The Sindh budget

The Sindh budget unveiled by Murad Ali Shah, provincial finance minister, on June 12, 2015, seems to be a routine affair, barefoot of any major initiative to take bold revenue mobilisation measures and ensure equity in taxation. The similarity between the last two budgets for FY15 and FY16 is in fact so profound that overall deficit during the two years is also almost estimated to be the same. Total budget outlay for the financial year 2015-16 is estimated at Rs 739 billion while total receipts have been projected at Rs 727 billion, yielding a deficit of Rs 12.7 billion as against Rs 14.0 billion during FY15. As usual, receipts from Federal government on account of revenue assignment, straight transfers and grants are estimated at Rs 494 billion, constituting about 68 percent of the total receipts of the province as against Rs 474 billion last year. Receipts for provincial own resources on account of tax and non-tax receipts are expected at Rs 144 billion, showing an increase of 15.2 percent over last year's. Current expenditures of the province are projected at Rs 525 billion, which include current revenue expenditure of Rs 503 billion and current capital expenditures of Rs 22 billion. Development expenditure of the province is estimated at Rs 214 billion, including provincial ADB of Rs 162 billion, FPA of Rs 27 billion, federal PSDP of Rs 9.6 billion and development financing of Rs 15 billion through Viability Gap Fund.
Murad Ali Shah also spent a lot of time of his budget speech in ensuring the parliamentarians that the government was serious in infrastructure development and improving service delivery. According to the Finance Minister, province's budget is aimed at bringing relief in the shape of better education, health and municipal services and a more responsive police force. Priority sectors in the budget include education, health, infrastructure development, energy, Thar coal, road infrastructure, irrigation water and drainage, small dams, water and drainage, agriculture and justice and law courts. These sectors have been allocated more funds to improve their organisation and performance. As far as tax measures are concerned, rate of sales tax on services has been reduced from 15 percent to 14 percent, tax on telecommunication sector has been lowered from 19.5 percent to 18 percent and rate of programme producers is reduced from 10 percent to 6 percent. The tax net was, nonetheless, broadened by bringing into it travel agents, credit rating agencies, underwriters, indenters, commission agents, etc. Pays and allowances for provincial government employees have been raised by a higher margin of 10 percent compared to 7.5 percent allowed earlier by the Federal government. Performance of Sindh Revenue Board (SRB) was also appreciated in the budget speech to encourage its employees and expand its capacity-building programmes.
A detailed review of the budget document would reveal that the exercise was carried out mainly to highlight the importance of certain priority areas, without making a major effort to generate provincial resources and dealing with certain burning issues that are impeding the growth of the province and making the lives of ordinary people more miserable. A peculiar aspect of the Sindh budget continues to be lack of any effort to tax the agriculture sector, heavy reliance on the receipts under the National Finance Commission award and broaden the tax net only in the urban centres of the province. Understandably, this is due to the fact that a large number of parliamentarians from the rural areas are sitting in the assembly; but such a tendency is against the principle of equity in taxation and a cause of great frustration in the urban centres. As such, it was time for every province to impose a uniform tax rate on all incomes irrespective of their source of origin. As the new measures indicate, these could hit only businesses in Karachi and Hyderabad while big landlords owning palatial houses in cities and riding luxury cars would be spared the tax rod. Such a distorted policy would ultimately create a crisis situation in the urban centres which would be hard to control later on. Another distortion is the presentation of a deficit budget when provinces are expected to generate a surplus after the latest NFC Award and a clear commitment with the IMF. We fail to understand the logic of a deficit of over Rs 12.7 billion when provinces as shown in the Federal budget, are projected to generate a surplus of Rs 297 billion during FY16. Clearly, provinces are now expected to be more responsible and energetic in their fiscal management and generate a surplus when the Federal government itself is finding it hard to balance its books and avoid the accumulation of debt.
The Sindh Finance Minister has identified law and order situation as a priority area and earmarked more funds for the law enforcement agencies but, in our view, the funds allocated for the purpose and the emphasis laid down on the subject would not be enough to meet the challenge of growing lawlessness in the province, particularly in Karachi. Even if we ignore the observations of Major-General Bilal Akbar, DG Rangers, that Rs 230 billion are squandered through a variety of crimes in Karachi every year, the remarks are too serious to be ignored easily or taken lightly by the provincial government. Unfortunately, if the present situation continues, entrepreneurs in the city would feel more threatened and move to other destinations, causing a big blow to saving and investment and a major harm to overall business activity in the city. In fact, such a trend is already discernible for the last few years but no serious efforts have been made to reverse this trend and restore normalcy in Sindh's cities. Crumbling roads, vanishing water supplies and loss of the writ of the state tell a story of an uninterested elite living probably on another planet. We feel that it is time for the Peoples Party to rise to the occasion, eliminate corruption from its ranks and face the truth that if it fails to deliver, people of the province could have other options to raise their voice, and refine the budget process. This is especially so when the people of the province are contributing a great deal to the national exchequer and yearning for a better life. Routine budgets cannot meet the challenges of extraordinary times that are staring in our face. Ironically, however, a higher increase in salaries of government employees is a measure that would increase fiscal burden on the government and raise the cost of production in the private sector. It would have been better to follow the line of the federal government in this respect to contain public expenditures and promote harmony between the centre and the provinces.