Euphoric Budgeting ~ III
Rajendra Kakodkar
If you enjoyed reading this article, you can help support our journalism by adding OHeraldo as a preferred source.
Dairy development seems to be the government’s flagship programme. From a paltry Rs 8 cr in 2011-12, the outlay was quadrupled to Rs 32 cr last year and further hiked to Rs 61 cr this fiscal. But the success will depend on the proportion of subsidies and wasteful expenditure on inefficient government staff. Animal husbandry is a tricky and risky business. The entire investment can get wiped off if a contagious disease like bird flu breaks out. Farmers must be well informed of the care that needs to be taken and must be provided with veterinary facilities.
Annually, Goa produces around 95,000 tons of vegetables and imports 55,000 tons from other states. Similarly, it produces 1.5 lakh litres of milk and imports 3.5 lakh litres. In his 2012 Budget, Parrikar targeted to make Goa self-sufficient in vegetable and milk production and thereby create rural employment to 10,000 people. If this is achieved in four years’ time, it would be one of the greatest achievements of any government post liberation. The chief minister’s announcement that milk output rose 40% is an indicator that he is on track.
Industry neglected
These may be apples and oranges, but the following comparison is being made to understand relative absolute figures. While Rs 530 cr would be spent on agriculture which contributes 2.8% to GSDP, Rs 68 cr would be spent on manufacturing which contributes over 25% to GSDP. Employment in tourism has reached saturation point with two of the three new jobs going to migrants. Being low in contribution to GSDP, growth in agriculture and therefore employment generation can only be a solution in eastern Goa and not a pan-Goa phenomenon.
Hence only the manufacturing sector can be the main engine that can drive employment growth. But Goan units are saddled with locational disadvantages related to labour and raw material cost and availability. To stimulate this sector the government must devise schemes to compensate cost disadvantages relative to nearby manufacturing hubs like Belgaum, Hubli, Pune and Kolhapur.
Over 1000 degree engineers passing out of six colleges in Goa are supposed to be job givers and not job seekers. But the irony is that many of them don’t even get placed in campus interviews. If young engineers are provided with entrepreneurial exposure in colleges, many could well emerge as Goa’s successful entrepreneurs. Every such entrepreneur generates on an average 60 jobs. Having had exposure to manufacturing, the current CM is well placed to usher in a revolution in the largest sector of Goa’s economy. In his first Budget he hiked the outlay on industry 2.5 times from Rs 16 cr to Rs 43 cr and further 1.5 times this year to Rs 68 cr. This was largely due to provision of Rs 30 cr as share capital to self employed local entrepreneurs. The scheme provides capital of maximum Rs 3 lakh for engineers and Rs 2 lakh to others. An engineer capable of becoming a job-providing entrepreneur will easily get a job with a starting annual salary over Rs 6 lakh. Hence the one time and repayable capital of Rs 3 lakh will certainly not lure him to take the risk of putting up a factory by rejecting a cosy and risk-free Rs 6 lakh job offer.
The employment subsidy scheme, bio-incubator and capital contribution are too small to make engineers shun lucrative jobs. The best these schemes can achieve is to release some doles to party workers who otherwise keep harassing MLAs for government jobs.
There is nothing in the Budget to stimulate an engineer to venture a start-up, except infrastructure development spending of Rs 40 cr. The day is not far away when active chapters of Goa Engineering College alumni associations will mushroom in Bangalore and Pune.
A fivefold increase in cancellation fees for imports/exports is an unnecessary burden on manufacturing units. Today, the international market like commodities have become so volatile that entrepreneurs have to adjust frequently to remain competitive. If one plans today, imported items can arrive only after a few months. The technology (eg: electronics) also changes every few months. If cancellation of import orders prevents the State from getting dumped with obsolete goods, is it not desirable? Considering the lead time constraints, industry makes quick amends as per global changes. Rather, the government should have waived the fees for manufacturers and facilitated in making them nimble footed. Higher cancellation fee may be levied only on traders, who are not faced with lead times related to production processes.
Tourism burdened
While the Goan manufacturing sector is saddled with locational disadvantages, tourism is already overtaxed, being easy prey. This sector with sizeable contribution to GSDP and employment needs a more careful approach. If taxed further it risks de-growth.
Tax during season is up whereas tax during off-season is decreased. This means the hotel industry will lose on 70% revenues in season and gain only on 30% revenues in the off-season. But the bottom line does not seem to be affected as tax on hotel rooms is slated to increase from Rs 130 cr in 2012-13 to Rs 144 cr in 2013-14. However last year tax on hotel rooms had increased 35% from Rs 97 cr in 2011-12 to Rs 130 cr.
Levy of entry tax and increase in permit fees will be a burden for lower end tourists. Both these could be detrimental. Entry tax of Rs 35 cr only on tourists arriving by road and not levying tax on those arriving by trains, ships and flights also raises questions. In fact the tax should be higher for those arriving by air because they can afford it. This could also affect business prospects for lower and middle range hotels. If the government intentionally aims to reduce lower end tourists to reduce pressures on infrastructure then this could be a welcome temporary step.
Fees from casinos increased from Rs 34 cr in 2011-12 to Rs 55 cr in 2012-13 and is expected to rise to Rs 70 cr in 2013-14. Excise on alcoholic drinks increased from Rs 182 cr in 2011-12 to Rs 211 cr in 2012-13 and is expected to rise to Rs 253 cr in 2013-14. These revenue raising items may not have much impact on tourism.
Additional FAR of 20% to five-star hotels in over-crowded tourist areas at a fee of Rs 20,000/sq m is without logic. Allowing additional FAR in an area which is already a concrete jungle with congested infrastructure, is a retrograde policy. The government is blundering by generating revenue from it. The government on the other hand should have attempted to decongest the hyped-up tourist areas by diverting tourists and then rewarding such diversions in a calibrated manner. If a hotel creates facilities in less-hyped tourist areas, which incidentally are also mining affected, allow them 10% additional FAR in both localities. This will also generate much needed employment in eastern Goa.
(To be concluded)
The writer is a corporate
management consultant
