Jharkhand Budget: State Plans Jump In Capital Outlay

Finance Minister for Jharkhand Rameshwar Oraon presented the state budget for 2022-23 on March 3.

The budget projects a total expenditure of Rs 1.01 lakh crore next fiscal, marking a 13% increase over the 2021-22 revised estimate. For 2022-23, a revenue surplus of Rs 6,752 crore or 1.68% of GSDP has been estimated. This revenue surplus can be used to pay off outstanding debt or incur capital expenditure to build assets.

The 2022-23 state budget increases the capital outlay by Rs 6,711 crore from the revised estimates of 2021-22, taking the total capital outlay for 2022-23 to Rs 16,606 crore.

Two major heads under which capital outlay is planned are water, supply and sanitation, which gets Rs 3,427 crore, and state highways, which has been allocated Rs 3,300 crore.

The state will also repay debt to the tune of Rs 6,714 crore in 2022-23. This is 57% more than the debt repayment in the current fiscal of Rs 4,289 crore.

This year, the state estimates interest payments to the tune of Rs 6,187 crore. Other items of committed expenditure include payment of Rs 14,657 crore on salaries, and Rs 7,424 crore on pensions. The allocation for committed expenditure, which includes salaries, interest, and pension, is estimated to increase from Rs 28,268 crore in 2021-22 to Rs 30,651 crore in 2022-23.

The national average for aggregate technical and commercial (AT&C) losses at distribution utilities stood at 20.9% in 2019-20. In Jharkhand, the AT&C losses of the Jharkhand Bijli Vitran Nigam Ltd. (JBNV) had worsened from 28.6% in 2018-19 to 37% in the next year. Poor billing and collection efficiency, along with theft contribute to higher AT&C losses.

In the budget speech, the Finance Minister informed the House of the government’s decision to participate in the central Revamped Distribution Sector Scheme (RDSS). RDSS aims to provide financial support for upgradation of distribution infrastructure and the installation of prepaid smart metering systems. Separately, the government announced 100 units of free electricity per month for farmers and poor households.

Compared to the sectoral allocation of all states, Jharkhand sets aside a lower percentage of its budget towards energy at 3.9%, based on the actuals for 2020-21.

Jharkhand has allocated Rs 6,532 crore for police in the next financial year. This includes Rs 3,306 crore for district police and Rs 297 crore for village police.

Compared to other Indian states, Jharkhand earmarks a higher allocation for police. Jharkhand has allocated 7% of its total expenditure on police in 2022-23, higher than the average expenditure on police by states at 4.3% based on the budget estimate for 2021-22.

The GST (Compensation to States) Act, 2017 guaranteed compensation to states for five years if their GST revenues fell short of a 14% growth rate. The Centre makes up for the shortfall through the compensation cess fund.

As of date, this guarantee ends in three months from now, in June 2022.

States which relied on GST compensation to meet their GST revenue shortfall might be negatively impacted. Jharkhand is estimated to receive 10% of its own tax revenue in the form of GST compensation in the current fiscal year. Jharkhand’s revenue collection from other sources such as sales tax, state excise would need to pick up, to make up for the shortfall after June.

The state estimates that it would receive GST compensation loans of Rs 1,981 crore in 2022-23. As of date, the compensation loan facility is only available until March 2022. This could further add to the revenue shortfall.

This is part of a series of articles authored by PRS Legislative Research, bringing attention to the priorities laid down by states in their budgets. Read the full article on the Jharkhand budget on the PRS Legislative Research website.