Special package for N-E region

STATE FINANCES

There are also incentives for West Bengal and Kerala, where polls are due.

The government has increased the states' share of taxes and duties by 20 per cent to Rs 113,448 crore for 2006-07. As per the revised estimates, the states will get Rs 94,402 crore during the current year. In addition, a separate incentive package for some states including West Bengal, Kerala and the north-eastern region was also announced on Tuesday.

Of the total Rs 113,448 crore as states' share in the tax receipts, 19 per cent will be given to Uttar Pradesh and 11 per cent to Bihar.

The states' share of tax receipts, estimated at 34.6 per cent of total tax receipts, remains stagnant compared with their share for the current fiscal year, estimated at 34.4 per cent. Net resources that will be transferred to states and union territories in 2006-07 have also been increased by 19.40 per cent to Rs 197,207 crore, from Rs 165,165 crore as revised estimates for the current year.

While the budgetary allocation for grants and loans has been increased by 15 per cent to Rs 90,521 crore, from Rs 78,740 crore as revised estimates for the current year, recovery of loans has declined by 15 per cent to Rs 6,762 crore, from Rs 7,977 crore.

Finance minister P Chidambaram also announced that 10 per cent of the plan budget of each ministry and department for schemes and programmes will be allocated for the north-eastern region. This amounts to Rs 4,870 crore for the year 2006-07 for this flagship program. The total budgetary allocation for the region is Rs 12,041 crore, including Rs 1,350 crore provided to the north-eastern region ministry.

For Jammu and Kashmir, the finance minister also announced special assistance of Rs 2,148 crore for power reforms and reconstruction, besides the state plan outlay of Rs 2,300 crore.

For tea growers in Assam, West Bengal, Tamil Nadu and Kerala, Chidambaram also announced a contribution of Rs 100 crore for a special purpose tea fund for re-plantation of tea. Another scheme aimed at West Bengal is the Jute Technology Mission 2006-07, under which a National Jute Board will be set up. West Bengal will also have a deep draft port, with the Finance Minister proposing to carry out a detailed study for the choice of location.

The Budget also contains a proposal for the government to provide Rs 3,000 crore as compensation for VAT losses during the next fiscal year. The revised estimates for the current fiscal year show that the compensation given to states' towards VAT losses is Rs 2,495 crore, compared with the budgeted amount of Rs 5,000 crore.

While he urged all states to implement the VAT, Chidambaram also urged them to abolish Central Sales Tax (CST). Chidambaram said that the government will compensate states for the loss of revenue through both monetary and non-monetary measures. The empowered committee of state finance ministers had recommended that CST be phased out.

Since states are taxing LPG at high rates, the finance minister has also proposed that the states should bear a portion of the burden of the high prices of petroleum products and has proposed that LPG should be included under the list of direct goods under the CST Act.

While the plan grants and loans to states has increased by 11 per cent from Rs 33,329 crore as revised estimates for the current fiscal year to Rs 37,166 crore, non-plan grants and loans given to the states have increased by 16.5 per cent to Rs 34,639 crore, from Rs 29,720 crore as revised estimate for 2005-06.

The central assistance for state plans for the next fiscal year has risen by just 11 per cent from Rs 54,461 crore as revised estimates for the current fiscal year to Rs 60,907 crore.

Of the total central assistance given to the states, there has been a substantial increase in the accelerated irrigation benefit scheme, which has increased from Rs 4,800 crore for the current year to Rs 7,121 crore for the next fiscal year.

The central government's assistance for externally aided projects has declined from Rs 7,400 crore this year to Rs 4,697 crore for the next fiscal year.