Government of Punjab

Department of Finance 

PRESS NOTE 

Subject: Punjab Budget 2006-07. 

Fiscal Trends & Economy: 

            This is the fifth consecutive Budget of the Congress Government, led by Capt. Amarinder Singh.  The vision spelt out in the last year’s budget was translated into a number of initiatives This budget reflects our continuing commitment to the goals spelt out in the earlier budgets and, at the same time, includes new initiatives to respond to the felt needs of the people.  Through prudent fiscal policies and financial discipline, our Government has been able to pull the State out of the financial morass that it was in when it assumed office.

         This is evident from the following major fiscal indicators:-

                                                   (Rs. in crore)

     

      Fiscal deficit, which was 6.99% of GSDP in 2001-02 is likely to come down to 3.28 percent in 2006-07. Committed expenditure on salaries, pensions and interest payments is estimated to decrease from 118.24 percent of revenue receipts in 2001-02 to 73.91 percent in 2006-07. The revenue deficit, which was Rs.3781 crore in 2001-02 is expected to decrease to Rs.1390 crore in 2006-07. Continuing on the path of fiscal consolidation, State Government is hopeful of achieving revenue balance by 2008-09. 

      Capital expenditure which was Rs. 682 crore in 2004-05 is likely to increase to Rs. 1980 crore in 2005-06 and Rs. 2376 crore in   2006-07.

      The State’s economy is picking up and the rate of growth is now 5.5 percent per annum whereas in 2001-02 it was only 2 percent.   

Development Highlights:

      We have, now, launched a credible development effort, after a gap of many years. 

      The bold initiatives taken by the Government are:

• Clearance of a record level of private investment, amounting to about Rs. 56,000 crore, in various industrial and housing projects.  Out of this, investment to the tune of Rs. 4,000 crore has already materialized.
• State’s tax revenue is likely to increase from Rs. 6945 crore in 2004-05 to Rs. 8608 crore in 2005-06 and further to Rs. 9811 crore in 2006-07. 
• Punjab was adjudged the best administered state in India by an independent survey conducted by a reputed publishing house. 
• Several important IT companies have set up their units in Punjab, including one of the world’s largest computer manufacturers, and two of India’s largest software companies.
• Historically, our share of foreign direct investment has been very low, amounting to less than 1% of the FDI flowing into India. This is changing quickly, and Punjab is now being recognised as a most favoured investment destination.
• State Government’s policies towards diversification of agriculture into high value-added produce and larger investment into research and development, marketing, processing and transportation have imparted a new impetus to agriculture.

 

State Finance Commission:

      The Third State Finance Commission has submitted its Interim Report, containing recommendations for devolution for the year 2006-07. With the implementation of the recommendations of the Commission, funds to the tune of Rs.496 crore will to be transferred to the Panchayati Raj Institutions and Urban Local Bodies during the year 2006-07. Out of this, the share of Panchayati Raj Institutions is Rs.308.03 crore and that of Municipalities is Rs.187.97 crore. Together with grants of Rs.99 crore, recommended by the Twelfth Finance Commission, which include Rs.64.80 crore for Panchayati Raj Institutions and Rs.34.20 crore for Urban Local Bodies; a total sum of Rs.595 crore will flow to the rural and urban local bodies in 2006-07. This is the highest level of devolution ever provided.   

Annual Plan 2005-06 performance:

      Plan performance during the current financial year has substantially improved over that of the last year.  An expenditure of Rs. 2116 crore, against a plan provision of Rs.3557.86 crore has already been incurred (59.46%) as on 31.12.2005, as compared to an expenditure of Rs. 1183 crore during 2004-05.

Annual Plan 2006-07

      The size of the Annual Plan 2006-07 has been fixed at Rs. 4,000 crore against the revised outlay of Rs. 3557.87 crore for the year 2005-06 this indicates an increase of 12.42%. 

Agriculture:

       On the recommendations of the Punjab State Farmers Commission, the Government will implement an Agriculture Renewal Programme for small farmers with holdings up to 4 hectares of land.  Such farmers constitute about 65 percent of agriculturists and cultivate about 30 percent of the agricultural land in the State. 
 
 

      State Government has launched a set of programs to increase productivity in agriculture and conserve soil & water resources, which include:

• A provision of 35.56 crore in the Annual Plan 2006-07 for the development and promotion of agriculture against an approved outlay of Rs.33.68 crore during 2005-06. For ‘Agriculture Diversification Research and Development Fund’, an amount of Rs.10 crore was released during the current financial year. 
• A grant of Rs.100 crore sanctioned by the Government of India to the Punjab Agricultural University, Ludhiana, in acknowledgment of its pioneering contribution to the green revolution. 
• A provision of Rs.24 crore under the ‘Agriculture Production Pattern Adjustment Programme’ for productivity and growth.  This programme will be implemented at an estimated cost of about Rs. 96 crore during the next 4 years. 
• An outlay of Rs.4.36 crore for the development of horticulture in the State in addition to the grants being received from the Government of India under the National Horticulture Mission.
• Contract farming, which has enabled farmers to diversify into non-traditional crops.  Such arrangements now cover 340,000 hectares and the target for the next year is 500,000 hectares. 
• Facilitation of large corporates to invest in agro-based projects.  ITC, Reliance & Bharti Groups have decided to invest over Rs.300 crore in agriculture production, processing and marketing in Punjab.
• Sugarcane arrears: It will be ensured that cane growers’ outstanding dues to the tune of Rs. 36.30 crore will be cleared by 31^st March, 2006.
• We propose to set up 6 rural business hubs in Punjab in collaboration with Industrial Associations, Financial Institutions and Panchayats, and expand to 30 hubs in 3 years. These hubs will provide access to information, finance and high quality training for rural farmers, entrepreneurs and artisans to improve their prospects and to assist them in self-employment ventures.

 

Irrigation:

      A provision of Rs.292.24 crore has been made in the Annual Plan 2006-07 against an approved outlay of Rs.221.76 crore for the financial year 2005-06.  Major works in this sector are:

• Extension of Phase-II of Kandi Kanal from Hoshiarpur to Balachaur -Rs.34 crore.
• Construction of Shahpur Kandi Dam – Rs.50 crore.
• Tubewells and other schemes for deep tubewells in Kandi area –Rs.32.70 crore.
• Converting Banur Canal from non perennial to perennial  -Rs.5 crore.
• Construction of fields channels  - Rs.23.00 crore

Rural Development:

• We have taken an important policy decision to hand over the management of primary schools and dispensaries in rural areas to Panchayati Raj Institutions and Urban Local Bodies. We shall begin by handing over nearly 4,000 primary schools and all 1,310 rural dispensaries.  PRI’s will recruit about 12,000 teachers on regular basis at full wages.
• Village Development Fund has been operationalised to provide low-cost sewerage facilities in 1692 villages at a total cost of Rs. 680 crore, out of which 10% will be contributed by Panchayats and 90% will come from VDF.  We hope to cover the remaining 10,800 villages in Punjab in the next 5 years. 
• Handing over the management of about 450 rural veterinary dispensaries to Panchayati Raj Institutions, along with funds for operating them.
• Gram Panchayats are the basic unit of self-Government in villages. Sarpanches play a vital role in their proper functioning.  With the devolution of more functions to Gram Panchayats, the responsibilities and duties of Sarpanches have increased. Recognizing the services of Sarpanches and other functionaries in the village, I am pleased to announce:-

1. An honorarium of Rs. 600/- per month to each Sarpanch.
2. An increase in the honorarium of Village Chowkidar  from Rs. 200/- per month to Rs. 400/- per month.
3. A grant of Rs. 300/- per month to each Panchayat for cleanliness and sanitation of the village.

Urban Development: 

      The Government plans to provide infrastructural facilities needed for the fast increasing urban population with the following proposals:

• PUDA will contribute Rs. 50 crore towards development of Mohali as super economic corridor.
• Municipal Development Fund for water supply & sewerage projects totaling Rs. 458 crore has become operative.  Water supply projects in 122 towns of Punjab and sewerage projects in 39 towns have been taken up.  The State will achieve 100% coverage of safe drinking water for its urban population during 2006-07.
• Rs.135.00 crore to be spent under the ‘Jawahar Lal Nehru National Urban Renewal Mission’ for the integrated development of Amritsar and Ludhiana cities. 
• Rs.8.00 crore  for the implementation of ‘Sri Guru Ram Dass Development Project at Amritsar’.
• Rs.10.00 crore for ‘Prevention of Pollution on River Satluj’ with participation of PIDB.
• Rs.31 crore for the development of Patiala city as a counter magnet to the National Capital Region.
• Rs.20.00 crore for the implementation of Integrated Development of Urban infrastructure in Bathinda City.  
• Rs.34.20 crore for giving grant-in-aid to Urban Local Bodies, as per recommendations of TFC, for maintenance of civic services in the urban areas. 
• In addition to the Municipal Development Fund, an outlay of Rs. 522.16 crore have been provided for development of urban areas.

 

Civil Aviation:

       Government of India have approved, in principle, the setting up of an international Civil Air Port at Halwara in district Ludhiana, catering both to passengers and cargo.    

Industry:

• The State Government has decided to raise bonds through PSIDC for the payment of Rs. 480 crore backlog of industrial subsidy in 3 to 4 years time. 
• Textile Policy will be announced in April, 2006.
• Octroi will be abolished in consultation with urban local bodies.
• Extension of time for recovery of interest-free loans will be granted.
• A policy for large manufacturing units with investment of over Rs. 1,000 crore will be announced.

 

Education:

 An outlay of Rs.240.96 crore has been provided for this sector in the Annual Plan 2006-07, against the outlay of Rs.177.51 crore during 2005-06. The major projects under this sector are:

• Sarv Shiksha Abhiyan (Rs.260.00 crore, including share of Govt. of India).
• “ICT (Information and Communication Technology) in Schools” has been implemented in 1,306 schools this year, another 1,306 schools will start this program in April 2006 and the remaining 2,050 schools will be covered by July 2006, thereby achieving full coverage of ICT in all 4,662 upper primary Schools in Punjab.  An outlay of Rs. 77.34 crore is proposed for the next year for this purpose.
• The Mid-day Meal program has been successfully launched and is proposed to be extended to all government schools next year. The allocation of Rs 13.1 crore this year is proposed to be enhanced to Rs 34 crore in 2006-07 to fully meet the requirements of this program.
• For the Indian Institute of Science Education & Research in Punjab, announced by Hon’ble President of India in his address to the Parliament, a token provision of Rs. 5.00 crore has been made in the Annual Plan 2006-07.
• It is proposed to set up ‘Rajiv Gandhi National University of Law’ in Punjab during 2006-07, for which a token provision of Rs. 5.00 crore has been made in the Annual Plan 2006-07. 
• An amount of Rs.2.00 crore was released to the Punjabi University, Patiala for the setting up of World Punjabi Centre at Patiala during the current financial year.  An amount of Rs. 3.00 crore has been provided in the Annual Plan 2006-07 for the construction of building of this centre.

 

Health:

 It has been decided that, all the 1,310 rural dispensaries will be handed over to Panchayati Raj Institutions, who will be provided funds at the rate of Rs 3.60 lac per dispensary per annum to engage service providers. A sum of Rs 48 crore is proposed to be devolved to Zila Parishads for this purpose in 2006-07.  

      The following important initiatives will be launched to ensure comprehensive health care to citizens through a network of Public Sector Health Institutions:-

• The National Rural Health Mission was launched by the Honourable Prime Minister on April 12^th, 2005, with an allocation of Rs 75.02 crore for Punjab. The objective of this Mission is to ensure effective, affordable and quality health care for rural people. The State Government has implemented all components of this Mission including the Reproductive and Child Health Care Program Phase 2, the Special Immunization Program and the upgradation of infrastructure. 
• A new Civil Hospital at Nangal (Rs.1.00 crore) and a Super Speciality Mother & Child Health Care Hospital (Rs.7.60 crore) at Fatehgarh Sahib in the memory of Sahibzada Zorawar Singh and Fateh Singh are being set up.
• Rs.22 crore has been provided for the expansion and improvement of three Medical and Dental Colleges in the State, which will be made autonomous by reconstituting them as societies. 
• Grant-in-aid to Baba Farid University of Health Sciences will be provided for infrastructure.
• Education Commission will be set up to recommend improvements in education at all levels.

 

Welfare of Scheduled Castes & Backward Classes:

      For 2006-07, the allocation under the special component plan has been increased from Rs. 934.62 crore (in Revised Estimates 2005-06) to Rs. 1154.00 crore, indicating an increase of 23.5 percent. An amount of Rs.65.65 crore has been provided in the Annual Plan 2006-07 exclusively for the welfare of SCs and BCs in the State.  This outlay includes:

• Rs. 20 crore for the grant of attendance scholarships to scheduled caste primary girl students. 
• Rs.35 crore under the scheme ‘Aashirwad to scheduled castes/Christian girls, daughters of the Widows’ at the time of their marriage.  The grant under this scheme has been enhanced to Rs.15000/- from Rs. 6100/-.  

 

Social Welfare:

 To help the aged, it has been decided to increase the amount of old age pension by 25% from Rs.200/- to Rs.250/- per month.  The State Govt. will open 2691 new Anganwadi Centres under the Integrated Child Development Scheme.    
 
 
 

Relief and Rehabilitation

      The Government of India has announced a Rehabilitation Package for the victims of 1984 riots, many of whom had migrated from other States to Punjab.  This  Package announced in January 2006 will benefit about 23,000 families in Punjab.

      Punjab Government has already initiated steps to implement the Package, with an allocation of Rs. 450 crore for this purpose.   

Defence Services Welfare:

 Three important decisions taken by our Government are:

• Enhancement in award money to gallantry award recipients in lieu of land / stipend / pension;
• Exemption from VAT for all CSD items; and
• Free treatment of ex-servicemen at State Government hospitals.

 

      In addition:

• Rs. 7.25 crore released during the current financial year to provide for the grant of Rs. 5 lac each for the purchase of plot/houses for the widows of Martyrs and 75% to 100% disabled soldiers during the different operations from 1999 onwards.  Rs. 7.00 crore has been provided in the Annual Plan 2006-07.
• The Govt. of India has been requested to set up a National Defence University in the State.

Infrastructure:

        We expect an investment of about Rs. 2,500 crore through public private partnership in the next two years.  The major projects through public-private participation already awarded by the Government are:

• 11 road corridors measuring about 600 km on BOT basis.

 

 Other important infrastructure projects undertaken by the Government are:-

• The Bus Stands at Jalandhar and Ludhiana have been awarded on BOT basis and their construction has begun.  
• 9 ITIs have been made operational by private parties who have taken over the management on a 30-year lease basis.
• 3 incomplete polytechnics are being awarded on the same pattern as ITIs.
• 3 State roads, 2 road over-bridges, the prestigious Ludhiana ring road and Mohali bye pass projects are being processed for public-private participation.  

 

Roads & Bridges

• Rs.176.24 crore under the ‘NABARD assisted project for construction and widening of roads and construction of bridges’.
• Rs. 100 crore for an ambitious ‘World Bank Project for Road Infrastructure’.
• Road Maintenance Fund has been set up with an outlay of Rs.216 crore per annum.
• 21 Road over bridges on railway lines will be constructed, and 2 under bridges at Mansa & Maur.

 

Road Transport:

       The State Govt. will launch a Public Transport Reform Programme   with three important features.

• First, the Punjab Roadways and PRTC will be strengthened and modernized with new buses of better quality. Modern inventory management, purchase and workshop systems, and improved human resources management will be introduced. With these measures, the Punjab Roadways is expected to reduce its losses and break even in 4 years.
• Second, the policy regarding identification, allotment and renewal of private sector bus routes will be rationalised to make it more transparent.
• Third, the major cities of Punjab namely, Amritsar, Jalandhar, Ludhiana and Patiala will be provided with high-quality urban bus services with public- private participation.

 

      Rs.20 crore for constructing bus stands at sub-divisional level towns with a contribution from the Punjab Infrastructure Development Board.   

Punjab Nirman Programme:

       The Government has launched the ambitious Punjab Nirman Program within an allocation of Rs. 500 crore. Out of this, Rs. 100 crore has been disbursed this year and Rs. 400 crore is proposed in the annual plan next year.  The scope of the Program includes all major types of rural and urban infrastructure.

      Out of the total outlay of Rs. 500 crore, a sum of Rs. 100 crore will be spent on State-level initiatives.  The balance Rs. 400 crore shall devolve to rural areas (Rs. 264.32 crore) and urban areas (Rs. 135.68 crore).

Taxation

      The introduction of VAT has been the biggest tax reform in India since independence.  We   shall continue to   address problems brought up by tax payers from time to time. In this regard, the following measures are being taken:-

• A separate audit required under VAT will be abolished where a dealer is already subject to income tax audit and his turnover certified by qualified auditors. 
• Pre-owned cars shall be taxed at 4% without entitlement of Input Tax Credit.
• For exporters, Duty Entitlement Pass Book (DEPB) and Duty Free Replenishment Certificate (DFRC) will be placed in Schedule ‘A’  i.e. items attracting ‘Zero’ rate of  VAT.
• Lump sum VAT shall be introduced for brick-kilns.

 

Annual Financial Statement

      The summary of the Annual Financial Statement according to the Budget Estimates 2006-2007 is as under: -

      Consolidated Fund     (Rs. in crore)

1. Revenue Account-

Receipts     20040.13 

Expenditure     21429.76

Net             (-)  1389.63

2. Capital Expenditure-    2376.45

 

3. Public Debt-     

  Debt incurred     5511.55

  Payments     1847.99

  Net      3663.56

4. Loans and Advances-

  Advances         52.12

  Recoveries        241.90

  Net         189.78

5. Total Consolidated Fund (Net)-  

(No. 1 to 4 above)    (+) 87.26

6. Public Account (Net)-   

(GPF, GIS, Calamity Relief Fund,   (+)309.68

Civil Deposits etc.) 

7. Total Transaction (5+6)-    (+)396.94
8. Opening Balance-            (+)1688.61
9. Closing Balance-             (+)2085.55

      The deficit on revenue account is estimated at Rs. 1390 crore for the year 2006-07, as against Rs. 1710 crore in 2005-06 (Revised Estimates) and Rs. 3391 crore in 2004-05.  We are committed to a fiscal reform path which will enable us to achieve a positive revenue balance in the next few years.  

 

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