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His please-all budget

July 24, 2008

South India’s first independent BJP government started off with a promise to replicate everything good the party’s regime in Gujarat has achieved. But Chief Minister B.S. Yeddyurappa’s Budget—his third and BJP’s first—comes as a disappointment. It has no bold reform initiatives of the kind the NDA reign piloted. Instead, it’s a bundle of freebies—a few reasonable, many unjustifiable. Sample: government employees will now retire at 60, not 58 as of now; farmers will not just get bank loans at 3 per cent rate of interest, but free supply of electricity, too; milk producers will get an incentive of Rs 2 per litre; so on and so forth.

Karnataka CM Yeddyurappa: Freebies galore, but no bold initiatives
Karnataka CM Yeddyurappa: Freebies galore, but no bold initiatives
Evidently, the Chief Minister has splurged tax payers’ money on some programmes—like Rs 25 crore for this year’s Kannada literary meet—that have no more than a sentimental value. That he has imposed no new levies is noteworthy, though there are modest measures to increase revenues from motor vehicles and liquor business. Overall, it’s an expenditure budget, with Yeddyurappa proposing to spend Rs 55,313 crore during 2008-09.

But can he manage this size of revenues to match his expenditure targets without upsetting fiscal deficit targets (Rs 7,029 crore projected for the year)? That looks unlikely; either the government will botch up on its promises or end up in deep red while trying to meet them. Karnataka is reeling under drought, consumers are grappling with unprecedented power cuts due to receding levels in hydel reservoirs, and runaway inflation and hard interest rates are no exception to Karnataka.

And the property market in Bangalore, which accounts for twothirds of the state’s revenue from stamp duty collections, is in deep slump. Yet, Yeddyurappa is projecting a rosy picture of close to Rs 32,000 crore collection in state taxes. Any slip-up in that, which looks certain, will turn many of the budget programmes upside down.

Take, for instance, the free power scheme for which the BJP regime has earmarked Rs 2,050 crore. It’s a million-dollar question as to how the government will meet this gargantuan commitment with limited funds at its disposal. Clearly, the finance department has relied on last year’s figures on the cost of power purchase. The reality is that costs have gone up steeply with rains failing and coal in short supply.

Some state utilities are either buying costly power from outside or have resorted to long hours of power shutdowns or both. When BT asked the Chief Minister how could he ensure free supply to farmers when the utilities could barely supply to paying consumers, he retorted: “Whatever we supply them, we will supply free of cost.”

In the please-all Budget, devised keeping in mind the possibilities of imminent Lok Sabha polls, there are a few bright spots here and there. The extensive focus and funds Bangalore’s creaking infrastructure has received, for example. The City of IT& BT (biotechnology) will get Rs 1,800 crore this year for fixing existing roads and laying new ones, providing drinking water to new areas, metro rail, etc. The best hope for Bangaloreans, then, is for the promised investment in this city to actually materialise.

K. R. Balasubramanyam


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