The total transfer of funds from the
Centre to Nagaland awarded by the Eleventh Finance
Commission (EFC) is 1.02% of the total transfers to
the States. This is 0.21% less than the transfers
awarded by the Tenth Finance Commission, which was
1.23% of total transfers to the States, according to
official sources.
The projected transfers from the Center to the States
under EFC award is not being released as a result of a
fall in the revenue collection of the Central
Government. The share of Nagaland in Central taxes
over the five-year period, 2002-2005 was estimated by
the EFC at Rs 820 crore, against which the likely
realization is Rs 548 crore as per the latest
assessment indicated by the Ministry of Finance.
The State Government has no means to absorb this
drastic reduction of Rs 272 crore. And the situation
will be unmanageable unless the Centre provides
special grant-in-aids to the extent of the shortfalls
in the State's share of Central taxes, especially for
a small and chronically deficit State like Nagaland.
Under the Fiscal Restructuring Program, the State
government is required to achieve an improvement of 5%
each year in the ratio of revenue surplus to revenue
receipts. Altogether the State Government has been
earnestly pursuing all fiscal reforms envisaged under
the MOU, achieving the required improvement of 5% each
year appears to be impossible task, particularly for
the State like Nagaland, whose own revenue receipts is
barely 6% of the total receipts. Couples with this are
the problem of shortfall in the revenue receipts under
the State's share of Central taxes, sources further
added.
Consequent upon the implementation of the 5th Pay
Commission by the Government of India, the State
Government was under compulsion to revise the pay
scale of their employees on the same lines. The annual
financial implication of revision of pay and pension
in the case of Nagaland is around Rs 150 crore.
It also said as a result of restricted inflow of
Central Plan Assistance for financing the Plan, the
State Government has to resort to larger borrowing to
finance its Annual Plans, with resultant increase in
the cost of debt servicing. At the close of 2001-2002,
the total outstanding debt of the Government of
Nagaland stood at Rs 2200 crore, of which Rs 533 crore
is owed to the Central Government.
To ease the burden of debt servicing of the State
governments, the Center should consider consolidating
all outstanding Central loans, including small saving
loans, and re-fix the rate of interest on the
consolidated loan at 8% per annum. The Central
Government has therefore been requested to consider
evolving a similar scheme in respect of all
outstanding loans of the State Governments from
various financial institutions.
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