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The detailed Budget documents for 2009-10 contain a number of interesting details that do not find a mention in the main text of the speech. However, they present important items of the financial system which deserve to be looked into. One of these is the expenditure on pay and allowances of babudom, especially in the light of the Pay Commission awards.

Contrary to common perception, the Budget is not overly dominated by pay and allowances of Government staff. Lay analysts and the public wrongly blame the Pay Commission and bureaucracy for all of India’s ills. It is worthwhile looking at the details of how much the Centre spends on pay and allowances of Government servants in relation to the total expenditure of the Budget, which as Mr Pranab Mukherjee points out, is about Rs 10 lakh crore.

An Annexure (Annexure VI) to the expenditure budget details the number of employees under each department and the estimated provisions for pay and allowances for various years. The total number of civil servants according to this statement comes to 33,63,754. Their provision for pay and allowances for 2009-10 are Rs 56,074 crore and Rs 29,004 crore, respectively, amounting to a total of Rs 85,078 crore.

Obviously, the establishment costs of the Government cannot account for the fiscal deficit. The total expenditure of Government for 2009-10 is nearly Rs 10 lakh crore. The fiscal deficit is estimated at Rs 400,996 crore, which is more than four-and-a-half times the salary expenditure estimated for the year.

The disaggregated picture is more revealing. Take, for instance, the pay and allowances of staff employed in the Revenue Department. These are estimated to total Rs 4,332 crore and the number of employees is 1,38,370. Compare this with the total tax collected. The total expenditure on the Revenue Department staff is a small proportion of the gross tax revenue of Rs 6,41,029 crore. It is obvious that the total expenditure incurred cannot be regarded as extravagant.

The expenditure on the police force is high in relation to other departments. But even this has been shown to be inadequate in handling threats to internal security and considering the demands on Central police forces. Witness for instance, increasing demands for Central security forces coming from Jharkhand, Bihar, Orissa and West Bengal.

The expenditure on police in the Central establishment is only Rs 18,000 crore. Attempts at enforcing economy in expenditure on Central police forces may be totally misconceived in relation to the perceived threat to internal security, especially arising from militancy in various States.

The Department of Railways is on a separate footing, in the sense that it is generating surpluses in recent years. In fact, its surplus has generated interest in many advanced management institutes, including Harvard.

The number of people employed in the Railways is estimated at 13,98,139 and the total expenditure on pay and allowances comes to Rs 35,890 crore. Considering the stellar performance of the Railways, this cannot be considered an extravagant provision.

The real villain in the Budget for 2009-10 is perhaps the Bill on subsidies. A separate statement included in the Budget estimates shows a total subsidy Bill of roughly Rs 1,11,276 crore. The bulk of this is subsidies on food, estimated at Rs. 52,490 crore. Fertiliser subsidies are projected at Rs 15,728 crore: of this urea (domestic) is Rs 9,780 crore and urea (imported) Rs 5,948 crore.

There is also an item on sale of controlled fertilisers at concessional prices to the farmers, accounting for Rs 49,980 crore. In the total subsidies figure, the petroleum subsidy included is only Rs 3,109 crore. The statement obviously excludes the off-Budget subsidies forced on oil marketing companies.

An interesting analysis has been presented in the Budget on the contribution of public enterprises to the Plan. In the statement, Annexure XIV, the distribution of resources of public enterprises is spelt out. Of the total Plan of Rs 2,08,081 crore to public enterprises, their internal resources themselves contribute Rs 98,526 crore.

The statement also shows that public enterprises raise through bonds a significant sum of money, amounting to Rs 46,525 crore. Thus, basically the public enterprises are supported by internal resources and funds raised from the market.

The Table illustrates the kind of resources that are available for the country’s public sector undertakings. The enterprises included are illustrative and demonstrate the tremendous potential of the public sector, if properly run.

Whether divestment of these enterprises will be worthwhile in terms of a proper multiple of capital received is a matter the Divestment Ministry and the Finance Ministry have to consider, before deciding the procedure for bidding and allotment to successful bidders.

While a number of public enterprises are generating enough internal resources to cover their costs, the per capita emoluments of employees points to a problem.

The Economic Survey, on page A-53, compares the increase in the per capita emoluments of public sector employees in India with the increase in the consumer price index over the years.

The statement shows that the per capita income of public sector employees from 1971-72 to 2007-08 increased by 58 times compared to a CPI increase of 30 times. This shows the increase in the per capita emoluments has been much more than what can be explained by CPI increases alone.

This is perhaps the main problem that undertakings like such as Air India face. There are obviously certain imbalances in the public sector that need to be addressed.

More Stories on : Economy | Budget | Human Resources | S Venkitaramanan

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