us, what all we need is specific complaints and credible evidences. On the contrary, we have another interesting scenario. At a time when

Epilogue Ă&#x2DC; 15 Ă&#x2014; January 2008

corruption is being described as most serious challenge before Jammu and Kashmir, last year the awards of honesty were conferred upon top most officers, except one from the middle rung. The outgoing Chief Secretary, the Chief Secretary-inwaiting, another top IAS officer, the Principal Secretary of General Administration and you shared the honours. Does this selection give to understand that honesty prevails only at the top and the rot has accumulation at the bottom only? We I am not the right person to answer this question. But I personally believe that such awards of appreciation should go to the people who have ten to 15 years of service to go. This can be a motivation for the awardee and inspiration for others. Your amended law against corruption has been much talked about. We are told that even people in Europe have evinced keen interest in applying this model there. What difference has this law brought in the crusade against corruption? The law you are talking about was imminent in view of a scenario where for the corrupt people the gains of corruption far overweigh the losses (on their prosecution, conviction or sacking from the government service. In fact, the United Nations too had proposed this law (as an effective tool to curb corruption) but we were prompt in having it in place. So far, we have taken over properties worth Rs 3.5 Crores in 12 cases of corruption. Now a new trend has come up. The people (with dubious money) are going in for Benami properties instead of buying in their names or in the names of family members. We are scanning every such case minutely to find out the linkages where they exist.

S P E C I A L

R E P O RT S

REFUGEES

West Pakistan Refugees : 60 years on, still refugees with no homeland Pawan Bali Their three generations have lived in the state, but have never been a part of it. For six decades, they have tilled the land, weaved a promise and waited anxiously. It has been over 60 years since the mayhem of 1947-when 5,764 families left the insecure hamlets of the newly created West Pakistan and took refugee in Jammu and Kashmir. Since then the families have lived as refugees, waiting to belong to the state where they once sought a home. Years later, they still have not got one. In the January 2008 assembly session of the Jammu and Kashmir government, chief minister Ghulam Nabi Azad once again mowed down their hopes. While replying to the Governor's address, he categorically stated that the issue of West Pakistan refugees was a human problem, more than a political one. In many words, Azad also ruled out granting Permanent Residents Certificate or state subjects to these families. The minister of state for revenue Aijaz Khan also said state subjects for them was a difficult decision. All this despite the common minimum programme of the government promised a solution in black and white. The government's plea is that granting Permanent Resident Certificates to West Pa k i s t a n R e f u g e e s r e q u i r e s a constitutional amendment to Article 370. And for this constitutional amendment they do not have the required two-third majority. With another tenure coming to an end this year, their demands will be in deep freeze for yet some more time. THE GENESIS OF THE PROBLEM: During the Partition, 5,764 families (47,215 people as per official records) migrated from West Pakistan and settled in parts of Jammu, Kathua and Rajouri. No land was allotted to them, but these families did occupy some government land and evacuee property, which later they were allowed to retain with certain conditions. In all, over 46,466 kanals was occupied by these families. But this was the land they cultivated, but never owned.

With Article 370 applicable in Jammu and Kashmir, the West Pakistan refugees were never considered a part of the state. Unlike refugees from Pakistan Occupied Kashmir, they were not granted a Permanent Resident Certificate or what in other terms is a state subject. Quoting the Jammu and Kashmir constitution (which was fully adopted ion January 26, 1957), the following Section 6 qualifies the permanent resident as: Every person who is deemed to be a citizen of India under the provisions of the Constitution of India shall be Permanent Resident of the state if on fourteenth day of May 1954 He was the state subject of Class I or Class II Having lawfully acquired immovable property in the state, and he has been ordinarily resident for not less than 10 years prior to the date (May 14, 1954). Any person who, before the fourteenth day of May 1954, was a state subject of class I and class II and who having migrated after the first day of March 1947 to the territory now included in Pakistan returns to the state under a permit of resettlement or for permanent return issued by or under the authority of any law made by the state legislature shall on such return be a permanent resident of the state. Since the West Pakistan refugees were not residing in the state territory, they

Epilogue Ă&#x2DC; 16 Ă&#x2014; January 2008

did not qualify as permanent residents as per these clauses. Also till May 1954, they had not even completed 10 years of stay in Jammu and Kashmir. The refugees from Pakistan Occupied Kashmir, however, were considered to be part of the Kashmir territory, and recognised as permanent residents. NO PRC -THE STRUGGLE: Lack of permanent resident certificate translates into gross disadvantages and disparities. This means that around 1.5 lakh of these West Pakistan Refugees here cannot buy immovable property, transfer land in their name, and under the rule 17 of J&K Civil Services Act, they are even barred from employment in the state government services. Also, they cannot vote in the state elections, and are even disqualified from being members of the village Panchayat under Section 6 of Panchyati Raj Act , 1989. They, however, have the right to vote in Lok Sabha elections. Men like 83-year-old Jaggu Ram, say they voted once immediately after the Partition when Justice Mehar Chand Mahajan took over as the first Prime Minister of the Jammu and Kashmir. But after, the rules changed, Article 370 came into force and they lost their voting rights. Ram says disillusioned by this discriminatory attitude of Jammu and Kashmir government, these families had once even decided to leave the state and settle down in Punjab. But it was then chief minister Sheikh Abdullah who asked

S P E C I A L

R E P O RT S

REFUGEES

them to stay back and promised a settlement. But the settlement never happened. Between conversations, refugees like 70year-old Mohan Lal say that once forms h a d b e e n d i stri b u te d th e n for registration of West Pakistani refugees. Sheikh Abdullah had come close to an agreement, but their people were divided then. An unorganised, leaderless body of West Pakistan Refugees split, took divergent views. Some even floated rumours that the forms were for sending them back to Pakistan. Selfish motives played with the ignorant class, and the matter was never resolved. This was the closest they ever came to a settlement. Since then, it has been protests and marches. Cries that sometimes reach the capital, and many times, do not cross the borders of the state. During Rajeev Gandhi's tenure as the Prime Minister, these refugees had staged protests at Delhi's Boat Club. Two years back, they again organised dharnas at Jantar Mantra. More promises, but never results. An irony in the recent times, since our present Prime Minister Manmohan Singh is also from West Pakistan. GENERATIONS WASTED: The past has not been pleasant, and the future does not look bright either. The families, majority of which belong to the scheduled caste, had been mostly into agriculture, tilling the patches of land which they had retained. Some opted for daily labour chores and a few lucky ones got into central jobs like armed forces. The problems have compounded now. The young have no future to look forward to. Without a state subject, there are no government jobs, and getting into armed forces is difficult. Young boys like Romesh Kumar in Parnoia village near Jammu have not studied beyond class 12. Higher education and even professional degrees again require state subjects. Getting a

driver's licence or even applying for a bank is not an option. What do the young do then? Set up shops, play card games, indulge in idyllic conversations and regrets. Some have meagerly paying private jobs, some take tuitions, and the rest hope that some day there is a change. The land holdings are also shrinking. The families have divided from nearly 6,000 to 24,000 households now. Since they do not own the land (most of which is evacuees property), it cannot be officially divided. New land cannot be purchased, no new houses can be set up. Cramped spaces and lost opportunities have been passed on as family heirloom to the generation next. WADHWA COMMITTEE REPORT : In 2007, after several debates and protests, the government formed a committee under the chairmanship of GD Wadhwa, Financial Commissioner Revenue, to look not the issue of those displaced during 1965, 1971 from POK and also, of the West Pakistan Refugees The committee, which submitted its report in November 2007, stated that the West Pakistan refugees were citizens of India, and their demand for state citizenship was a political one, which should be decided by the government Barring this, the committee did make some favourable recommendations for the West Pakistan refugees: Provision of separate funds for providing basic civic amenities for the areas inhabited by these refugees. Since most of these displaced people belonged to schedule caste category, the government should issue grant them reserve category certificate applicable only for recruitment of posts under Central Government or other state governments and para military forces Centrally sponsored schemes should be

Epilogue Ă&#x2DC; 17 Ă&#x2014; January 2008

applicable to their areas. On the analogy of Kashmiri migrants, identity cards should be issued for disbursing of any type of relief Those living on Custodian land and property should be allowed to repair their houses as per norms Deputy commissioners will be directed to issue them domicile certificates after fulfilling formalities Special package should be formulated for them and the matter should be taken up with the Central government. THE PATH AHEAD: The road ahead does not seem easy either. With a complete lack of a political will to resolve this issue, a change in their fate is a thin chance. President West Pakistan Refugee Committee Labha Ram Gandhi threatens that if left with no choice the families would uproot themselves once again and settle somewhere else in the country. The Courts are another option. Labha Ram claims that there have been times when relaxations have been made while granting permanent resident certificates, like for several Tibetan refugees who settled down in Kashmir during Sheikh Abdullahs tenure as chief minister. Then why not this section of refugees? The Wadhwa Committee report did make some favourable recommendations, which need to be implemented immediately. Regarding the issue of granting state subjects, a right political will is the key. Jammu and Kashmir goes to polls once again in 2008. The issue of West Pakistan Refugees will prop up in various agendas, but will this issue ever see resolutions. Some conflicts benefit seats of power. And unfortunately, just like this one, they benefit a few at the cost of thousands.

S P E C I A L

R E P O RT S

DELIMITATION

Delimitation Farce For a ‘Khush-hal’ Kashmir Anmol Sharma The rationale for including Delimitation Commission in the Common Minimum Programme of the coalition government was not only to end the disparity in the number of the assembly seats but also to end the political, social, and economic hegemony of one region over another. However, the truth is that it remained far from its objective of equal regional development and was from the very beginning mere rhetorics and shambolic with series of contradictory statements by the Mufti-Duo, the then PCC Chief Ghulam Nabi Azad, and belligerent NC leaders like Abdul Rahim Rather. The Delimitation Programme was more of less like a football match played between the heads of various political parties in the parochial chowk of the Kashmir centric politics, with Congress and PDP carelessly fooling around in the futile parleys and JKNPP leadership meanwhile intermittently grabbing the agenda like rugby aficionados. The supremacist Chief Minister on 15th Jan' 2008 blew the final whistle with the ego of being a international demagogue in the Assembly Hall of the Jammu Darbar. The unapologetic body language of the CM had no trace at all of regret for his utter failure to fulfill the promises made to the people in the manifesto and numerous public meetings. Referring to a local daily, 'Virtually kicking off the campaign for the forthcoming Lok Sabha elections… the setting up of Delimitation Commission, Mr. Azad assured the gathering that Congress will leave no stone unturned to remove discrimination with any region or sub-region of the State' (DE, 11th Feb' 2004)

Azad disrespected and sacrificed Mangat Ram Sharma for the sake of salvaging his own incompetence, by remarking 'Punditji to is tarah ki assurances dete rahte hain' (KT, 16th Jan' 2008), and in that way turning the senior most party colleague into a cheap sitcom stooge. By this over simplistic explanation, Mr. Chief Minister has tried to trivialize the complex and delicate character of DograKashmiri geopolitics while ostensibly he himself has so many times made oxymoronic statements in the Press. At one place he said, “the same (delimitation) is needed for the next elections and if we did the same it will destabilize the whole functioning of the Government…delimitation of constituencies at present juncture will lead to neglect of some areas." (DE, I will continue as PCC chief, 27th Jan' 2003). While addressing a press conference as Co-ordination Committee Chairman and PCC (I) President Mr. Azad declared “...that all promises regarding implementation of Wazir Commission and setting up of Delimitation Commission, can be fulfilled in just three months of the Government.” (DE, 'What NC couldn't do in 6 years; we have done in 3 months', 15th Feb, 2003) Then, he tried to place the carrot in front of the donkey by floating a separate, unrealistic, and impracticable idea of increasing the number of seats in each region by 25%, which he very well knew before hand that JKNPP, NC, and PDP would never support. To quote a local

Epilogue Ø 18 × January 2008

daily, “For the third straight time, the People's Democratic Party (PDP), the main coalition partner in Congress led Government, boycotted meeting of the political committee …. as Abdul Rahim Rather (Leader of Opposition in the Assembly) and Prof. Bhim Singh also didn't turn up, the meeting held in Srinagar under the chairmanship of Health and Medical Education Minister Mangat Ram Sharma, was virtually reduced to a farce.” (DE, Draft bill on delimitation circulated, 11th June' 2007) The last excuse he could mush out was “…that the Government would need a two-third majority (for delimitation) in the State Assembly which was not there at the moment.” (DE, 5th Nov' 2007) Not just him, but all the consecutive Chief Ministers are explicitly guilty of ignoring and snubbing the constitutionally guaranteed fundamental rights of the people of Jammu Province. At the risk of sounding clichéd, it would nevertheless, be pertinent to point out that the provisions of both the Constitution as well as the Representation of the People's Act were never scrupulously adhered to, even during NC's regime. The favoritism with one particular region and the gross discrimination with Jammu were self-evident when 75 members of the Jammu & Kashmir Constituent Assembly, all of them belonging to the National Conference, embarked to delimit the assembly segments based upon the obsolete 1941 consensus. The bar was discriminatingly set at 60,000 voters for each assembly seat at Jammu

S P E C I A L

R E P O RT S

DELIMITATION

while it was only 40,000 for Kashmir. This legacy of the propounders of 'Khushal' Kashmir has continued until today in the fact that a mere 9,900 electorate exists for the Gurez segment while the figure is 1.65 lakh for Jammu-West seat. It would be very interesting however to see the how Farooq and Co face the Jammu electorate in the forth coming assembly elections. Farooq and his party are openly averse to any process of delimiting the constituencies. (DE 1st April' 2002). Abdul Rahim Rather gave the lame excuse that delimiting would mean more and more legislators and the consequent burdening of the ex-chequer. If anything really, came in the way of setting up this Delimitation Commission, it was the obdurate and intransigent mentality of the representatives of Kashmir. Their apprehension was that delimiting constituencies would increase the number of seats form Jammu and if the demand of JKNPP to give eight reservations to the people from POK living in Jammu were also met, it would polarize the power in the hands of nonKashmiris. That is the reason perhaps, why Mehbooba termed the caucus meetings discussing delimitation as “mazaak” and a futile exercise, which she naturally never attended. The biggest tragedy with Jammu is that it lacks politicians with oratory and leadership qualities like in Prof. Nirmal Singh or Mr. Ashok Khajuria. Bhim Singh on the other hand is in the habit of making such fantastical statements, like the one he had made in Parade Ground, “Mahabharata will start if delimitation commission etc., is not constituted” (DE 29th May' 2003), that now nobody takes him seriously enough. Harsh Dev Singh who is sadly notorious for losing his temper in public meetings and debates in the Assembly Hall has also contradicted himself many a times on the delimitation issue.

Sometimes he talks about setting up Delimitation Commission, demanding that is a constitutional requirement under Section 47 of the J&K Constitution and section 3 of Representation of People's Act. At other times, he forgets what RPA actually mandates, and brings from nowhere his 'Sheikh Chilli' ideas of the like, 50 seats each should be given to both the regions.

To illustrate an example by referring a local newspaper, 'Former Minister for Education and senior National Panthers Party legislator from Ramnagar, Harsh dev Singh has said that his Party will move bills regarding delimitation of assembly seats with 50 seats each for Jammu and Kashmir regions…' (DE, 27th July' 2006, Bills for 50:50 Assembly seats, 5 yr LA term being moved: Harsh)

Epilogue Ø 19 × January 2008

gone up to 52 by the time the bill had reached the House. However, knowing perfectly well, being a good student of law, he is, that any increase in the number of seats without the satisfying the parameters mentioned in The RPA and the Constitution would be illegal, unconstitutional, and void abinitio. Still he displayed the fixation of doing those kinds of things for the reasons best known to him and his leader. The prose of the great poet Iqbal suits the present predicament very well when he said, “Bus ek he ullu kafi tha barbaad gulistan kerne ko, har shaakh pe ullu baitha hai, anjam-i-gulistan kya hoga.” Therefore, the citizens must exercise their votes sensibly this time so that they do not elect persons who make fool of themselves are not opportunists, and take the people, who elect them, for a ride.

In Jammu City Get your copy of Epilogue delivered at your doorstep Call : 9419180762

I N

F O C U S

THE MONEY MOVEMENT

Budget 2008-09 : Political Courage Sans Innovation ? Dipankar Sengupta State Budgets do not generally get the kind of publicity that Union budgets do. This is because given the centralization of finances that still persists and the absolute figures involved the Union Budget not surprisingly puts state budgets in shade. For example the Central Government's share of plan expenditure has consistently been over 55% while the share of all the states hover around 40%. Additionally, as the Economic Advisor to the State Government, Haseeb Drabu pointed out, the budgetary measures like income tax policies that give relief to the ordinary citizens lie with the Central Government. The ability of States to do anything in this regard is limited. That is why the storm created by the State Budget despite its short duration was surprising but not perhaps unjustified. Backdrop

Government) took the politically courageous step of postponing the budget and going in for a “vote-onaccount” instead as the budget framed was under-prepared and in a mess. The numbers about to be presented were fictitious and lacked credibility. It was

For one this is the last budget that is being presented by the Congress-PDP coalition government as it completes its full tenure of six years. The budget speech delivered by Mr. Tariq Ahmed TABLE 1: BUDGET AT A GLANCE Qarra resonated with this theme as he Items 2002-03 2006-07 2007-08 described the (Pre-actuals) (BE) upward economic (RE) trajectory traversed by the State in the 11981 7524 13555 A Revenue Receipts last six years leaving 10212 7442 10763 B Revenue Expenditure others to infer that it 1769 Revenue Surplus (A-B) 82 2792 was indeed this 2182 2712 1771 C Capital Receipts government that was 3951 5504 2391 D Capital Expenditure responsible for the -2182 Capital A/C Deficit(C-D) -2792 -620 economic upturn. He 14163 16267 9833 E Total Expenditure went further. The minister also 14163 16267 9296 F Total Receipts claimed the 0 0 Budget Deficit (E-F) -537 restoration of -1509 Fiscal deficit -2011 -1881 financial governance -308 Primary deficit -760 -722 and discipline which in turn enabled the realized that not only would the plan size State government to spend increasing have to be brought down to more amounts in capital formation. realistic levels but also revenues would have to be raised by the politically This is a theme that has underlain almost inconvenient but necessary method by all budget making exercises since 2003. getting people to pay for government That was the first time the newly elected services. This process of putting the state PDP-Congress coalition (with some government finances into something prodding from the NDA-ruled Central resembling fiscal discipline has been

Epilogue Ø 20 × January 2008

continued throughout the duration of this coalition government. One aspect of this effort is the introduction of “zero-deficit” budgets. Another aspect of this effort can be seen i n t h e rationalization of （ in Rs crore） taxes and singleminded and even 2007-08 2008-09 narrow stress on tax (RE) (BE) collections. How has this strategy fared? In absolute 13901 15316 numbers, the 11855 12089 State's own tax 2046 3227 revenues have risen 3453 3127 from 936 crores in 5499 6354 2 0 0 2 - 3 to 2 2 9 9 -2046 -3227 crores in 2007-8 and 17354 18443 are projected to rise to 2666 crores 17354 18443 in 2008-9. As a 0 0 proportion of State -2737 -2330 Domestic Product -706 -730 this means an increase from 6.2% in 2002-3 to 10.2% in 2007-8 and is projected to rise to 10.6% in 2008-9. Since SDP itself has demonstrated moderate growth, tax collections have been buoyant. Clearly, on this score, the coalition government cannot be faulted for patting itself on its back. Similarly Plan Capital Expenditure (which now

I N

F O C U S

THE MONEY MOVEMENT

goes largely to building infrastructure and increases the productive capacity) of the economy rose from 1316 crore rupees in 2001-2 to 4007 crore rupees in 2007-8. Even when Central government largesse is availed of is in the case of the Rs 3900 crore Power Grant spread over three years it has been matched by the State with a commitment to bring discipline to this sector by undertaking reforms the most visible and politically difficult examples being the metering of connections and the hiking of power tariffs. It is to the credit of the government that the independent auditor has certified to the central government that the state has achieved the benchmarks mutually agreed upon by the Centre and the State governments.

indulged like that of a backward child that has performed well but rather with critical eyes. This is to be welcomed as this is surely a step towards the restoration of dignity and self-respect a theme that Mr. Muzaffar Hussain Beig brought up when he presented the budget in 2005. Or so it would seem.

We are perhaps seeing the beginning an era where the state of Jammu and Kashmir is no longer being looked at as an entity to be bribed or coaxed. It is indeed being looked as a state that can and should stand on its own two feet. Indeed, when it was announced that the state had led the nation in growth of VAT collections, the observation that Jammu and Kashmir had started from a very low base (albeit correct) came in too quickly. This possibly suggests that the state's performance in any area will not be

Economic Policy and Budget Making It is well known that the sector that contributes the most to employment is agriculture. The sector that has grown most rapidly is the Arts and Crafts sector employing 340,000 artisans. Other sectors that have also grown are tourism especially in the Jammu region while

The first indicator of the magnitude of the task that lies ahead was described by Dr. Drabu himself when he pointed out that salaries alone exceeded the State's own revenues! The estimated salary bill in 2008-9 is 4771 crore rupees which is Memo Items: Gross State Domestic Product

16980

29115.26

8.9

13.7

14.7

15.4

16.1

Tax Revenues / SDP ratio (%)

5.75

8.6

10.1

10.2

10.6

Fiscal Deficit / SDP ratio (%)

11.07

5.2

6.2

8.5

6.5

47.6

44.5

53.6

47.7

Own Revenues/SDP ratio (%)

The nature of fiscal reforms whether they are in the realm of generating resources or changing the composition of expenditure increasingly in favour of capital formation (from 23% in 2003-4 to 32% of total expenditure in 2007-8) has occurred in a milieu of increasing transparency the most important manifestation of which is the publication of the annual Economic Survey of the State a practice that has been prevalent in other states. This document which is a commentary on the State's economy describes the context in which the budget making exercise takes place so as to make debate on the budget more meaningful.

In this context the government wants the budget to be viewed as an employment oriented budget; it would be fair therefore to use this yardstick to judge the government's effort this year.

Salary+pension+int/rev rec (%) (A)

32172.24 32172.24 35872.05*

＊ projection on an assumption of １１．５％ growth． double the 2002-3 figures of 2394 crore rupees when the coalition assumed power. Thus the increase in the salary bill during the Congress-PDP rule is more than the increase in tax revenues! The second is the massive outflow on account of power where expenditure on power massively outstrips revenues although on this count the state government can be credited with bringing it down (by raising revenues more than threefold from 268 crore rupees in 2001-2 to a projected 922 crore rupees in 2008-9). But these problems place the Jammu and Kashmir in the company of other state few of which enjoy healthy financials and not a state that has to be constantly bribed into submission! This however is not enough and as much is admitted by the State's policy makers. They want the budget to be much more; specifically they want the budget to be an indicator of the Government's long-term policies.

Epilogue Ø 21 × January 2008

tourism in the Valley has exhibited some signs of recovery. It is not necessary given the Coalition's stated goal of employment creation that the budget allocates funds to sectors depending on contribution to employment or even growth. That would be simplistic and even unnecessary. For example the dynamism of the Arts and Crafts may not need heavy financial assistance given local entrepreneurship and effort. Thus the quantum of funds spent in this case will be less important than the quality of intervention required. On the other hand productivity in the state's agricultural sector (which accounts for 29.44% of the SDP and supports 80% of the population) is below national averages for many crops a dismal state of affairs given the fact that national productivity figures themselves are low to begin with. Moreover the State is food deficit and imports cereals, meat,

I N

F O C U S

THE MONEY MOVEMENT

eggs and milk from other states. When it comes to investment or capital expenditure in the rural sector, the total sums allocated under various heads in the budget presented are roughly around 584 crore rupees or little more than 12% of the proposed total capital outlay. What is embarrassing Figure 1. is that for certain heads, Where does

low. At the same time corporate India (as well as industrialists of the state) face a massive shortage of skilled people. At this juncture which has seen increased demand for skilled workers; Jammu and Kashmir finds itself unable to take advantage of this opportunity. On the other the rupee come from? Composition of Revenue Receipts hand the government has particularly Rural announced the opening of Resources from the Centre Own resources Development where the several new colleges with plan outlay in 2007-8 was an eye on the coming 391 crore rupees the actual assembly polls. This comes 23% 34% 38% expenditure was at a time when most approximately 149 crore colleges in the state are 77% 66% 62% rupees only! Similarly, running with the help of against the plan outlay contractual lecturers hired allocation of 238 crores on a temporary basis. 2002-03 2007-08 2008-09 (Projections) committed to irrigation and Moreover, the employability flood control in 2007-8, only of these graduates is low 133 crore rupees was spent. given the curricula. A far This failure to spend the Figure 2. cleverer policy and one that allocated budget for a Where does the rupee go to? Composition of Total Expenditure would also be politically sector that needs it most acceptable would be to set Resources from the Centre Own resources and employs the most up technical institutes or number of people is polytechnics that would at alarming and makes a least equip students with 24% 32% 34% mockery of the claim that skills needed for the job this budget is an market. Clearly, much of 76% 68% 66% “employment budget.” This the capital outlay of 70 underutilization of the crore rupees on colleges allocated amount is also is to could have augmented the 2002-03 2007-08 2008-09 be expected, given the size 26 crore rupee allocation (Projections) and topography of the state, made to technical towards educationists and health the centralization of its governance and institutes. Here unfortunately, the workers from the day the coalition complete disempowerment of budget falls, a victim to a lack of assumed office would have delivered Panchayati Raj Insitutions in the state imagination and innovation on part of the impressive dividends cumulatively over who could have otherwise been coalition. five years. This is while it is impossible to entrusted to plan and execute some of do anything about the government these investments given their proximity The areas that consume the greater employment at any single point in time; to the farming community. Thus, in this shares of the capital outlay are Social incremental changes can have significant case a budget allocation made in a vital Services (1283 crore rupees or 26.2 % of cumulative effects even in the medium sector comes undone because of the proposed total capital outlay), power term. governance and the centralized (1156 crore rupees or 23.6% of the structure of the government. proposed total capital outlay) and The other area in which the budget is a victim of government paralysis and lack of innovation is evidenced in the runaway salary bill. It is a paradox that the size of the state government is so large when

the social services supplied by it are so little. Social indicators like literacy rates are well below national standards. A concerted plan to change the nature of government employment (if not the size for reasons of political expediency)

The implications for employment the stated government goal of “employment generation” are serious. It is well known that given the lack of institutions that impart technical skills, the employability of people who graduate from colleges is

Epilogue Ø 22 × January 2008

transport (673 crore rupees or 13 % of the proposed total capital outlay). General Economic Services have been allotted 567 crores (11.6 % of the proposed total capital outlay). The sectors that directly affect the productivity of the economy

I N

F O C U S

THE MONEY MOVEMENT

are the latter items. The bulk of the outlay on power is to go to transmission and distribution (812 crore rupees) with generation getting a modest amount (285 crore rupees). The impact of investment in power generation will come later when apart from hard infrastructure the financial health of this sector improves with the reforms in place. Admittedly, in this area deadlines have been met.

units registered, is the highest showing that these bogus units were registered to take advantage of the generous scheme of subsidies that are in operation. A better indication of investor intent is the surge in the demand for land in the designated industrial estates and the government is responding to these signals as evidenced in the allocations made to the industrial estates.

The bulk of the outlay on transport is targeted at road construction (approximately 600 crore rupees). Rural connectivity gets approximately 100 crores by way of the Pradhan Mantri

The Budget in this Context How is one to evaluate the budget? Given the yardstick given by the

Figure 3. Where does the rupee go to? (In greater detail)

Maintenance 8% Security 4%

Security 3% Others 10%

Salaries 24%

Others 9%

Power 10%

implemented with all benchmarks being met. Indeed these measures have demonstrated (although few have noticed) how false is the stereotypical image of the state as one that has to be continuously bribed into submission. The lack of political innovation or vision is demonstrated in the failure or refusal to empower Panchayati Raj Institutions of the state. It is also demonstrated in the failure to lay the foundation of changing the composition of government employment to enable better delivery of social services and creation of human capital formation even if it did little for fiscal discipline in the short or medium term. It is this demonstration of political courage sans political innovation that has prevented a commendable turnaround in government finances into being a spectacular one. GLOSSARY OF TERMS

Salaries 30%

Vote-on-Account

Pensions 6%

Power 10% Capital Expenditure 28%

Interest 10%

2002-03

Gram Sadak Yojana. This investment is vital as connectivity in this mountainous state is still weak. Increasing connectivity is a vital precursor to the exploitation of the state's bio-resources and mineral wealth, indeed all economic activity. The problem with investments in power and transport is that while they are capital intensive and vital, the benefits will come only later and that too if the corresponding reforms continue and investors grow more confident. As things stand today, where industry is concerned, the State holds a unique position where the proportion of phantom or nonexistent units of the total

Capital Exp 34% Interest 9%

Pensions 5%

2008-09 (Projections)

government itself, the shortcomings of the budget become all too evident. This per se is not the fault of the budget. The budgets are after all periodic expressions of the state's long term economic policy. This in turn is dependent on political management of the necessary difficult decisions that have to be taken to turn an economy such as this troubled state's. The tragedy is that while political courage has been demonstrated, political innovation has not. The former is evidenced in the manner the state's tax revenues have grown a feat not matched by many states special category states or otherwise. It is also evidenced in the manner that power reforms have been

Epilogue Ă&#x2DC; 23 Ă&#x2014; January 2008

As opposed to a Budget (which is a complete set of accounts, including both expenditure and receipts and which lays out both the manner in which the money is to be spent and how it is to be raised), a vote-on-account which is resorted to mainly by care-taker governments deals with only with the expenditure side is a device by which the government obtains the vote of the legislature for a sum sufficient to incur expenditure on various items for a part of the year. This is a stopgap arrangement that enables the government to function till the budget is approved by the legislature. Zero-deficit Budget A zero-deficit Budget is merely one where estimated receipts and estimated expenditures are equal implying all items of expenditure have been budgeted only after identifying the resource to fund them.

I N

F O C U S

THE MONEY MOVEMENT

Revenue Account

Revenue Receipts

The revenue account comprises expenditures covering the routine administration of the State, such as wages, salaries, maintenance and repairs, telephone expenses, day to day office running expenses and other overheads. Expenditures relating to the creation of assets - and this includes most (but not all) of Plan expenditure - are in the Capital account.

Revenue receipts are all those incomes which do not incur repayment liability. These include, in addition to the State's own revenues, grants from the Central Government for the financing of State Plans, as well as non-plan grants. Capital Receipts Capital receipts include internal debt, loans from the Center and the State's

recovery of its own loans advanced to State Corporations, Co-operative Societies, etc., and are entered in the capital account. On the outlay side of the capital account, there are expenditures corresponding to the State's own investment outlay and disbursements, which are comprised of repayment of State public debt and the loans and advances made by the State to the various entities. Thus, both the capital and debt portions of the Consolidated Fund are under the Capital budget.

Why Epilogue The northern most state of India bordering Pakistan towards Northwest and China towards North, Jammu and Kashmir remains to be most favourite dateline for the world's news media. With Kashmir as center of discord, India and Pakistan the two South Asian neighbors divided by history have already fought almost four wars and a low intensity conflict is on in this region since 1989. Of late India and Pakistan going nuclear have already added to the global anxiety over the prospects of peace and stability in South Asia. The scourge of violence has its own realm and the politics of conflict does not seem to end in near future. On August 13, 2003, the United States Deputy Secretary of State, Richard Armitage, while delivering a lecture in Sydney said, Kashmir, along with Palestine and Israel, is the most dangerous place in the world. Armitage went on to say, there are a lot of other dangerous parts in the world. India and Pakistan over Kashmir come to mind. Conflict is still on and the raging tension is yet to settle down, violence is a daily routine, but this is not the bottomline of the story. Jammu and Kashmir State has hundreds and thousands of stories to tell the world and which the world too must know to understand the conflict and the strides life is making behind that conflict. It is not only the conflict for which Jammu and Kashmir State should be known world over there are many other facets which need to be looked afresh. A tourists paradise, Asia's largest fresh water lake, unique geography and topography, a cold desert, one of worlds most strategic peaks, worlds highest and coldest battle field, worlds highest motor road, worlds highest motor bridge, worlds highest railway bridge, large hydro-energy resources, world class handlooms, saffron fields, willow clefts, international quality fresh fruits, India's second most frequented Hindu shrine, secular values of a Muslim majority state in a Hindu majority country, the only special status Indian state with constitution and flag of its own, over 10 million population, diverse ethnic identities, expanding economy, emerging institutions and rich biodiversity are some of the features of Jammu and Kashmir which offer an alternative news paradigm. With an overwhelming focus on conflict, the areas of reportage covering social, economic and cultural aspects of the life in Jammu and Kashmir have not got much attention in the mainstream media. With Jammu and Kashmir becoming more and more important in international thinking, news from this State and about this State is believed to be highly important to rest of the world. In this backdrop EPILOGUE as an online news resource and monthly magazine serving as an authentic and accurate source of information on Jammu and Kashmir came into being with an aim to collect a widest possible variety of news and views from all nooks and corners of the state and disseminate the same with a professional construction to those who have always been keen to know the developments in this Himalayan territory. With a team of highly professional, sharp and sensible journalists we concentrate on local, national and global processes effecting the economic, social, political and cultural development of the people of Jammu and Kashmir in particular and the context of such news in relation to the South Asian region in general. We strive to disseminate genuine, meaningful, useful and easy to comprehend news and information from Jammu and Kashmir and on Jammu and Kashmir to the people across the globe. Apart from spot reporting, in-depth coverage of issues and follow-up is cornerstone of our news dissemination process. The constituent elements of EPILOGUE are an independent policy, a pioneering spirit, a highly motivated professional team, state-of-theart technology, strategically located Correspondents spread all over Jammu and Kashmir, and above all a sense of mission. We have a deep appreciation of what independence actually takes and how difficult it is to uphold. Out financial independence lies in the independence our editorial policy. The core policy at EPILOGUE is to impart an up-to-date factual and unbiased panorama of the state of affairs in Jammu and Kashmir, as it stands today and as it is expected to unfold in the future.

Epilogue Ă&#x2DC; 24 Ă&#x2014; January 2008

I N

F O C U S

THE MONEY MOVEMENT

‘Figures Fuged, Statistics Faked’ Abdul Rahim Rather I wonder what the Finance Minister has sought to convey by taking pride in the proposed high spending of Rs 87,000 crore during its six years rule.

gone down. For example, the export of carpets, which was worth Rs 489 crores during 1999-2000, had gone down to Rs 300 crore in 2005-06.

Instead, the Finance Minister should have drawn a comparison on what NC Government had achieved from Rs 45,000 crore spending in its six year rule and what the coalition regime did with Rs 87,000 crore.

The survey conducted by country's leading magazine India Today in its series of “Best and Worst States” is an independent analysis of the shift economic condition of Jammu and Kashmir since the coalition government took over from National Conference. In 2002-03 when we had just demitted office, the India Today survey placed Jammu and Kashmir at 12th rank in terms of agriculture production while the latest survey places us at 16th rank. Continuing with the present trend of ignoring the agriculture sector we may soon be at 20th rank. Similarly, in the primary health sector, we were at number one during 2002-03 survey but the latest survey has placed us at seventh rank. This is enough for the government to understand as what they have done to the state's e c o n o m y. In infrastructure development, the State's ranking has gone down from 8th to 11th, in consumer market from 6th to 8th and in law and order from 13th to 15th.

In case of more spending the growth rate of Gross State Domestic Product (GSDP) too should have gone up. However, this was not the case. The Economic Survey has showed that during 9th plan period, State's growth rate was 11.98 but it went down to 9.96 during 10th plan. Agriculture and allied services accounted for 5.92 per cent in 2001-02 when National Conference was in power but this again came down to 1.32 per cent during 2004-05. The overall economic scenario has been following an unhealthily trend over all these years. Take for example; the state's imports are increasing. This is not a healthy sign. The import of grains and pulses was 86 lakh quintals in 1999-2000 which had gone upto 89 lakh quintals in 2005-06, an increase of 2.67 lakh quintals. Similarly, import of vegetables was 9.73 lakh quintals in 1999-2000 which was now 23 lakh quintals, a jump of 13.84 lakh quintals. Fodder's import has gone up from 4.79 lakh quintals to 11 lakh quintals. What does all this show? While the imports are following an upward trend, at the same time, our agriculture production and exports have

There is deterioration in every sector. Take the example of power sector. despite the Government's claim of reforms in power sector including increase in tariff, installation of meters etc, the power losses have gone up from Rs 559 crore in 2002-03 to Rs 1281 crore this year and are projected at Rs 1295 crore next year. The Finance Minister has claimed an exemplary performance of the coalition

Epilogue Ø 25 × January 2008

government. Before claiming credits, he should refer to October 17, 2007 statement of his party patron and former Chief Minister Mufti Mohammad Sayeed wherein he said that his party was not happy with performance of the coalition government for its deviation from the political and economic agenda. Does an outsider need to tell them about the scenario. Then the Finance Minister claims that the coalition government has brought Jammu and Kashmir out of the fiscal mess. I would rather say that they have actually pushed Jammu and Kashmir into a fiscal mess. Whether dishonoring of Government cheques by Government Departments is hallmark of credibility of the Government"? As per my information generated from credible sources, as on January 14, (two days ahead of the presentation of budget for 2008-09) bills amounting to Rs 548 crore were pending in the treasuries while Rs 165 crore worth bills were pending in the Secretariat treasury alone which including salary of the employees. Overdrafts of the Government with Jammu and Kashmir Bank have gone up to an all time high at Rs 2250 crore. Limits of both normal and power ODs has been exhausted. Employees were not getting their own GPF. Ministry of Railways' money kept with the Government for payment of compensation to the people has also been used. Cheques issued to earthquake victims are getting bounced. How can the Government, in such a situation, boast of a zero deficit budget"?. Isn't it fudging of figures and postponing of liabilities. One must understand that the Over

I N

F O C U S

THE MONEY MOVEMENT

Drafts are obtained from the Bank to overcome temporary mismatch between expenditure and flow of funds from Centre. However, in the present case, the Over Drafts have never gone down from Rs 1800 crore. If the budget is really Zero Deficit, as claimed by the Finance Minister, on last day of the financial year, the Over Drafts should have been Zero. But in the present case this is more than Rs 2200 Crores. Isn't it fudging of figures? I remember, when we had demitted office, the Over Draft was Rs 817 Crores. Let me go back to the last year's budget speech of the Finance Minister. He had talked about Venture Capital Fund, Employment Mission and Self Employment Schemes. But nothing has been seen

happened on the ground in this connection and interestingly the current year's budget speech of the Finance Minister is completely silent on these issues. They talk about the fiscal discipline and bringing the state out of the mess. Look at the figures and find out the claims for yourself. On April 1, 2002, Jammu and Kashmir had a total debt burden of Rs 9800 crores and, therefore, the per capita debt was at Rs 9703. If we compute the figures as expected to emerge on April 1, 2008, the total debt burden would have reached Rs 20,561 Crores and accordingly the per capita debt would be Rs 20,375. Is this the fiscal discipline, the coalition government

Epilogue because there is more to know

ARE YOU MISSING YOUR EARLIER STORIES ?

has been talking about. If we take an overall look at all these factors, one can understand that the state is headed towards a fiscal disaster. The situation which has assumed over these years is the one where no political would like to take the responsibility of the Finance Minister and no bureaucrat would accept the assignment of Finance Secretary. I am surprised, under such a gloomy scenario; the Finance Minister describes the budget as 'Zero Deficit'. It is a classical case of fudging of fudging of figures. ABDUL RAHIM RATHER is leader of opposition National Conference. He was Finance Minister of J&K till 2002.

June 2007 Looking Beyond “K” May 2007 Peace Process April 2007 PDP-Congress Coalition Schism March 2007 Baglihar February 2007 The Promise Ahead

Write to editor.epilogue@gmail.com

Epilogue Ø 26 × January 2008

January 2007 Book of the year

I N

F O C U S

THE MONEY MOVEMENT

‘We Have Brought Turn Around In Economy’ Tariq Hameed Karra We must ask ourselves the basic question as to who has brought out the Economic Survey? It would appear from the speech of Hon'ble Leader of Opposition that the opposition has prepared it! We must appreciate that it is our initiative. So when you quote from the Economic Survey, please remember, we, the government, have given the figures. You have not got them from some own private source. My friends from the opposition need to make up their mind, whether the Economic Survey figures are right or wrong. You can't run with the hares and hunt with the hounds! When it suits you, you quote Economic Survey; e.g on rate of growth of SDP. And not take you don't like it, you call it manipulated. Let us take economic growth, for example Economic Survey has showed that during 9th plan period, State's growth rate was 11.98 when went down to 9.96 during 10th plan. Agriculture and allied services accounted for 5.92 per cent in 2001-02 while it came down to 1.32 per cent during 2004-05. You are talking of nominal growth. The rate of growth of 12 percent in 9th plan comprises two components viz, real growth and inflation. In the ninth plan, out of 12 per cent, 7 per cent was inflation (please see page 47 eco survey) and 5 per cent was real growth; during 10 plan, GSDP was 10 percent of which only 4 pr cent was inflation and 6 per cent was real growth. The same is true for all sectors. On rising imports, I have a couple of points to make:Higher imports do not necessary mean that they are not a healthy sign. We are a consuming state. If we have the incomes, and as I showed, per capita income has increased, it is quite consistent and expected that imports will rise.

Two things have to been seen: Imports as a percentage of GSDP (import intensity): This has not increased. Total Exports as a proportion of imports: This is increasing indicating that a larger part of the imports are being financed from exports and hence there is a resource flow from the country to the state. During NC rule there was a net resource outflow from the state to the outside. Carpet exports have gone down, because of global reasons and competition. Let me remind that in the past tax exports were taxed and concessions were given to imports!! This is contrary to common economic logic. It amounts to penalizing your producers and subsidsing the outside producers. Toll on horticulture is a case in point. Per Capita Income While referring to the status of Per Capita Income (PCI) during the period 1997-98 (Rs.7128) to the year 2002-03 (Rs.7675), the income figures have been reckoned at constant prices based as the old series of 1993 -1994. As regards the Per Capita Income Rs.19899 for 2008-09, the following two changes/aspects need to be understood:

Epilogue Ø 27 × January 2008

Although per capita income has been quoted at constant prices only, and that too in relation to NSDP, the numbers have been based on the new series of 1999 2000 series. Economic Survey gives out a table where Per Capita Income (PCI) for the year 2006-07 has mentioned as Rs.16779. I have made an assumption 6.5% growth for the current year and 7% growth for the next year and, based on such assumptions with regard to growth ,I have quoted a figure of Rs.19899, for the year 2008- 2009. Therefore, Hon'ble Leader of Opposition is absolutely correct in stating the per capita income figures based on 19931994 series. The problem has mainly arisen because a comparison has been made in my speech between two sets of figures: one based on the old series and other based on the new series and also taking into account assumption of growth for the current year and the next financial year. I trust this should clarify matters. To also put the matter further in the correct perspective, Page 10 of the Statistical supplement of Economic Survey: states that Per capita Income has increased by 4 per cent in real terms over te 10th plan and by 0.31 per cent in 2000-01 and declined in 2001-02!

I N

F O C U S

THE MONEY MOVEMENT

Also, at page 6 of the Statistical survey of the Economic Survey. The Index of per capita Income has increased from 100 in 1999-000 to 104 in 2002-2003. Four per cent increase over a five year period upto 2002-03. It has increased from 104 then to 126 in 2005-2006. That is a 22 per cent increase. That is what is in the budget. Yes, we have projected it for the year-end. But then every single number is the budget is a projection.

Appropriation Accounts and Finance Accounts for the State of J&K for the year 2006-07 were first received in the Finance Department on 15.11.2007 but were sent back to the Accountant General, J&K for re-checking and correcting the same as some discrepancies and wrong figures were

III. India Today Survey Any criticism, based on this survey, is subject to three major limitation:This is a survey based on sample method of survey. This can not be a substitute for a Government's report.

Comptroller and Auditor General of India's Report for the State of J&K for the year 2006-07 also stands received in the Finance Department on 07.01.2008 and after passing through various stages has been submitted to the Presiding Officers of both the House of Legislature on 22.01.2008 for laying in the House as prescribed under rules. There is no question of any deliberate attempts to delay the presentation of the Reports.

Data generation and reporting has been a problem in J&K. It is not clear as to what set of data/ figures this survey is based upon.

II. FRBM Passed in August 2006 and operative from 1.4.2007.

It cannot be pre-supposed that other states will not grow or have not done better. Any slippage in position does not necessarily mean hat our performance has gone down. The performance of other states may have improved. As the Hon'ble Chief Minister spoke for three hours in the house giving you graphic details on every single developmental work that we have done. So where is the need to repeat it.

Governor and his consent was received on January 14, 2008. The same have now been submitted to the Hon'ble Chairman Legislative Council / Hon'ble Speaker Legislative Assembly on 22.01.2008 for laying in the respective Houses.

Draft rules since prepared and legally vetted by Law Department on December 7, 2007. Rules formally approved and sent for notification in Govt. Gazette on 22.1.2008. discovered in the Draft Accounts; particularly relating to “Power Receipts”. The discrepancies arose on account of the two overdraft accounts and the processes relating to inter-OD transfers.

Govt. of India have suggested that the State Act should be brought in line with the national act with regard to the cut off date for :

SPECIFIC BUDGET RELATED ISSUES I. Finance Accounts

After making necessary corrections, the Finance Accounts were processed by the Finance Department for approval of the

Epilogue Ø 28 × January 2008

Eliminating 31.3.2010.

revenue

deficit

I N

F O C U S

THE MONEY MOVEMENT

Our Act envisages reduction of fiscal deficit to 3% GSDP by 31.3.2010. Central Government has suggested that the cut off date should be 31.3.2009 to make J&K also eligible for incentives along other states. An amendment bill has been drafted for submission to Cabinet for approval. The issue highlighted by Hon'ble Leader of Opposition on presentation of statements alongwith the Budget is absolutely valid. But, in the absence of Rules and the prescribed formats, the laid down requirement could not be met. As soon as FRBM rules are notified, all requisite information on prescribed formats will be placed before this House. It is also assured that after the required statements are prepared and presented before this House; an independent agency will be engaged for evaluation and authentication of the performance as reflected by the statements. III. Debt Position Hon'ble Leader of Opposition had stated that state had a debt of Rs 9,800 crore on 1/4/2002 which comes out at Rs 9,703 crore per capita while as on 1/4/2008, the debt will touch Rs 20,561 crore (Rs 20,375) per person. The Hon'ble House needs to appreciate a few aspects: I am paying past dues. As I said, Rs 1,008 crore was unpaid. NSSF Rs 683 crore was unpaid, which I propose to pay. Baglihar bonds, I have paid. Debt/SDP ratio You have to compare debt with income. Suppose, I have a debt of Rs 1,000 and

you have a debt of Rs.200. Am I more indebted than you are? Not necessarily. One has to see the income also.

make every effort to bring down the overdraft in the first instance to 14.5% of expenditure.

If my income is Rs 10,000 and yours is Rs 1,000, then I am less indebted than you even though my absolute debt is higher. Similarly, if my income has gone up 20 per cent and debt has increased by 10 per cent, I am not worse off. Nor am I in a debt trap. Please, do more sophisticated economic analysis.

A very large part of the overdraft has assumed the character of a “structural deficit”. We need to break the current level of overdraft into two componentsa long term liability and a short term “ways and means” facility. We could possibly look at meeting the first component through a combination of grant from Central Government, issue of bonds by J&K Government and raising of Additional Market borrowings. In any case, therefore, the most practical way and perhaps the only way to go forward is to replace the structural part of the overdraft by a long-term debt.

A large part of this debt is “debt in perpetuity”. This is related to pension funds. This will rise as and when government employment rises. Hence pensions also rise. IV. Overdraft At the outset, I must say that, as a part of the last year's Budget Speech, the Government took the decision to share the details of overdraft of the State Government with J&K Bank. In this context para No. 23 to 25 of my Speech may be referred to wherein it had been stated that, over the years the overdraft with JK Bank has shown significant increase. Power deficit has been one of the major reasons for this. The overdraft stood at Rs. 2,190 Crore – Rs. 1,942 crore as normal overdraft and Rs. 248 Crore as power account overdraft on the date of presentation of Budget last year. Overdraft has to be seen in relation to total expenditure. As a percentage of total expenditure, the overdraft amounted to 15.33 % in 1996-97. The percentage worsened to 18.37% in 199798. On March, 31, 2007, the ratio stood at 15.44%. The overdraft at the end of the third quarter i.e. on December 31, 2007 was Rs 2,110 crore i.e. below the March 2007 level. The Government will

Epilogue Ø 29 × January 2008

V. Position in Treasuries Hon'ble Leader of Opposition referred to the position on January 14, 2008. Let me give the specific details. The overdraft position as on 14.01.2008 is as under :OD-I OD-II

= (-) 2092.57 crore = (-) 195.64 crore = 2288.21 crore

Total Pendency as on 14.01.2008 in all the Treasuries of the state was Rs.551.66 crore. The amount includes amount payable to FCI Rs.85.00 crore. Total pendency in Civil Secretariat Treasury as on 14.01.2008 was Rs.129.51 crore and not Rs 165 crore. Total pendency under Salary, Pension and wages as on 14.01.2008 was Rs 6.06 crore. The demand was cleared on the same day. I may add that all outstanding bills across the treasuries in the state relating to salary/pension /Wages/ CDF/TE-OE-

I N

F O C U S

THE MONEY MOVEMENT

POL/Drug & Diet/Cash Assistance to Migrants stand cleared upto 19.01.2008. Gratuity Commutation payments stand cleared upto 20.12.2007. G.P.Fund payments have been made upto 18.12.2007. Contractors/Firms, Material/ Supplies and Self- help-Group payments stand cleared upto 19.12.2007. As regards pendency as on 22.01.2008 under Railway Land compensation, the same was Rs. 8.19 crore only. Bills received during 2007-08 amounted to Rs 20.07 crore. Bills aggregating Rs 11.88 crore stand cleared. VI. Expenditure of Rs 45,000 crore Vs Rs 87,000 crore The simple point I have made is that in the past money was spent on salaries and I have used it for capital expenditure. The most telling achievement that expenditure has been doubled and capex increased five fold is the real point. We have spent on developmental works. VII. Transfers from Centre In Revised Estimates 2006-07 the total Receipts were estimated at Rs 14163 crore and the Actual Receipts were Rs.14080 crore

TAX RELATED ISSUES I. Placement of Raw Tobacco & Bidis in Zero percent rate category under VAT The Empowered Committee of State Finance Ministers took the decision for placement of raw tobacco and bid is in zero percent rate category. It is a decision not relating to J&K along. Most of the member states have already adopted the decision of the Empowered Committee The trading fraternity during the prebudget consultations also demanded placement of the said items in zero percent VAT category for purposes of uniformity and to check diversion of trade. The Government is conscious about the health hazards of these demerits goods and believes that it requires educating the consumers about the ill effects of these and other like goods. II. Exemption of VAT on CSD Goods: The VAT regime does not recognize any exemptions. Concessions in other forms are available to the defence personnel both serving as well as ex-servicemen in the state.

The variation between Total Receipts, Revised Estimates and Actuals is 0.1 %

Excise duty concession on liquor sold through CSD is available to the personnel of the army forces.

Total Revised Expenditure Estimates for 2006-07 were Rs 14163 crore and the Actual Expenditure is Rs.14,627 crore.

Total collection of Excise Duty on liquor throughout the country is Rs 28,000 crore.

The variation between RE and Actual so far as expenditure is concerned is 3.3 %

Excise duty concession in the country on liquor sold through CSD is Rs.400 crore.

Epilogue Ø 30 × January 2008

The State Government has been providing concession in the form of excise duty on liquor sold through CSD to the tune of Rs.60 crore This concession accounts for 15% of the total concessions provided throughout the country. The Government is seized of the concern of ex-servicemen of the state. A Cabinet Sub-Committee has been constituted to work out a mechanism for providing a relief package for them. III. Placement of rice, paddy, atta, maida, Suji etc in zero rate category It was solely with the intention of providing relief to the common man that the Government went ahead with the continuation of placement of these commodities in zero percent VAT category for one more year. Other states are yet to do so. DEVELOPMENT ISSUES I. Pre-ponement of Budget The basic idea of pre-ponement of budget was to optimally utilize the lean winter months for seeking legislative approval of the budgetary proposals much ahead of the norm so as to maximize the limited working season for implementing and monitoring plan schemes. Accordingly, the meeting between Hon'ble Chief Minister and Deputy Chairman, Planning Commission for finalizing the Annual Plan 2007-08 was held on 13th December 2006. The approved copy of the “Scheme of Financing (SoF)” was however, received only on 9th of April 2007. In the absence of SoF, neither the District Plan nor the

I N

F O C U S

THE MONEY MOVEMENT

State Plan could be finalized. The delay in the receipt of SoF tended to neutralize the advantage of early finalization of Annual Plan 2007-08 outlays. On 5th of April 2007, Planning and Development Department authorized all the Departments and District Development Commissioners to incur expenditure on on-going schemes upto 25% of last year's approved plan outlays both under Revenue and Capital components during the current financial year. The approval of the Planning Commission for the Scheme of Financing for Annual Plan 2007-08 was received in the Planning and Development Department on the 9th April, 2007. In order to ensure that developmental works do not suffer, 50% of plan outlay was authorized to the Departments on June 27, 2007 and 100% plan outlay was authorized on July 31, 2007. In so far as the District Sector is concerned, based on the sectoral outlays for district plan obtained from the Heads of Departments, district-wise plan outlays were communicated to the District Development Commissioners on 09-05-2007, and while doing so, authorization was also given to incur expenditure upto 50% of current year's approved plan outlays on on-going schemes. The district plan outlays could not be taken as final at that stage because of the then on-going exercise for redrawing the boundaries of the districts. The Re v e n u e D e p a r t m e n t i s s u e d a Notification regarding the boundaries of the districts only on May 22, 2007 under SRO 185. Accordingly, sectoral outlays for districts were again obtained from the Heads of Departments and final outlays communicated to the districts on June 15, 2007.

In doing so, all the District Development Commissioners were also advised to get their plans approved by the District Development Boards, which met during the month of June, 2007 and first week of July, 2007. II. Current year's expenditure If we compare the expenditure of the current year with the last year ending November, the %age of expenditure under Capital Component for the State as a whole for 2006-07 was 30.71%, and for the current year it is 30.47%. Similarly, under the District Plan, the expenditure under the Capital Component during last year ending November was about 32.72% and during the current year it is about 28.19%. The main reasons for the low expenditure are:

NABARD projects and finally the sanction has been received as such expenditure will now pick up. Besides, HUDCO loan of Rs.100 crore has not been released due to default on repayment. Similarly, the LIC loan (Power Sector: 95 crore, PHE: 20 crore) loan has not been lifted so far due to some outstanding. Power Sector is the major consumer of plan funds, both under the State Plan and the PMRP etc. The utilization of funds, however, in this sector has been low under the schemes like APDRP, Strengthening of T&D etc. In actual terms, the work done on the ground is much higher than the expenditure incurred. It always picks up during the last months of a financial year. III.

An amount of Rs.40.00 crore was provided under the approved plan outlay for creation of new districts has remained under-utilised, as adequate staff has not been posted yet. Similarly, an outlay of Rs.45 crore was provided for establishment of infrastructure in the new districts. As it took some time to finalise the designs etc, the expenditure is only now picking up. One of the key reasons for low expenditure is the fact that the new districts continue to be disadvantaged by way of non-availability of full complement of staff, which is hampering developmental activities. Against the tied allocation of Rs.355 crore under Externally Aided Projects (EAP), only Rs.79.60 crore has been lifted so far. Against the loan of Rs.635 crore, only an expenditure of Rs.73.49 crore has been made ending November,2007. It took some time in finalizing the priority of

Epilogue Ă&#x2DC; 31 Ă&#x2014; January 2008

Shortfall in Receipts in 2006-07

Transfers from Centre were estimated at Rs.7,985 crore and the Actual Receipts were Rs. 6,977 Crore i.e. a short fall of Rs.1,008 Crore. Short fall was in the following items:Rs. 700 crore were estimated under CSS but actual receipts were Rs. 539 crore shortfall Rs. 161 crore. Power Reform grant of Rs. 300 crore was not released - short fall Rs.300 crore. Amount for EAPs not claimed as no scheme was put forth. Amounts for EAPs are included in Plans by design and usually remain unclaimed - shortfall Rs.298 crore. Security Related Expenditure was estimated as Rs.325 Crore but actual expenditure was less and amount reimbursed was Rs.163 Crore. Hence less reimbursement - shortfall Rs.171 crore. As will be seen from above the total short

I N

F O C U S

THE MONEY MOVEMENT

fall of Rs. 931 crore is on account of such schemes for which the amounts are either not spent till money is received or in respect of schemes for which GoI is committed to release money and is claimed subsequently IV.

District Planning

As neither the District Plan outlays nor the State Sector outlays could be finalized in the absence of the Scheme of Financing (SoF), it was considered expedient to authorize the District Development Commissioners to utilize funds upto the extent of 25% of last year's approved outlays for ongoing schemes. This was done vide Planning and Development Department's letter No.DP-16/2007-08/PS-901 dated: 05.04.2007. The SoF was received from the Planning Commission only on the 9th April,2007. Immediately on receipt thereof, an exercise was initiated in consultation with the Administrative Secretaries and the Heads of Department to work out the outlays for the District Plan and the State Sector Schemes. In respect of the district outlays, this exercise was initially carried out on the basis of the recommendations of the Bloeria Committee, which was not final at that stage. It was, however, considered expedient that while acceptance of the report of the said Committee may take some time, the planning process at the District level should be kick started. Following this exercise, District Plan outlays were conveyed vide this department's letter No. DP-16/207-08/PS-901 dated: 09.05.2007. While doing so, it was stipulated that except in the case of Kupwara, Kargil, Leh, Poonch and Rajouri Districts (not affected by ongoing exercise for re-organisation of district boundaries) the outlays may be treated as provisional as these may undergo changes after finalising boundaries of the other districts. Through this

communication, the District Development Commissioners were also authorized to utilize funds upto 50% of the outlays. The final notification regarding the boundaries of the Districts was issued by the Revenue Department vide SRO 185 dated the 22nd May, 2007. In order to align the District Plan outlays with the district boundaries notified by the Revenue Department, it was considered expedient to have further consultations with the Heads of Department. Finally, based on these consultations, District Plan outlays were communicated vide this department's letter No. DP-16/200708/PS-901 dated: 15.06.2007. District Development Boards met in the months of June and July (First week) to approve their respective District Plans. In due course, authorization was also given to the District Development Commissioners to the utilization of 100% of outlays under District Plan, 2007-08 vide this department's letter No. DP16/207-08/PS-901 dated: 08.08.2007. The total expenditure in case of districts upto November, 2007 is 32.67% of which 46.28% is the Revenue and 28.19% is the Capital. Statement showing districtwise outlays of Revenue and Capital and the % expenditure ending November 2007 is given in the table annexed at 'A'.

be prepared/finalized and construction agencies also had to be nominated. Full component of Staff not positioned in the newly created districts. This has also resulted in under-utilization of an amount of Rs.40.00 crore earmarked as Re v e n u e C o m p o n e n t , b e s i d e s hampering developmental activities. The projects for infrastructure development and agencies have now been approved by the Committee constituted for the purpose and most of the staff has also been sanctioned. Keeping these points in view, the expenditure is expected to pick up. V. Agriculture growth The main reason is the reduction in the allocation of IWDP project. While as in 2001-02, the allocation of IWDP was Rs.56.66 crore which represented about 3% of total plan allocation of Rs.2,050 crore, the allocation of this project in 2006-07 was Rs.51.42 crore which represents about 1.47% of the total plan outlay of Rs.3,500 crore excluding PMRP. If allocation on account of IWDP is netted out, the relative %age capital outlays as a share of total capital outlays for Agriculture & Allied Sector for 2001-02 and 2006-07 work out to 4.2% and 3.4%. Moreover, in respect of Agriculture Sector alone , the comparative percentage under Capital Component are 3.06% (2001-02) and 2.44 % (2006-07). An amount of Rs.90.77 crore was also available under the Centrally Sponsored Schemes (which include Central Share of Rs.84.13 crore of Central Share) during 2006-07.

It is seen that in case of older districts, expenditure of Capital component is about 31% and in case of new districts the %age expenditure of Capital component is 24.41%. This shows that the expenditure of newly created districts is comparatively less as compared to the old districts. This is because of the following reasons:

VI. Industrial production

In case of new districts Rs.5.00 crore each was earmarked for infrastructural development for which projects had to

In respect of Handicrafts, the production has risen from Rs 821 crore during the year 2003-04 to Rs 950 crore during the

Epilogue Ă&#x2DC; 32 Ă&#x2014; January 2008

I N

F O C U S

THE MONEY MOVEMENT

year 2006-07. Out of this production, the exports have risen from Rs 595 crore during the year 2003-04 to Rs 785 crore during the year 2006-07. Carpet, Woolen shawls and paper machie have been the main items in the handicrafts sector In respect of SSI, the economic survey says that there is an annual average growth of 6.03% by number of enterprises and 6.82% in employment during the period 1998-2005. The production by the existing SSI units has been normal and in most of the cases flourishing, an increase of 29% in the investment haws been registered in this sector in Kashmir Division during the past year along (2006- 07), with setting up of 833 industrial units with an investment of Rs 36.07 crore. However, a decline of around 65% in investment has been registered in Jammu Division during that year. In Jammu division, against an investment of Rs 100 crore in the year 2005-06, only an investment of Rs 65.74 crore was registered during the year 2006-07, only an investment of Rs 65.74 crore was registered during the year 2006-07 due to non-availability of land in the industrial estates. Nevertheless, this year the trend has been on reverse as upto ending November, 2007, 216 SSI units have been established with an investment of Rs 81.81 crore in Jammu division. In large and medium sector, again the existing industrial units have been flourishing as no sickness/ closure has been reported in this sector during the past year, which could denote decreased production and resultant decline in export. The investment mobilization during 2006-07 is almost equivalent tot aht mobilized in 2005-06. The investment in large and medium sector has been Rs 869 crore during the year 2004-05, Rs 674 crore during the year 2005-06 and Rs 673 crore during the year

2006-07 respectively. OTHER ISSUES

Power Reform Grant is not something different but forms part of negative BCR in our Resources assessment statement which is considered by Planning Commission while fixing our Annual Plan. In view of our huge negative BCR it was considered to address our power sector separately as it was the main issue responsible for huge deficit. State Government had to enter into an agreement for enforcing power reforms in order to claim the grant. This necessitated taking of some hard decisions so as to ensure reduction in power deficit in three years when power reform grant shall cease to be available.

considered to address our power sector separately as it was the main issue responsible for huge deficit. State Government had to enter into an agreement for enforcing power reforms in order to claim the grant. This necessitated taking of some hard decisions so as to ensure reduction in power deficit in three years when power reform grant shall cease to be available. People in the State were suffering due to increased power cut. Power cuts were imposed for 9 hours in a day and even more in some areas. The reduction in power cut has meant more power imports hence more expenditure. This should have been appreciated that we have been able to reduce the sufferings of common people. Some facts and figures may also be quoted in respect of Power Purchase:Rs. In crore Year

Budget

Actual

Provision

purchases

1999-2000

605

669

2000-01

650

814

2001-02

670

954

2002-03

670

661 up to Sept., 2002

An amount of Rs. 423 crore were outstanding on account of power purchase ending Sept., 2002 despite having exhausted the Budget provision of the year. It may also be indicated that an outstanding of Rs. 1204.66 crore were converted into Bonds in the year 2002

I. Power Deficit II. Public Sector Undertakings Power Reform Grant is not something different but forms part of negative BCR in our Resources assessment statement which is considered by Planning Commission while fixing our Annual Plan. In view of our huge negative BCR it was

Epilogue Ă&#x2DC; 33 Ă&#x2014; January 2008

The financial position of the PSEs is precariously poised. As of 31.03.2005, as against a total paid-up capital of Rs. 206 crore, the accumulated losses of the Corporation aggregated to Rs. 1736

I N

F O C U S

THE MONEY MOVEMENT

crore. The liabilities on account of statutory dues alone stand at RS. 318 crore. The PSEs employ manpower force of around 22500 workers; half of which appears to be surplus. During the current financial year, an amount of Rs. 40 crore is available with Government to provide residuary support to ailing PSEs in their endeavor of offering GHS/VRS to their employees, which is both voluntary and compulsive in nature. In fact, PSEs in their revival attempt will not only have to implement GHS/VRS but also take some other stringent measures simultaneously. As for instance: PSEs to identify assets free from encumbrances and make those assets fungible to meet the cost of GHS/VRS, to pay off statutory liabilities and arrears of salary/wages and also generate surplus for working capital requirements etc. Not to release any further COLA installments until the statutory liabilities and loans are fully discharged. Conceive future business outlook for a long term sustainability on their own and chalk out business revival plan for the coming five years which will include replacement of obsolete machinery. Close down units/activities which are beyond any scope of revival and restructure, both professionally and technically, the potentially viable units. In other words, budgetary subventions could come only as last resort for such PSEs as do not possess disposable assets, or, to fill the gap between the cost of implementing GHS/VRS and the funds realized from sale/exchange of assets in the case of others. Kundal Committee while giving model

GHS/VRS, have also identified 2225 workers of 5 ailing PSEs who could be

The financial position of the PSEs is precariously poised. As of 31.03.2005, as against a total paid-up capital of Rs. 206 crore, the accumulated losses of the Corporation aggregated to Rs. 1736 crore. The liabilities on account of statutory dues alone stand at RS. 318 crore. The PSEs employ manpower force of around 22500 workers; half of which appears to be surplus.

considered for exit in the first phase. Likewise, an indicative list of disposable assets of ailing PSEs has also been given which holds a promise of potential of generating about Rs. 200 crore. The Committee have further identified 253 units of various PSEs that need to be closed down. Since implementation of VRS/GHS is a sensitive issue, it may take some time for implementation. Some Corporations have already initiated action in this direction and proposals are under examination at various stages. The position is proposed to be reviewed by Chief Secretary towards the end of January, 2008.

‘J&K Is Headed For A Severe Debt Trap’ Interview with Mohammad Shafi Uri, former Finance Minister The coalition government says that the National Conference regime (1996 to 2002) pushed Jammu and Kashmir into a financial mess which they claimed to have corrected in next five years. Can you recall your assessment of the economic scenario in 1996 when you took over as Finance Minister? Situation in 1996, when we took over after six years of Governor's rule was quite disappointing. There was no tax compliance. People in Kashmir did not pay taxes at all and as an effect the collections in Jammu region too were negligible. Same was the case with nontax revenue between 1990 and 1997. The Security Related Expenditure, a huge burden on the state exchequer, was not being fully reimbursed by the central government. I remember, when we took over, besides an ailing economy the immediate burden before us was the implementation of the recommendations of fifth pay commission. We had to clear arrears worth Rs 800 Crores. The debt burden was above Rs 1400 Crores. Infrastructure was gutted. The power tariff collection was negligible and Transmission and Distribution Losses were highest. Another serious problem before us was alarming problem of unemployment which had to be addressed at priority to save our youth from going astray. Was there an easy way out?

TARIQ HAMEED KARRA is Minister for Finance, Jammu and Kashmir

Epilogue Ø 34 × January 2008

No, there was not. Since the issues were

I N

F O C U S

THE MONEY MOVEMENT

too precarious and list of problems too large, therefore, we generated an order of priority to address the issues. We pleaded before the central government for reimbursement of the Security Related Expenditure which was running around some Rs 700 Crores. We also took up with them the reconsideration of special category status to address the serious problem of grant and assistance ratio. The 90:10 ratio had been applicable to the North Eastern States ever since the inception of the scheme in 1969-70 but there was a discrimination in case of Jammu and Kashmir. We wanted this assistance pattern with retrospective effect which could have written off our Rs 1400 Crore debt burden. We also gave a memo to the central government for resources to address the unemployment problem. The case of compensation on account of Indus Water Treaty was also taken by with New Delhi as our waters are used for the benefit of entire country but the discriminatory clauses against us are resulting into an annual loss of Rs 6000 Crores to Jammu and Kashmir. Was Center forthcoming in helping you out in that situation? Unfortunately the Central Government did not help us the way we had wanted and the way we rightfully deserved. We did struggle but finally we had to spade work at home instead of wanting for the desired response from the Center. So, what immediate measures did you propose at that time as Finance Ministers? Perhaps I was the first and last Finance Minister who had to take some harsh

measures. Besides putting in place a regime of austerity measures, taking up strict fiscal management initiatives, I had to impose some tough taxes on a variety of sectors. I remember the opposition saying that “only air for breathing has been spared in the new tax regime”. In our 1997 budget, we proposed a general amnesty for the tax defaulters and the taxes were rationalized under different slabs. Power tariff was revised and an effective campaign was launched for tariff collection in order to recover, at least, the cost of maintenance. Under a slew of measures to put the derailed system in order, interim recommendations (Madhav) Godbole Committee on Financial Reforms were implemented. With the passage of time some semblance or order returned to the system, tax collection improved and thinks started looking up. In 1998-99 a new industrial policy was out in place with a slew of incentives to revive the sick units and attract new investment. The policy showed tremendous results. When I had left as Finance Minister (and took over as Education Minister) the tax collection had reached three times higher and we had already started gearing up for the VAT regime. My successor (Abdul Rahim Rather) further improved the system. Muzaffar Hussain Baig took over as the first Finance Minister of coalition government in November 2002. He, and also the Economic Advisor to the Government Dr Haseeb Drabu, claims that Jammu and Kashmir was headed towards a serious fiscal crisis when they had taken over. They say, the

Epilogue Ø 35 × January 2008

problem of managing finances was so critical that it was not possible for any Finance Minister to present a regular budget and therefore a Vote on Account had to be sought for first three months. How to you react to this? The Vote on Account was a ill conceived terminology and highly politically action of the government to show to the people that things were not right. In fact every thing was in perfect order and there was no need to seen a Vote on Account. I admit there was some debt burden at that time but that was due to Center's default at the commitment. To expenditure in limits, the Center had to release funds which were not released in time. There was absolutely no need of seeking Vote on Account. The Finance Minister Tariq Hameed Karra has recently presented the last budget of the coalition government. You were the one who had presented the first budget of National Conference regime (in 1997). How do you look at the scenario now? I must say with authority that if corrective measures are not immediately taken up the state is headed for a severe debt trap. This is my basic assessment of the situation. I often laugh at the Zero Deficit terminology. Figures have been faked and statistics fudged to portray a colourful picture of finances. The Zero Deficit term looses its very meaning when you see that government does not have enough of money to pay salaries to its employees.