Subsidy made state one of worst performers

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Old 09-Oct-2010
Subsidy made state one of worst performers

Bathinda October 9:

The subsidy-driven development model of Punjab is one of the reasons why state is the worst performer in the country on economic equality front measured through Gini co-efficient. Not only this, revenue collection is the lowest in the country at 6.86% as against a national average of 10-12%.

Subsidy is going to only the rich with peasants being pushed out of agriculture. It has come to focus as its reduction is one of the conditions of Centre's debt bailout package being touted about by finance minsiter Manpreet Badal and being opposed by deputy chief minister Sukhbir Badal.

''Until political leaders shun practice of unfurling fancy ideas just to win votes and not adopt subsidy rationalization policy, there is no way out to escape crisis,'' said Dr Lakhwinder Singh, a special invite to 13th Finance Commission of India. Punjab is a state where tax evasion is perhaps the highest in the country and inequality of distribution between rich and poor in rural area is at very high level, so while arguing on tax collection and discussing subsidy, the state need to adopt a tax and subsidy rationalization policy, he added.

Against 10-12% revenue collection from state domestic products in most of the states in India, it is just 6.86% in Punjab due to rampant tax evasion and waiving off many taxes like octroi, house and property taxes. If Punjab increase it revenue collection to 10%, it will generate Rs 4,440 crore extra per annum and if the collection rises to 12%, it will generate additional income of Rs 7,400 crore.

Political parties are offering free power, water and even a poor tax regime just to keep the powerful happy. But most of the subsidies are being cornered by rich landlords and big farmers and a small portion goes to small and marginal farmers, said Sukhpal Singh, a senior economist in Punjab Agricultural University, Ludhiana.

While most of the power connections are with big farmers and only they could afford to spend up to Rs 2 lakh on submersible pumps to draw water from deep borewells and they are beneficiaries of free power. The small farmers have no power connections, no tubewells. So most of the farmers who committed suicide in Punjab were small farmers.

Agriculture is not viable without subsidy, but subsidy providing system is wrong in Punjab. While maximum of it should go to small farmers, but it is the big ones, said Kesar Singh Banghoo, head of economics department in Punjabi University, Regional Centre in Bathinda.

Government waived octroi, a tax, without any logical reason. Besides losing big revenue, the waiving of octroi tax helped in proliferation of tax evasion in the state. As octroi was helpful in keeping a track on the entry of taxable commodities in a town and the tax evasion was easily detectable but now there is no record of the commodities entering a town, said Banghoo.

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