Broad National Interests and Concerns : Shared by CM KCR with Chairman 15th Finance Commission

Broad National Interests and Concerns

Shared by CM KCR with 

Chairman 15th Finance Commission

19-02-2019, Hyderabad

I will briefly share with you my concerns with regard to broad national interests, some of which may be outside the remit of the Finance Commission. The reason for sharing these concerns with you is that as an important and prominent Constitutional and expert body, you are better placed to flag these issues of national concern for the serious consideration of the Union Government. We are confident that your suggestions will have greater force in influencing the thinking of the Central Government. 

·       As a nation, we need to introspect where we stand in comparison to many contemporary nations. I feel that piecemeal and half- hearted measures taken so far will not suffice. We have to make a paradigm shift in our institutional structure and official business processing. Let me cite some examples.

·       India has 40 crore acres of arable land and 70,000 TMC of surface water is available. We can provide irrigation by traditional means alone to each acre of arable land with only 40,000 TMC of water in our country. By following efficient irrigation systems such as drip, sprinkler and piped irrigation, the task of universal irrigation could be achieved with much lesser quantity of water. Nature has provided us in a way, enough water that can meet the requirements of every acre of land.

·       Despite several programs and schemes taken in the past, the fact is that only 5.5 crore acres (14%) of agricultural land is under canal irrigation.  Several well-known factors namely, inter-State issues, legal hurdles, delays in land acquisition, rehabilitation and resettlement, poor project planning, and implementation are the main impediments for water sector projects.

·       Inter-State River Water Dispute Tribunals take decades to give their verdict. What a State can do with this kind of speed?

·       After the formation of Telangana in 2014, Government of India was requested to refer the matter of determining river water rights of newly formed State to the Tribunal under section 3 of Inter State River Water Disputes Act, 1956. Even after lapse of so many years, the matter has not been referred to the tribunal. This kind of apathy runs across the system and various sectors.

·       Can a country afford to waste its resources due to inefficient individuals, institutions and processes when the immediate need is to maximise growth. In order to neutralize perverse incentives of individual Tribunals, the proposal to set up a permanent River Water Dispute Tribunal is under consideration by the Government of India for quite some time but without any tangible progress.

·       If legal process is time consuming and insensitive to the national concerns, what about setting up an alternative dispute resolution mechanism for this purpose. The successive governments have failed to take any institutional initiative encouraging the States concerned to discuss the issues and come around to accept a mutually beneficial solution. In cases where such meditative and arbitration mechanism fail, one has to necessarily resort to legal recourse.

·       At our level, we have tried to cross various hurdles.  However, all of us have to join hands in this process.  Soon after formation of Telangana State, despite absence of any institutional mechanism, we have successfully resolved our differences in water sector with Maharashtra and Karnataka. Kaleshwaram project is the living example of such negotiated agreements in water sector.

·       Another issue that I would like to highlight is unlimited, unbridled and unending litigation. Can we find a way to prevent frivolous PILs?

·       There are countries that were poorer than us, but they have achieved remarkable growth by leveraging their economies to much greater extent.

·       China has consistently maintained a high growth rate from 1979 onwards with a very rapid growth from 1992 onwards continuously for more than 25 years. The GDP of China was less than that of India till 1971. Now it is 4 times of India’s GDP. Why could we not do it? China’s stellar economic growth in the past 4 decades can be attributed to the proactive and visionary approach of its Government.

·       East Asian Tigers like South Korea, Singapore and Taiwan and ASEAN countries like Malaysia, Indonesia, Thailand, Vietnam, Singapore, Philippines, etc., achieved miraculous growth. Japan rose from ashes to become a country with one of the highest per capita incomes in the world.

·       Can’t we leverage the wealth and inner strength of our country and its economy? What is stopping us? It is not an insurmountable problem, but it is a mindset issue. Country needs a new direction as 70 years have passed since independence and still, we are struggling for basic minimum needs. Significant chunk of our people are still Jobless and poor. Let us not talk of ‘Best practices’… Let us think of ‘Next practices’.

·       National agenda has to be changed and routine budgets year after year and usual methods and conventional thinking will not bring any big changes.

·       We have to get rid of poverty of thought and plan big instead of incremental thinking! Out of the box thinking is the need of the hour.

·       If we have to develop India, we have to empower the States. Time has come for reinventing India by setting a development-centric national agenda and move away from centralization.

·       India needs a new economic model that has States at the forefront. Growth of the States is the growth of country. At present, growth of the country is nothing but the growth of hardly 8 to 10 States in the country. Other States are much behind. If the country has to grow and achieve its potential each State has to grow duly leveraging its resources and potential.

·       States need to be given more space to prioritise issues at their level. Even in the subjects listed under the State List, there are numerous Centrally sponsored schemes.

·       Even during Sarkaria Commission discussions, States proposed for abolition of Concurrent List. States expressed the view that the Concurrent List has been operated by the Union in a monopolistic and unilateral manner as if it were a second Union List.

·       On the subjects listed in the Concurrent List, most of the laws are made by Parliament like criminal law, forests, bankruptcy, trade unions, welfare of labour, legal, medical and other professions, education, electricity, etc.

·       Even some of the subjects which were earlier in the State List like education, forests, weights and measures, protection of wild animals and birds and administration of justice, were also brought to Concurrent List by 42^nd Amendment Act of 1976, thus restricting the subjects of the States further.

·       Sarkaria Commission recommended that in cases of proposed legislation on a subject in the Concurrent List, prior consultations may be held with State governments individually and collectively in the Inter State Council.

·       There is a need for the Central government to introspect and justify huge institutional structures.  Agriculture, education, health, urban development, rural development, housing, drinking water, sanitation, and women and child welfare are subjects which are best left to be handled by State governments.

·       Despite pruning several schemes, there are still large number of Central sector and Centrally sponsored schemes and sub- schemes in subjects that should entirely be handled by States as per local priorities.

·       Though there is a provision of devolution of 42 % of the Tax Revenue (GTR) of the Union, in actual terms, this has never been achieved. The devolved share has been only around a third of GTR. This is mainly due to significant percentage of cesses in the GTR, which are outside the divisible pool.

·       India needs economic reforms to improve Ease of Doing Business, attract foreign investments, and resolve issues that hinder growth. For example, removing bottlenecks by improving container handling capacity and turn-around time at ports, improving average speed on National Highways and freight traffic on rail, reducing time to get customs clearance, etc., will improve business environment (In India average speed on highways is 50 Kms per hour compared to 80 Kms per hour in Japan and South Korea and 95 to 115 in the U.K. and the USA. In India, rail freight traffic moves at 24 km per hour whereas in countries like the USA, Japan and Australia, it is 80 Km per hour).

·       Our infrastructure status is far from satisfactory. If we have to grow faster, we need to improve our infrastructure significantly by spending at least 3- 4 % of GDP every year additionally in our infrastructure sector. (China had leveraged the credit from public sector banks to fund infrastructure. Many countries have more debt than their GDP: USA 105%, Japan 250% and Singapore 112%).

·       To achieve this, we need structural reforms for higher FDI inflows. These include developing SEZs like China, stable tax regime and no retrospective changes in laws.

·       We also need to bring out an attractive and practical tax amnesty scheme for bringing black money to the country and to invest it in infrastructure.

·       Amnesty scheme brought out in Indonesia in 2016-17 resulted in a disclosure of US $ 366 billion (Rs.24,00,000 crore). In another amnesty scheme in Italy in 2009, people declared US $ 137 billion (Rs.9,79,550 crore).

·       Every Indian should be a proud tax payer and partner in nation building. He may voluntarily pay even if it is just 1 Rupee.

Agriculture

·       The profitability and productivity in agriculture is low. There is a huge gap between farmers’ and consumers’ price.  Farmers do not get enough income to take care of their families.

·       Investment Support of Rs.10,000/- per acre (@Rs.5,000/- per crop per season for both Kharif and Rabi) as in Telangana will be a step in the right direction to address the distress in the sector.

·       Increase MSP by Rs.500/- or 1/3^rd more of existing MSP. Thereafter the MSP should be increased every year by linking it to the price index as in case of employees’ dearness allowance.

·       Based on agro-climatic advantage of each area, there should be area-wise crop colonies to grow specific crops.

·       Connect MNREGA with agriculture sector to enable 50 % of labour payment from NREGS to increase profitability.

Drinking water

·       Our government has shown that drinking water can be taken to each and every household through Mission Bhagiratha project.

·       We should target to supply water to every village in the country within 5 to 6 years. It may cost about Rs 8 to 10 lakh crore.

I am very confident that making the States fiscally stronger and thereby enabling them to tap the immense growth potential that the country is bestowed with will make our country stand out as a strong and vibrant nation in the world.