MQM’s Rs668bn shadow budget focuses on uplift

Karachi
The Muttahida Qaumi Movement presented a shadow Sindh budget for the fiscal year 2015-16 with an outlay of Rs668 billion to the provincial government on Saturday that focuses on reducing non-developmental expenditures so that more funds could be spent on education and health sectors as well as improving the law and order situation.
The budget also proposes empowering the province to collect sales tax and transferring the provincial government’s resources to the districts.
Presenting the budget at a press conference at the Sindh Assembly building, MQM parliamentary leader Syed Sardar Ahmad demanded that provincial government should transfer 57 percent of its funds to the districts so that they could be used on development projects.
He said the shadow budget has been prepared considering that the province would generate revenues worth Rs150 billion in the next fiscal year and also receive Rs480 billion from the Centre.
Speaking on the occasion, Khawaja Izhar-ul-Hassan, the opposition leader in the provincial assembly, said the government budget was usually a jugglery of digits and statistics. “Even in the outgoing financial year, the funds allocated for fresh appointments were spent on ghost employees,” he added.
He said in its shadow budget, the MQM has made recommendations for improving the law and order situation and also proposed chalking out a health insurance policy for government employees.
According to the MQM shadow budget’s copies handed over to reporters, the proposals contain conceptual approaches for addressing issue of human rights, entitlements, political accountability and citizens’ participation (in a participatory democracy) in relation to the budget process.
The budget carries the following proposals:
Self reliance
The province relies heavily on the federal transfers - assignments, straight transfers, grants and project assistance. Against the total outlay of the 2014-15 budget of Rs.765,118 million, the province’s own estimated revenues amounted to Rs125,060 million but the tax collectors could collect only Rs72,331 million over a period of nine months.
Even out of this paltry collection, only two taxes - sale tax on services (Rs33,959 million) - and infrastructure cess (Rs17,047 million) constituted 70.8 percent of the total provincial own receipts.
Hence it is high time to explore more avenues for collection of taxes non-taxes and other fees etc from within the province.

Skilled functionaries
Billions of rupees under current revenue and capital development are spent but its proportionate benefits are not enjoyed by those millions who pay taxes out of their hard earned incomes. Lack of expertise in fiscal management, economic planning, designing of projects/schemes and their execution remain conspicuous more at the secondary and tertiary level. During the last decade government spent Rs526,855 million on development schemes under the annual development programme alone, but it has failed to alleviate poverty or create opportunities for the people to improve their quality of life. Skill development, in-house training and direct recruitment of skilled candidates from the private sector are needed to ensure that every penny goes to benefit the disadvantaged.
Province and districts
It was suggested in our last year’s budget proposals and is again reiterated this year that the province retains funds not more than what are vertically transferred on the formula adopted by the NFC to the provinces under the 7th NFC Award.
Since the federation is transferring 57.5 percent (raised from 56 percent) of the net proceeds of the divisible pool to the provinces and retains 42.5 percent on the same analogy, the province needs to retain 42.5 percent out of the transfers made by the federation and transfer 57.5 percent to the districts/local governments.
The vertical and horizontal formula, multiple-criteria based, in vogue of course is expected to be maintained between the provincial and districts/ local governments till its is altered under the 8th NFC Award.

Revision of expenditures
Traditionally, we are following the calf path for the last 68 years. The consolidated fund expenditure broadly contains three heads - current revenue expenditure, capital expenditure and development expenditure. There are several challenges including the growth of unemployment and unabated rise in the prices of food items and fuel the greatest need of the time is to alleviate poverty. To upgrade the quality of life of the poor, especially for those 45 percent languishing below the poverty line, a drastic cut in non-development/current revenue expenditure is needed to increase the outlay on measures that mitigate the adverse effects of poverty. In view of the availability of limited resources, it is mandatory that non-development revenue expenditure be contained and should not exceed 50 percent of the total actual expenditure incurred.

Development and capital expenditure
The actual development expenditure for the years 2011-12, 2012-13 and 2013-14 stood at 20.5 percent, 18 percent and 20 percent respectively of the total consolidated payment. It needs to be enhanced to at least 42 or 45 percent. Simultaneously, the capital expenditure needs to be contained by not exceeding the availability of funds under this head.
Development plan
The Provincial annual development plan, drawn haphazardly, motivated more by local political consideration than driven by economic requirements, over the last six decades has resulted in skewed micro development with squandering of public money. We spent about Rs79,186 million on health and Rs180,693 million on education alone during the last five years, but the improvement in health facilities and literacy speaks volume of the inadequacy of the services rendered. A comprehensive integrated three- or five-year provincial plan by the specialised economists/planners is the key to provide basic health and educational services to the ailing and illiterate segment of population. It is thus proposed that an independent planning cell be created under the chairmanship of the chief minister, comprising at least three specialists to be picked from the private sector on contract for a period of six months and three or five MPAs may be selected, to prepare a compressive three years plan. For the next fiscal year, the MQM has proposed sectoral and local government allocations laced with special packages for deficient sectors/areas for a balanced growth in all sectors and regions.

Agrarian reforms
Agriculture, the mainstay of 60 percent rural population, remains neglected. Only the owners of large holdings, defying all land reforms introduced in 1959 and 1977 are the beneficiaries of the subsidies, incentives and increase of procurement price, especially of wheat, to the chagrin of the of small farmers. The proposal to implement land reforms, the panacea to small farmers, introduced in the National Assembly by the MQM, still remains dormant. The supply of irrigation water to the small farmers and tail-enders remains unsatisfactory. The apportionment of water between Punjab and Sindh under the Water Accord rules remains a problem for the growers in Sindh. Land reforms are the only solution to the malaise.
Autonomous entities
The ad-hoc state trading of wheat, the investments of government funds in defiance of the Sindh Fund Management House Act 2013 and the non-reflection of the state of affairs of the Sindh Bank, owned by the government, in the annual budget, not only need an audit by a chartered accountant company of repute but the receipts and expenditure of such entities also need to be reflected to be in the annual budget.

Participation of MPAs
As provided in the rules, preliminary discussion of budget in the assembly needs to be made latest by 31st March. It is also proposed that the supplementary budgets need to be approved by the House in the first week of January and April every year.

Policy proposals
Local government election should be held immediately and sufficient fund should be allocated in this budget to facilitate the election commission.
Sustainable water supply across Sindh, especially in Karachi, should be ensured by immediately starting the K-4 and initiate the 2nd phase of the K-4, expediting work on 65 MGD and 100 MGD approved schemes, releasing Rs10 billion for revamping and rehabilitation of the existing infrastructure of the KWSB, Crackdown on water theft, illegal connections and hydrants and allocating Rs500 million to every district for the rehabilitation of the drinking water infrastructure.
For improving the education sector, basic facilities and infrastructure should be improved and development share increased from 10 percent to 20 percent.
Around 2.5 percent of the total education budget should be used for increasing enrollment through incentives of Rs25,000 and Rs 50,000 for boys and girls respectively after successful matriculation. The SNEs of completed buildings should be approved and sanctioned. Technical education and vocational trainings should be promoted and centres of excellence set up.
A health insurance policy should be chalked out for government employees
The energy crisis should be resolved by exploiting wind, solar and ocean waves energy. Entrepreneurs should be encouraged to set up coal-fired generators for providing electricity.
Toa dress law and order problems, police reforms and training on latest techniques should be introduced, multiple selection criteria should be abolished, local policing on a district level should be encouraged, the institution of the SHO should be encouraged and funds should be allocated for a comprehensive education, life and health insurance plan for police.
The Property Tax levied and paid by the property owners of Karachi alone is about 95 percent of the total Receipts. It is, therefore, proposed that tax on all properties in the province should be imposed.
The valuation table of the properties of Karachi alone that has been revised to increase the categories from six to nine is causing great setback to sellers and buyers who have to pay the stamp duty and registration fee at a higher rate than paid by their counterparts in other districts. Hence it is proposed to revive the old six categories.
Stamp duties and registration fee be adequately reduced to an aggregate one percent as the construction industry is already paying taxes of more than seven percent.
Stamp duty and registration fee on mortgages should be abolished.
Around Rs2 billion should be allocated for improving the infrastructure of the seven industrial towns in Karachi.
The infrastructure cess is being charged at 0.95% at the airport but other parts of country are exempted from this duty resulting in the preference of imports through other dry ports and airports. This is another example of the discrimination with Karachi
Small and cottage industries need to be encouraged to generate self employment and the production of consumer goods on mass scale, both for home consumption and export
An industrial estate needs to be established in Ghotki.
DNA and forensic laboratories needs to be set up, existing hospitals in all districts should be improved and highway emergency centres need to be built. Awareness and family welfare schemes are also needed.
Transport fares should be strictly regulated by the government. Transporters should be brought within the ambit of income tax. The green bus service should be revived and more 500 buses added to it.
Unfortunately, katchi abadis have doubled in the last six years in Sindh. Strategies are required to upgrade slums, urban planning with city wide infrastructure development and public low housing projects.
Other proposals include launching the Karachi Circular Railway and the solid waste management system. Government hiring should take place in a transparent manner.