There is an increasing realisation by the state governments of the importance of non-tax revenue in the context of fiscal deficits and the heavy financial requirements for upgrading infrastructure, say Mahesh C. Purohit and Vishnu Kanta Purohit in ‘Non-Tax Sources in India’ ( >www.gayatri-publications.com ). “Non-tax revenues ensure that the sources of revenue to the State exchequer are broad-based and buoyant. Unlike tax revenues, in the case of non-tax revenues, the agencies of the Government first provide a service and then collect the user charges.”
While the growth of own non-tax revenue (ONTR) of the States has been at the rate of 7.9 per cent over the period 1994-2004, the share in aggregate receipts has declined from 11.6 per cent to 2.9 per cent. The States collect an appallingly low level of user charges, and that adversely impacts appropriate cost recovery, the authors rue.
They concede, however, that fixation of user charges for non-tax sources is a complex issue. “While rational user charges can generate means to achieve a greater growth rate, an irrational structure can cause adverse economic effects which invalidate growth objectives. Therefore, it is important to keep the objectives of equity, consumer acceptability, administrative feasibility, environmental issues, etc. in view while fixing the user charges.”
Studying the revenue realised (RR) and revenue expenditure (RE) for ten services – viz. public works; education, sports, arts and culture; medical, public health and family welfare; water supply and sanitation; forestry and wild life; major and medium irrigation; minor irrigation; industries; mines and minerals; and roads and bridges – the authors find that RR/RE has risen only for two services in all the major States, ‘education, sports, arts and culture’ and ‘roads and bridges.’
They recommend the estimation of a desired ‘RR/RE’ for each service at the State level, using the regression technique, and then comparing the actual ratio with the all-States data. “The difference between the all-States’ rate of recovery for each select service (taken as the norm) and the actual RR/RE of that particular service in each of the States will indicate the rate by which a State needs to make an effort to achieve that desired level.”
The book concludes with a list of policy imperatives for select services with a view to mobilise additional resources for plan development. For instance, in the area of medical and public health, there is a suggestion that insurance status be used as an indicator of those people who can afford the medical care, so that full cost can be charged from insured persons.
On royalty revenues, which are an important source for the mineral-producing States, the authors observe that when the rates of royalty remain unchanged for a long time, the real value of royalty declines significantly due to rising inflation. Also, they urge that royalty rates be based on sale price rather than quantity.
A study of the type covered by the book has its own difficulties; and the intro highlights some of these. For instance, comparability of data across the States is tough owing to divergent practices.
It is possible to alter the legal scope of Governmental activities and thereby, the scope of non-tax revenue, without in anyway modifying the underlying economic reality, find the Purohits. “For example, it is possible to transfer a departmental undertaking (e.g. Milk Scheme run by the Government) as a public sector organisation, which subsequently affects the flow of non-tax revenue of the Government.” Another example is about how the Punjab Roadways run by the department is a part of the governmental non-tax sources while the PEPSU Road Transport Corporation (a non-departmental organisation) is not a part of the non-tax sources.
It may not be common knowledge either that not all receipts by the Government get accounted for in its consolidated fund. “For example, in education, although the students pay a variety of fees, only the tuition fees are credited to the treasury.”
Similarly, in medical and public health, the authors find that in some States the user charges paid by outpatients are not put into the consolidated fund. “In Rajasthan this is credited to the welfare of the hospital staff, and in Tamil Nadu it is considered to be a part of the maintenance expenditure of the hospital.”
Recommended read.
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