The Telegraph
Tuesday , March 25 , 2014
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Rio hits out at Centre for woes

Kohima, March 24: Chief minister Neiphiu Rio, who also holds the finance portfolio, today blamed the Centre for Nagaland’s financial burdens for the past almost two-and-a-half decades.

Addressing the House on the last day of the budget session, he said since 1989 the Centre had discontinued the funding pattern that used to cover all non-plan deficit as was expected under the 16-Point Agreement and the state’s financial problems started from 1990.

From 1990 to 2002, the state had to impose restrictions such as pro-rata cuts in both plan and non-plan expenditure. No salary payment could be released in time and, at times, even pensions, leave encashment, medical reimbursement, debt servicing and power purchase dues could not be cleared.

He said today Nagaland was one of the best states in the country in terms of timely repayment of debt to financial institutions and its positive management of finances had also been acknowledged by the RBI governor during his visit to the state in 2007.

He said the 13th Finance Commission (2010-2015) had fixed the ceiling on the state’s salary expenditure at 35 per cent of the total revenue expenditure, excluding pension and interest payments, when the state’s expenditure on salary was already around 60 per cent.

He said to comply with the recommendations of the 13 Finance Commission, the state government would have to retrench 46,599 employees but his government had not resorted to any such measures, keeping in mind the welfare of the employees. He said the state has an excess of 54,689 employees but this problem has existed right from the beginning.

Rio also blamed Nagaland’s negative state of finances on the arbitrary imposition of “cash drawdown” by the Planning Commission.

“This method took into account the artificial cash balances shown against the balance of the state on the last day of March as an available resource of the state for the state plan, without recognising the fact that it was unreconciled by RBI,” Rio said.

“In fact, by the last day of March, the state’s cash balance is always in negative. The positive balance shown was mainly on account of inability of RBI to reconcile accounts due to heavy financial year-ending transactions of all states. As a result, we were penalised for resources that did not exist,” he added.

Rio said unlike most states, his government had adopted preventive measures to tackle the problem of cash drawdown, put in place since 2012-13, by closing the financial year effectively a few days ahead, so that the actual cash position was established on or before March 31 and the state was not “victimised”.

Rio appreciated that the Centre had provided more than 90 per cent of the state’s resources and given Nagaland Rs 15,999 crore for development for the past 53 years.

He, however, added that this amount, provided to Nagaland since it had attained statehood, for development was less than a year’s plan outlay of a medium-sized state in the country. He said the plan outlay for the current year, 2013-14, had in fact been reduced by 13.04 per cent compared to the previous year.

He said the state’s closing deficit estimate of Rs 950.90 crore for 2013-14 fiscal, and, more over, the actual deficit could have been much less if the Centre had released the state’s pending reimbursements of Rs 324.18 crore.

Rio said less receipt of the state’s share of central taxes by Rs 90.52 crore was another reason for the high deficit.

With these two receipts, the actual deficit would have been only Rs 536.20 crore.

He claimed that despite the problems, his government had managed the state finances well during the past 11 years and his government had never failed to pay salaries and pensions on time.