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Tuesday, March 15, 2011

Andhra Pradesh: Economic Vision - Budget 2011-12

The Seminar on "Andhra Pradesh: Economic Vision - Budget 2011-12" organized today by FAPCCI, at at Surana Udyog Auditorium, Federation House, Hyderabad.

The Seminar was organized in Two sessions with Government higher officials and Political party Representatives separately.

Session 1:

Mr. G. Sudhir, IAS, Sp. Chief Secretary to Govt., Finance, Mr. L.V Subrahmanyam, IAS, Principal Secretary, Finance & Planning, Mr. S.P. Tucker, IAS, Principal Secretary to, Planning, Mr. V.K. Srinivasan IAS (Retd.), Vice Chairman, Indian Institute of Economics, Dr. M. Gopala Krishna, IAS (Retd.), Prof. R.K. Mishra, Director, Institute of Public Enterprises, Mr. Potturi Venkateshwar Rao, Senior Journalist, Mr. Shekhar Agarwal, President, FAPCCI, Mr. Devendra Surana, Vice President, FAPCCI and Mr. M.V. Rajeshwara Rao, Secretary General are participated in 1st session.


Session 2:

Mr. Bandaru Dattatreya, Former Union Minister, BJP, Dr. K. Narayana, State Secretary, CPI, Mr. B.V. Raghavulu, State Secretary, CPI (M), Mr. Y. Sujana Chowdhary, Parliament Member, TDP, Mr. Kamalakara Rao, Ex-MLC, APCC, Mr. K. Srinivasa Rao, Lok Satta Party, Mr. Shekhar Agarwal, President, FAPCCI, Mr. Devendra Surana, Vice President, FAPCCI and Mr. M.V. Rajeshwara Rao, Secretary General are participated in 2nd session.

Inaugral Session:

Chaired by Mr. Rajeswararao.

Welcome address:

Delivered by Mr. Shekhar Agarwal, President, FAPCCI.

High rate of industrial growth is commended by Mr. Agarwal and hike in the allocation of the resources for Power and Infrastructure is also commended. President Agarwal stated that AP has the best Infrastructure Enterprenuers in India with international reputation. 10-15% rateof industrial growth is possible and six new industrial estates with the “State of the Art” infrastructure is a boon for the state. Department of Industries should be headed by the person with the rank of the Chief Secretary as recommended by FAPCCI. 15,000 crores of annual investment and five lakh new job creation is possible only through proper reorganization of the Department of Industries. Competency should be the main focus of the budgetary programs rather than dependency. Dependancy on uncertain and low quality Power is a major concern.

Dr. Sangeetha Reddy, Chair person of FICCI:

FAPCCI’s initiative to focus on the State Budget is novel and the initiative is worth continuing. High rate of education, Enterprenuerial spirit and fairly good infrastructure has translated into higher rate of industrial growth in the past 20 years.

However since the past two years, AP is lagging. AP lost the opportunity to become the Auto hub. AP’s good agricultural base has got a lot to do with future and present thrust on the agro products. FICCI preferred to focus more on agriculture in Andhra Pradesh.

How much of the 31,000 crores of union budget allocation for the skill development or the Skill Development Mission can be tapped by AP. IT, hospitality, tourism, agriculture etc must be the focus. Medical tourism is the major focus because, the population to bed ratio in AP is among the highest in India. Health care is part of the infrastructure now to enhance the medical tourism. Smaller hospitals with less than 30 beds are likely to benefit the most. State boundaries contours and its changes should not affect the positive high rate of industrial growth in AP.


Professor RK Mishra, Director, IPE.

The Budget is commended by Prof. Mishra. Benchmarking and value addition should have been focused better. A comparative analysis across the regions and countries and across the time must be made. There are many countries comparable to AP’s size and even smaller. Tamil Nadu’s state Government much more Pro-Active than even the Central Government. Human Development and physical infrastructural development are all superior in Tamil Nadu. Tamil Nadu has done greater service to the Power sector.

Over a third of India’s wind power capacity is supplied by Tamil Nadu.

AP’s fame has confined to the Ongole Bull. Revenue to Capital ratio is still very low in AP. China’s Revenue / Capital ratio is very high. Huge tax eriers in India and also in AP. Uncollected taxes must be the prime focus followed by the focus on the Black money.

AP’s productivity is only 40% of that of Tamil nadu. Climate, culture, food basket and culture are the best in AP. Yet, relative and absolute productivity are declining in AP.

Constructive criticism is lacking in AP and bribes are highly tolerated. The focus on the outcome is not yet there. Bigger vision should be there. Even Chattisgarh is thinking big. Activity based budget should be the focus. How can most of the people be kept dissatisfied. Capacity building has not received attention. udget must be outcome based and not incremental or financial based. Forward and backward linkages must be captured by the budget. Unbalanced growth must be focused and priority areas must be taken up.

Potential areas of corruption must be identified and plugged. Most of the recommendations by the committees are overlooked. Non tax revenue should be increased tremendously. PSUs are the important vehicles to increase the Non Tax revenue. How is it that the state PSUs are not made profitable unlike the central PSUs?

AP has the Factor Endowment advantages. Services export is the major strength of AP. More Manipal like Universities should be established in AP.

Telugu people played very important role in South Africa’s all round development and progress. Why can’t this happen in India and in AP itself? BioTechnology, Medical sector, IT, Education and R&D should be the major focus in AP. Country can only progress if core R&D is focused upon.

Resources should be allocated for growth, achieving excellence, future progress and for the Social Sector. Budget should target Productive efficiency. People live by Tomorrow and not by Today. Hence, planning and allocation should be proper.

Mr. S.P. Takkar, Secretary, planning:

AP grew by 200% in the past ten years and 100% in the past 4.5 years. Per-Capita income Rs. 60,000 or US$1,300. Mckinzey identified 17 growth Engines in AP. 8-9 focussed now.Tamil nadu had the infrastructure 50 years ago and AP developing only after the independence. MDGs will be achieved by 2015. 80% value addition is possible in agriculture. 40% of Horticulture products are damaged at the production level. Micro Irrigation is being focused now. Anantapur district comparable to Israel. A very silent revolution is happening most of which is through the private sector. Lot of unspent money is lying : especially the allocation for cold storage. Soon, the revolution is taking place.

Live Stock development is ambitious and milk production to increase from 105 to 250 million Metric tons. Teem building and Skill development is a serious lacuna. Hence, seven to eight million jobs can be created if we overcome these problems. Ground water is getting recharged contributing to the silent revolution. Bharat Nirman Program is contributing t a 50% growth in the Infrastructural development in AP.

“Bottom of the Pyramid” growth is emphasized by Mr. Takkar. Mr. Takkar recommends each woman to buy four saries every year contributing to the growth in the State Domestic Product, Service tax etc. Cash transfer is possible in few sectors now.

Chief Guest Mr. Sudhir:

Increased revenue generation can contribute to the rendering of greater justice through the budget to various sectors including the Social Sector. State Government’s responsibilities are clearly delineated in certain areas and overlap with the Center in certain other areas that are in the Concurrent list. The sources of Revenue are very limited in AP. Natural disasters and political upheavals have contributed to the difficulties in revenue realization and the meeting of the budgetary targets.

Fiscal deficit of 17,500 crores is well within 3% of the State Domestic Product in AP. There is a Power Vs. Irrigation expansion challenge in AP. Resources do not permit complimentary development of both the sectors.Industrial Investment Proposal clearance is the area of high priority. PPP projects are highest in AP and the Hyderabad Metro Rail project is one of the biggest PPP projects in India. Revenue generation in state PSUs is very difficult because of the popular protests. This causes a dent in the expansion of the production and services. APS RTC and State Dairy Development Corporation are the examples.

Mr. Sudhir requests the Chambers of Commerce and other Associations to help identify the priority areas in conjunction with the Research institutions and Universities.

Dr. Gopala Krishna, IAS:

Focus should be on the Economic Vision and the role of the Budget. Tax measures need to be introduced after consultations with the tax payers. An ideal recognition of the “Taxation with Representation” principle. Priority areas and areas with faster returns should be focused upon. Stability of taxation measures, the trends and the thrust of the budget should continue for years. Stable policies for stable budgeting is important. Timeframe fixation is a very important concern. Structural imbalances should be overcome.


Length and breadth of services in economic development should be understood.

Role of incentives in development and rationalization of the tax structures become important. Tracking and monitoring mechanism helps in the tax rationalization and the distinction between the essential and non essential commoditees.

Equity and justice should be focused upon so that people’s confidence and cooperation can be ensured. The Sun god picks up water vapour from few and distribute to all the areas. Hony Bea picks up the flower in a harmless manner. Thus, the Sovereign should sustainably tax the people and ensure the equity and justice. Tax evation is leading to corruption, criminalization, communalization and other ills. Hence, the tax net has to be widened and enforced.

Revenue growth and prioritization have improved a lot. IN 1960s and 1970s, 60 to 70% focus was on the irrigation. Along with the financial deficit, Governance Deficit should also be looked at and filled up. Perspective Plann should depend on the endowments and the capital. Resource endowment, human, knowledge, customer and social capital should be incorporated in the plan. Market status and potential should be understood. Economic Vision should visualize and actualize the plans. Japan’s perspective plan projects to 50 years. GDP growth rate is the function of the productivity growth rate.

Hence, skill development thus becomes very important. Non Employable Engineers and Technicians is a major problem in India. In Germany for example, a Technician performs the Engineer’s function. Little assistance should be able to translate itself into an inclusive society. Opportunities competence building, accessibility and utilization of the competencies becomes important.

a. Food,

  1. B. Water,
  2. C. Energy and
  3. D. Environmental Security should never be compromised.
  4. New initiatives should be taken up. Budget should be the instrument of the new initiatives.

Conversion of capital to revenue is important. Sale of land by the state in an uncontrollable manner is a mockery of capital generation.

Short Gestation projects should be focused and money can thus be generated for long term projects. Water, Energy and Environmental conservation should be important and food security should be made sustainable. Physical, Knowledge and Electronic Connectivity in the infrastructure should be ensured. This will ensure prosperous cities.

AP has missed the bus in terms of agro-processing industry. This has to be rectified. Gap appraisal and plugging should be important. Knowledge, Performance, Technology, Strategy, Credibility and Will Power gap should be plugged. Teem work and Teem building should be focused upon. Personal and Collective initiatives are called for by Dr. Gopala Krishna.

Open Session:

Chaired by Dr. G. Subramanyam, IAS

Dr. Subramanyam states that the knowledge creation process is not sufficient while making the budget. Objectives, Growth, the Quality etc are not fully defined. Awareness about the budget among the stakeholders is very limited.

Stakeholder engagement is grossly insufficient. Far less than ten percent of News paper space is allotted to the Economy.

State of Knowledge Capital, the extent of creation, the extent of dependency on the state and the ways to reduce such dependency are important. Why aren’t the economics professors conducting the pre-Budget workshops? Why isn’t there a full house during the pre and post budget sessions?

Fiscal Parameters are showing marked improvements. However, the targeting errors are also growing alarmingly in terms of the provision of social services. Non Bureaucrats should raise these questions. Bureaucrats are not allowed by the Conduct rules to raise these questions. Corruptions and Cutting Corners are becoming real problems. Youngsters are attempting and at times succeeding in cutting the corners. Pre and post Budget Sessions and also the common sessions with all the legislators are recommended by Mr. G. Subramanyam.

Audience:

Structural Composition of the Budget should be better focused. Services led growth is not sustainable in the long-run. Hence, industrial growth rate should be a bit higher than the growth rate of the service sector. Service sector usually provides employment for the White Color people.

Labour force dependence on agriculture should be substantially brought down from 60% to at the most equivalent to the contribution to GDP. Power sector growth for exporting to other states should be the trump card for AP.

Political Session:

Welcome address by President Shekhar Agarwal: President Agarwal believes that AP will produce great results in future as in the past. Life of the economy is in the hands of our leaders.

Mr. Raghavalu of CPIM:

Sanctity and the prominence of the budget is gradually reducing. If at all some salvaging could be accomplished, it could be by the ruling party politicians. Lots of gap between the estimates and the actuals. Transfer of money from one to another department is often resorted to and the predictability of the expenditure is questionable. Lot of unspent money is lying. Decisions and the actual allocations do not tally. Democratic exercise in the pre budget and post budget exercise.

The way the Jalaygnam was planned and implemented is not according to the wishes of the CPI. Gestation period is very high and the estimates revised upward tenfold as per the international experience. Small and Medium projects were suggested by-and-large and large projects suggested in a phased manner.

Now, the works are not only incomplete, but also the work in progress is tardy. The capital invested thus became “Dead Capital”.

Backward and Forward linkages absent in road laying projects. Many roads laid in not so busy areas to benefit the rich people. Unlike in Tamil Nadu, Karnataka etc, development is not spread across the state. Harbors and infrastructure not well developed. Most of the concentration of industries is in and around Hyderabad and now partly in and around Visakhapatnam. Brain Drain is a major problem.

Many incomplete projects in AP. Commencement takes place without the stakeholder participation. Hence, agitations and protests cause indefinite delay. Power projects mostly concentrated in Nellore and Srikakulam districts. Spread is lacking. Power to other states and the affliction of pollution in AP? Neither White paper, nor the policy paper nor the discussion among the stakeholders and among the parties. Real estate simply booms. The one who contributes land for the power project or any other project gets less money and those who are adjacent enjoy an unprecedented boom in the real estate price. Gujarat seems to have some scheme to spread the benefit of the real estate boom in an inclusive manner.

Why can’t Vijayawada industrialists manufacture sandals? Why only they sell them and give excuses such as the lack of competitive advantages in spite of being in proximity to the market? Bureaucrats tend to dance to the tune of ministers’ tastes and preferences. Even in the areas of contracts and the movie industry, AP tends to lag behind unlike the past. Systems and Institutions should govern the state rather than the personality cult.

Mr. Srinivasarao of Lok Satta:

20% variation between the estimated and the actual expenditure. Out of the five or six priority areas, firstly, agriculture should be focused upon. This is on grounds of higher percentage of population and less amount of per-capita income to the farmers.

Lack of sufficient storage for the crops. Agricultural exports discouraged in spite of surplus production. Neither the farmer benefits nor the consumer benefits. The crops get spoilt due to lack of sufficient storage facilities. Mirchi farmers are all right because they have sufficient cold storage facilities. Vegetables and food products need to be processed and cold stored. Why should Tomatoes cost one rupee in one season and over 40 rupees in another? This is due to lack of storage. Utilization of the Agri Waste is highly insufficient. Mere free power to the farmers is useless.

Skilled personnel like the Plumbers, Carpenters, and Electricians etc are lacking and it is hard to get their appointments. It is enough to spend 2,500 crores to train and employ about ten lakh skilled professionals. Central Tool Design Institutes should be set up in each and every district. Railway development mostly took place under the British rule.

400 KM of coastal Corridor leased only to three companies. However, The biggest ship yard in Singapore occupies only 45 Sq Km. Even Government Power Plant: viz : the NTPC’s Simhadri pollutes many villages with its ash destroying the agricultural productivity of the land. Thousand townships can be developed across AP with the investment of only 25,000 crores.

Mere 8,000 crores or over 6% of the state budget to local Governments or a Per-Capita fund transfer of Rs. 1,000 will do wonders because local bodies and people know what they want and will implement appropriate schemes. AP’s Wind Power bought by Gujarat. Among the big states, AP is low in development. Over three million graduate unemployed are roaming around. It is a potential destabilize of the society.

Lok Satta shall always be a positive force in the Development.

Mr. Bandaru Dattatreya of the BJP:

Budget document is a respectable document to be approved by the Government, the Legislature and the people. There is really no sanctity to the budget these days. In spite of being approved by the legislature, reallocation of funds and the watering down of the schemes occur most often in spite of the availability of funds. Fulfilling the election manifesto is most important.

Opposition parties should be the guiding force for the ruling part. Usually, the opposition parties tend to disrupt the proceedings, stage a walk out etc. Political stability is paramount to fulfill the budgetary objectives and commitments. Law and Order, a Decisive and Dynamic Leadership are also very important. A political party should be elected consecutively twice so that full justice can be done to the election manifesto.

Transparency is most important. People believe in those who practice honesty and transparency. Credibility gap should be plugged. Delhi Chief Minister Mrs. Sheela Deekshit meets and takes suggestions of and assistance from the Union Ministers most often. This budget of AP neither suggests a direction nor leadership. AP’s position should be first ascertained. AP’s advise was sought after during the Chief Ministership of N. Chandrababu Naidu or the NDA rule at the Center. But now, even Biharies take pride in their own achievements and vision.

The present Government is based on the personality cult and there is competition to get things prioritized. Food security and Farmers’ livelihood security are important. Over 30% of agricultural: especially food output is likely to be lost. Over 22,500 crores of property damage faced by the farmers due to the recent natural disasters. Marketing and other infrastructure and extension services are lagging far behind.

Prioritization of the irrigation projects does not take place and hence all the projects tend to progress tardily. Where is the National status for the Polavaram project? Government’s loans higher than the budget by over 11%.

Only a third of or at times a fourth of allocation is spent on Jalayagnam. Not even a fourth of irrigation apacity is added through Jalayagnam after commencement in 2004. By 2010, about 98 lakh acres of irrigation capacity is supposed to be added. Hypocrisy seems to be the trait of the political parties.

Government should take up the responsibility in producing power and AP Government has not taken interest in PPP in power production. Gestation period, pollution, and other issues related to rehabilitated not properly monitored by the Government. Coastal area is thoroughly misused in AP.

Rural roads are key for all round development and natural disaster management. Coastal roads not even built after the Diviseema disaster of 1977.

Hence, repeated natural disasters are causing hardships to the people. Power cuts are too many and already in March, rural areas are enjoying ten hours of power cuts. Skill development is adversely impacted by delay in fee reimbursement to the higher education institutions. At-least share the situation with the opposition parties concerning the priorities, reasons for lagging behind and failures. AP needs a proper leader. In spite of the Telangana movement, AP still has lot of economic opportunities and potential. Proper investment climate should be created so that AP can attract investment like the Gujarat. First, eliminate the political corruption. Bureaucratic corruption will automatically reduce.

Mr. Narayana of CPI:

Dedicated political leadership should form part and parcel of the perspective.

Outcome based budgeting needs to be introduced. Prioritization did not take place in Jalayagnam. Digging of canals is merely for the purpose of capturing votes.

Canals are dug far away from the actual project area with or without the prospect of linking up.

PPP should be with a human face. Bridging of the gap between the haves and the have not is necessary. Ecological balance is disturbed severely in Nellore district’s coastal area with the construction of 28,000 MW Power plants in just 20 SQKM of area.

Industries in coastal areas simply dumping waste in the sea. Fishermen who used to catch near the coast are now forced to go at-least 20 Km inside. Budget should guarantee the agricultural output and marketing. Health and education sectors should receive budgetary protection so that the Human Resources can be strengthened.

Outcome should be measured in terms of social development. Bureaucracy should act in accordance with the guidelines of the political parties. To realize this, political parties should be gutsy. To be gutsy, sincereity is paramount. Most of the present politicians are neither sincere nor gutsy. Over a lakh of crores of Rs. Are invested by Andhra Pradesh based and Telugu origin people in Gujarat.

Social accountability and punishment for failure should be enforced. Accountability should ensure the spending of the allocated money.

Y.Sujana Chaudary, PM of Telugu Desam Party:

What is the agenda here? Is it the Political Corruption or Budgetary issues? There are lots of shortages in the system. Variation analysis: viz : the allocated Vs. the actual is lacking. In spite of Windfall revenue from the Araku Valley projects, funds were not released for IIIT severely jeopardizing the admissions. AP ranks #15 in education among the large states with only Bihar lagging behind.

Attempt to plug the deficit through the Liquor based duties is counterproductive in health and investment aspects. Politicians should intervene only in special situations. Normative administration must be carried out by the bureaucrats. Much of it can be undertaken by the lower level officials. Farmers are only used as the vote bank and hardly any attempts are made to ensure sustainable income. No one knows how much and how properly the skill development is spent. Quality of education has gone down to a marked extent.

Will power is lacking in the Government and among the politicians. Finance Minister has no subject knowledge pertaining to the budget and economics. Blue print should be proper so that lower level officials can implement the projects. Urban congestion is increasing and decongestion needs to be encouraged. Targeting is poor while undertaking social welfare measures. Variation analysis should be outsourced.

Mr. Kamalakar Rao of the Indian National Congress:

50% of opposition party delegates’ opinions are empathized by Mr. Kamalakar Rao. Errors should be realized by the Government and rectified. Realization and rectification will take place. Internal democracy is strong in the party. Kamalakar Rao is needed by the party to prepare manifesto and action plans. Lot of lobbying and convincing is necessary to implement a scheme in the Congres Government unlike the parties based on the personality cult.

The society is pluralistic. All the stakeholders are important. Obtaining votes is even more important. The budget hence has degenerated as “Reactive” budget. Governments yields to the demands. Appropriate ways of demanding should be resorted to so that things can be get done.

Potturi. Venkateswararao: Senior Journalist

What does it mean by lower fiscal deficit? Government is understaffed. There is no money for proper maintenance of the Government machinery including the vehicles etc. Yet, a lesser fiscal deficit achieved and propagated.

Bureaucrats tend to present only about few sectors of the economy or one or two developmental schemes. But, the broader questions of farmers insolvency, suicides and the lack of “Trickle-Down” of the income are not focused. Why are farmers afraid of undertaking agriculture? AP people obsessed with Real Estate Management. Real industrial development is not taking place.

Are the Nationalized banks really disbursing 18% of deposits as agricultural loans? Is there a mechanism to monitor the mandatory commitments of the Banks? Permanent lecturers not re-employed while contract lecturers’ options are open. In many instances, contract lecturers are paid more than the permanent lecturers and in many instances far less.

Minister simply reads the speech prepared by the officers. State of health of the state is certainly not in a good shape. Almost the whole of the Excise revenue is going for loan repayment. In spite of tardy progress or lack of progress in irrigation works, contractors are paid money. Here is high potential for corruption. Irrigation canals mostly useless after the rainy season.

Dr. B.G. Shastry.

Indusive and conducive climate, efficiency in service delivery, Technical and Economic Efficiency are the key drivers of growth in manufacturing sector. Linkage between the positive intentions and actions is not concrete. Small and Medium industries are not attracting enough capital and skills.

Professor Ram Kumar Mishra:

Gujarat is not doctoring the figures. Gujarat is achieving real growth. AP was doing it in the past. But now, doctoring of the figures is a reality. Food inflation should be overcome to achieve real growth rate. Supply chain management will render justice to the producers and consumers while doing away with exorbitant profits for the middlemen.

The kind of PPAs agreed upon while agreeing upon the power projects is a matter of alarm. PPAs prove costly to the Government and to the consumers. The gestation period for the power projects is a matter of alarm. It is very long. CAG lists a variety of lost opportunities for AP. We should have utilized the “Super Critical Technologies” very long ago. Tax/GDP ratio should be compared to the income levels. Those countries with 15 to 30 or more times the income levels of India can afford to have a Tax/GDP ratio of over 20% yet leaving people with lots of disposable and savable incomes. IN India, about 11% is ideal for the time being. Presently, it is 9%. Professor Mishra recommends Power and Higher Education to be transferred to central Government. Mumbai Municipal Corporation has greater level of income than all the North-Eastern States put together and a couple more states.

Scandinavian countries are really interested in AP. Even Japan is interested provided proper plan is prepared and executed. AP should do well. Else, it will backfire on the Central Government. AP Politicians are playing with the sentiments of the people. Better economy, society, Consumption and Social basket are all necessary. People deserve them.

1 comment:

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