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CHAPTER-3

REVENUE RECEIPTS

3.1 IntroductionAs economy grows, the needs of society also grow, increasing the activities

or functions of the State government. These activities involve rising expenditures as

naturally, the States have to spend increasing amounts for satisfying collective

wants. Spending is not possible without managing equal amount of receipts and

hence, the government has to raise public revenue to meet corresponding public

expenditure. It further implies that the government has to think about how, how

much and when to raise revenue from its various existing sources to fulfill its

expenditure requirements in various areas of the economy.

Thus, any government needs income to carry out a variety of functions and

meeting its expenditure. Income of the governments which includes various sources

like taxes, borrowings, fee, donations etc. is called public revenue or public income.

In many studies, the term ‘public revenue’ has been used in two senses – wider and

narrow. In a broad sense, it includes all the income and receipts, irrespective of their

sources and nature, which the government happens to obtain during any period of

time. In addition to those receipts which need not to be repaid, it includes all those

loans also which governments have to repay in future with interest or other services

according to the terms and conditions of the debt. In the narrow sense, it includes

only those receipts of the government which are its own receipts and need not to be

repaid.

The structure of the government accounts is the same for the central and the

State governments, as laid out by the Constitution of India. The budget is divided

into three components – Consolidated Fund, Contingency Fund, and Public

Accounts.

3.1.a Consolidated Fund: Under Article 266(1) of the Constitution of India,

all revenue receipts, all loan raised by the issue of treasury bills, loans or ways and

means advances and all moneys received in repayments of loans by the government

of a State constitute one fund, known as, “The Consolidated Fund of the State”.

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Article 266(3) provides, in addition, that “No moneys out of the

Consolidated Fund of India or the Consolidated Fund of a State shall be

appropriated except in accordance with law and for the purposes and in the manner

provided in this Constitution”. Articles 198 to 207 spell out the manner in which

monetary matters have to be handled at the State level and the role of the State

Legislature.

3.1.b Contingency Fund: Article 267 of the Constitution provides that the

Parliament and the State Legislature may by law establish a Contingency Fund for

the centre and the State respectively. This Fund is like an imprest placed at the

disposal of the government to meet urgent unforeseen expenditures which cannot be

delayed. Legislative approval for such expenditure and for withdrawal of an

equivalent amount from the Consolidated Fund is subsequently obtained and the

amount spent from Contingency Fund is recouped to the Fund.

3.1.c Public Account: Apart from the normal receipts and expenditure of

the government which relates to the Consolidated Fund, certain other transactions

enter into government accounts. For instance, transactions relating to Provident

Funds, Small Saving Collection, Depreciation and Reserve Funds of Government

Departments, Postal Saving Banks, various deposits under the Income Tax Act etc.

belong to this category where the Government acts as a banker because all these

payments are mostly of the nature of banking transactions. This money, as a matter

of fact, does not belong to the government and has to be paid back sometime or the

other to the persons who deposited it. Money thus received is kept in the Public

Account and payments from the Public Account, therefore, do not require

corresponding disbursements from any other Fund.

The total budgetary receipts of the Government of Haryana (or any State

government) can be broadly divided into two types, namely Revenue Receipts and

Capital Receipts.

All the receipts of the government which are non-redeemable in nature (with

no future obligations or received against past transactions) may be termed as

revenue receipts. Revenue receipts comprise the revenue raised by the State

government through various taxes and non tax sources and though central transfers

in the form of shared taxes and grants-in-aid. Those receipts of the government

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which create liability or reduce financial assets are called capital receipts. The main

components of such receipts are borrowings of different kinds and repayment of

loans and advances provided by the government in the past to other parties.

In this chapter, trends in revenue receipts of the State of Haryana are

examined in some detail. This is preceded by summarization of some observations in

the available literature regarding such receipts in the context of State finances in

India. While this provides the context, the rest of the chapter analyzes the revenue

performance of the State in the context of both its own performance over time as

also in a comparative framework in a cross-section analysis. Tax revenues are paid

special attention in view of their predominance in the revenue receipts of the State.

3.2 Review of Literature

Several studies on State finances in India have observed that over a long

period of time, revenue receipts of the States have generally been lower than their

expenditures, leading to high levels of revenue and fiscal deficits. Decline in non tax

revenues was primarily responsible for relative inadequacy of total revenue receipts

of the States, and not the tax revenue component of revenue receipts. For example,

M.G. Rao (1992) found in his study of States as a whole that during the 70s and 80s

tax revenue receipts of the States increased at reasonably high rates and the growth

of central transfers to the States also was higher than that of both central revenues

and States’ own revenues. But non tax revenue receipts, due to reluctance to levy

proper user charges on social and economic services, and declining return from

departmental and non departmental commercial enterprises, followed a low and

declining trend. This in turn adversely affected the overall growth of total revenues

relative to the growth of revenue expenditure. Archana Dholakia (2000) observed a

similar trend of low non tax revenue receipts for the individual State of Gujarat

during the decade beginning with 1991-92. She reported that Gujarat started facing

the problem of fiscal imbalance on revenue account from the year 1984-85 onwards,

which raised fiscal deficit of the State rapidly. While this called for reforms by the

State to raise its revenue receipts, she also underlined that Gujarat was among the

highest taxed States in India whereas in terms of non tax revenue per head of

population, it ranked among the lowest. Low share of non tax revenue in total

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receipts and increased implicit subsidies were responsible for fiscal deterioration of

government of Gujarat.

The share of non tax revenue in the State’s own revenue remained at about

25 percent during the study period which was lower than observed in other,

comparatively rich States. Growth and buoyancy of non tax revenue also showed

deceleration between the pre-reform and reform periods. In Gujarat, the lower

proportion of non tax revenue was attributed to less than 15 percent contribution of

revenue generated out of all publicly provided economic and social services.

On the same lines, I.C. Arya (2004) also highlighted the decelerating growth

after mid-1980s in revenue receipts of the States. Own tax revenues registered low

growth rates because of tax evasion, undervaluation of property during registration,

complicated tax structure, weak administrative machinery, exemption of tax on

agriculture income, very low profession tax and too many exemptions. Non-tax

revenues were also lower, for which the responsible factors were lower recoveries

from public services, viz. low irrigation charges, high level of subsidies, free

availability of electricity to the agricultural sector and various exemptions to the

industries to promote them. Transfers from the center were also lower because

financial condition of central government also deteriorated during the study period

(from 1980s to 2001).

The positive role played by healthy growth in tax revenues is also

emphasized by R. K. Mishra (2000) in his assessment of State finances in Andhra

Pradesh. He shows that during 1974-82, fiscal position of Andhra Pradesh was

sound because during this period, revenue receipts increased by 16 percent p.a.

whereas revenue expenditure increased by a considerably lower rate of 3 percent p.a.

But after that, revenue receipts declined from 17.8 percent of GSDP in 1986-87 to

13.3 percent in 1997-98. This decline was contributed by low tax buoyancies in

comparison to other 14 major States especially in case of excise duties due to which

tax revenue receipts declined continuously. This decline to some extent was caused

by smaller non tax revenues, which declined due to sickness in and losses of large,

medium and small industries in public sector, lower user charges of services

provided by government, and lower recovery of cost especially in irrigation and

power sector.

Another specific example of the developments noted by Arya was provided

by the State of Uttar Pradesh, as narrated by Naseem A. Zaidi (2002) in his study

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for the finances of this State during the period 1990-91 to 1998-99. During his study

period, tax revenues were not buoyant due to various tax exemptions (especially in

trade tax), lower tax rates and inefficient tax administration. Negative contribution

or losses of public sector undertakings in the power sector with high costs and

irrational tariff structure, low and negligible recovery rates in the case of major and

medium irrigation and road transport as well as other economic and social services

were the responsible factors for the lower non tax revenue receipts. Total revenue

receipts increased by 10.93 percent per annum while revenue expenditure grew by

14.57 percent per annum during the study period. Due to the increasing gap between

revenue receipts and revenue expenditure, more than one third of total receipts were

mobilized in the form of capital receipts (borrowings). Debt-SDP ratio which was

2.1 percent in 1990-91 increased to 4.1 percent in 1998-99. Consequently, interest

payments, which were 15.4 percent of revenue receipts in 1990-91, increased to 31.7

percent in 1998-99. High debt servicing raised the question of sustainability of

finances of U.P State government.

Rao (1992) suggested that the State governments should rationalize and

simplify their tax structures. In sales tax, the number of tax rates should be brought

down to two that will reduce both administrative and compliance costs significantly.

To reduce tax evasion and undervaluation of immovable property, stamp duty and

registration fee (SDRF) rates should also be reduced. Due to reduction in tax rates,

tax revenue will not decrease because declining rates will open new doors of

investment and income generation which will enhance tax revenue. To increase non

tax revenue receipts, in the case of public sector undertakings (PSU), State

electricity boards (SEB), road transport corporations (RTC) and other social and

economic services, especially in public health, education and water supply, the

government should raise user charges on the basis of cost recovery criteria. In some

cases, like health, education, water supply etc. which are essential and have

externalities, the government should use price discrimination policy according to the

financial position of people so that only poor people of society can get benefit or

concession on the goods and services provided by the State government. Arya

(2004) similarly suggests that the tax structures had become very complicated which

aided avoidance and evasion and made administration difficult. Therefore, tax

structures needed to be simplified with low tax rates so that cost of collection

decreases and net collection increases. For raising higher revenues from SDRF, he

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suggested the use of State level valuation/verification of property instead of doing it

at the registering office. He also felt that large farmers should be brought into the tax

net. On the one hand, it will raise revenues and on the other, it will check evasion of

tax on urban income using agricultural income (by purchasing some land for

agricultural purpose) as a disguise. Governments should also increase user charges

of various public services.

Dholakia (2000) singled out low user charges and poor recovery of costs as

the factors responsible for the low proportion of non tax revenue in total receipts of

Gujarat. She felt that the widening gap between effective prices (effective prices

include actually announced price and cost of other services like transport etc. at

which public goods/services reached to the people for consumption) and announced

(by government) retail prices due to inefficiency was responsible for increase in

implicit subsidies. During the study period, total subsidies doubled and out of these

the proportion of targeted and merit subsidies were quite small as compared to non

merit and non targeted subsidies. Due to already high tax burden and declining

financial position of the State, the only option it had was to raise its non tax revenue

and reduce, especially (or at least), implicit subsidies. User charges of many social

and economic services were untouched for more than a decade. Government of

Gujarat took some measures at the end of 1990s to raise recovery rates but these

measures were not very successful whereas performance of non departmental

undertakings improved significantly and their recovery rates were considerably

higher than the national average.

She suggested that the State government should revise user charges on the

basis of cost recovery criterion and privatize those sectors which produce non merit

goods, by which on the one hand, government’s subsidies (implicit) will decrease

and on the other hand, due to activation of market mechanism, efficient prices will

be determined and quality of such goods and services will also improve. Last but not

the least, the government should reduce political interventions in departmental

undertakings.

Mishra (2000) felt that in the case of the SEB, the State government (of

Andhra Pradesh) should try to minimize transmission and distribution loss. The

government should invite private parties for the generation of electricity and to

facilitate private generation, the government should ensure supply of fuel to them

which was a major problem in the generation of electricity in the State. In the case of

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health, education, welfare programme and irrigation government should raise user

charges on the basis of capacity to pay and affordability.

Zaidi (2002), apart from advocating increase in tax buoyancies by

withdrawing the plethora of exemptions and by adopting uniform floor rates adopted

in different States and union territories, also suggested curbing the growth of

revenue expenditure by cutting non essential subsidies especially from power and

agriculture sector. He felt that a policy of privatization should be adopted for power,

road transport, irrigation sector and other sick PSUs to provide relief to the State

finances. A Fiscal Responsibility and Budget Management Act (FRBMA) on the

line of the one adopted by the Union Government could provide some legally

binding impetus to the State for containing fiscal and revenue deficits.

Saumitra Chaudhuri (2000) examined the changes in the finances of State

governments in India, at the aggregate level, during the period 1980-2000. The

author divided these two decades into four periods: the first period was from the

early 1980s ending with 1984-85, the second covered the second half of the 1980s

and up to 1990-91, the third started from the beginning of the reforms (1991-92) and

ran up to 1995-96 and fourth beginning with 1996-97 up to 2000. Of these four

periods, revenue receipts were focused upon in the analysis of the second half of

1990s or the fourth study period, during which revenues fell more than expenditure,

leading to a reversal of the earlier trend of declining deficits and of debt levels.

During this study period, the decline in the States’ own tax revenues at 15 percent of

total decline was less important than the 25 percent contributed by the States’ own

non tax revenues. Two main reasons were identified by the author as responsible for

the decline in the State’s own tax revenue. First, the States reduced sales tax rates in

order to wean business away from neighbours. The affected then had little option but

to match the lower rate. The impact of this was widespread losses of sales tax. The

second reason was that sales tax concessions were given to new industrial

undertakings and they were not liable to pay sales tax for the concession years. Not

only this, new undertakings with sales tax concession often drove a pre-existing

sales tax paying industrial unit out of business, leading, therefore, to another source

of revenues loss. Central Transfers, both share in central taxes and grants, also

declined during whole decade of 1990s. Grants declined more in comparison to

share in central taxes.

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Measures to broaden the tax base were introduced when the centre adopted

VAT in place of sales tax and all the States barring eight followed suit from April

2005. But there have been controversies about the adoption of VAT due to fear of

reduction in sales tax revenue in States. R. Kavita Rao (2004) concluded in her

study on estimation of the impact of introduction of VAT that the impact varied

considerably across States; while some States seemed to gain consistently with such

a transition, in some other States the gains converted into losses depending on the

assumptions on increments to value added. The estimates were based on the

assumption of adopting uniform VAT design in all the States. The author suggested

that one way for the States to avoid incurring losses with introduction of VAT would

be through appropriate variations in the rates and/or structure of tax. Variations in

the tax structure, however, were being perceived as hindrances to the formation of a

common national market. Clearly, the cost of imposing/assuring such uniformity

would need to be borne by the Union Government. The central government’s

assurance of compensation could, however, trigger off a negative response from the

States when poor collection was rewarded.

Some Economists feel that to make the revenue and expenditure reforms

more effective amendment of the constitution was needed. M. G. Rao (2002)

highlighted in his study that inefficiency and distortion in the sub national fiscal

policy were due to (i) complicated tax structure which was in turn due to multiple

objectives of tax policy, weak governance, poor information system, weak

administration and ineffective enforcement mechanism, on the revenue side, and (ii)

(a) proliferation of expenditure in salaries, pensions, interest payments and subsidies

which crowded out outlays on creation and maintenance of physical infrastructure,

artificial distinction between plan and non plan expenditure has caused expenditure

profligacy, (b) low productivity of public expenditure, and (c) proliferation of

central sector and centrally sponsored schemes which distorted the priorities of

expenditure with respect to the physical infrastructure requirement of the States, on

the expenditure side.

Due to deteriorating financial condition of States, inefficiency and distortion

in fiscal policy, not only achievement of fiscal consolidation but also restructuring

the administrative machinery, downsizing of bureaucracy, prioritizing expenditure

allocation to provide quality infrastructure, increasing allocation to human

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development and creation of business friendly environment were some critical

challenges which State governments had to face. In an era of fragmented polity and

coalition politics, the challenges were even more serious in the task of improving

non tax revenue by increasing user charges and fees. These challenges required

reforms in expenditure and tax systems, power sector and restructuring State

enterprises, administrative re-engineering, building up a proper information system

and computerization of tax administration. Although State governments took several

measures to raise tax revenue, for success of these reforms it was necessary to

enable the States to levy taxes on services. Therefore, the Constitution needed to be

amended to provide concurrent power to taxing services to the States.

To Sum up, it is observed from the above review of literature that after the

mid 1980s and during the decade of 1990s, tax and non tax revenue receipts have

been lower which called for reforms to raise revenue receipts from the available tax

and non tax revenue sources. Tax revenue receipts have been lower due to

complicated tax structure, rate war (of reduction) in sales tax among States to wean

business away from their neighbours, tax concession to the new industrial

undertakings etc. Non tax revenue receipts have been lower due to lower user

charges, lower contribution and losses of PSUs & SEBs, high cost production and

irrational tariff structure etc. Although some measures have been adopted by the

States and central government to raise revenue receipts of the States, these measures

have been controversial. Adopting the suggestions made by various

economists/authors in the literature discussed above may not be easy; impact of

these suggested measures will vary State to State. Therefore, before adopting any

suggestion there is need to have correct estimates of the impacts of the concerned

suggestions, which requires improvements in the methodologies adopted to estimate

such impact; further, the adoption of some measures would require some

amendments in the Constitution also.

Most of the above studies were based on all general category States or at

aggregate level of States of India. The present chapter will now examine the revenue

receipts of Haryana State government and try to find out areas where there has been

further scope for the State government to raise its finances, although by the end of

the study period, fiscal key indicators of Haryana State had improved significantly.

In what follows in the rest of this chapter, sections on (i) structure and trends

of own tax revenues receipts of the Haryana State government, (ii) a detailed

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exercise of tax effort in Haryana (both cross section and time series analysis) and its

comparison with the tax efforts of other major general category States (only for

cross section analysis), (iii) size, trends and major components of non tax revenues,

and (iv) trends of central transfers (shared taxes and grants) cover different aspects

of revenue receipts in the State of Haryana.

3.3 Composition of States’ Revenue ReceiptsA State’s revenue receipts comprise of tax and non tax revenues and

transfers from the centre. The tax revenues of the State government comprise of two

parts:

1. Revenue from State’s Own Taxes such as Agricultural Income Tax, Taxes

on Professions, Trades, Callings & Employment, Land Revenue, Stamp Duty

and Registration Fee, Urban Immovable Property Tax, Sales Tax (including

State sales tax, sales tax on motor spirit and lubricants, surcharge on sales

tax, receipts of turnover tax, other receipts), State Excise Duty, Taxes on

Motor Vehicles, Taxes on Goods and Passengers, Electricity Duty,

Entertainment Tax and Other Taxes (includes taxes on advertisement, betting

tax, receipt under the Sugarcane (Regulation) Supply and Purchase Control

Act., Taxes on entry of goods into local areas, toll tax etc.). Not all these

taxes are levied by each State, however. Also, sometimes one tax is merged

into another under one Act.

2. Share in Central Taxes as determined by the successive Finance

Commission for every five years. Before the Eleventh Finance Commission,

these included mostly share of Personal Income Tax and Central Excise

Duty, but include the entire central tax collection net of cost of collection,

excluding those ascribed to State level taxes collected by the centre in the

Union Territories.

The non tax revenue of State governments also comprise of two parts:

1. State’s Own Non Tax Revenue includes revenue from Interest Receipts,

Dividend and Profits, and receipts from (user charges/ prices/ fees) General,

Social and Economic Services.

2. Central Transfers include transfers from the centre to the State in form of

Grants in Aid. States receive normal Plan transfers through the Planning

Commission, grants under the Central Plan/Centrally Sponsored Schemes,

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grants through the Finance Commission and other (discretionary) grants

from central Ministries.

3.4 Own Tax Revenues: Structure and TrendsThe total revenue receipts of the Haryana State in absolute amounts,

components of State’s revenue receipts as percentages of total revenue receipts and

GSDP have been shown in Tables 3.1, 3.1(a) and 3.1(b) respectively.

Total revenue receipts of Haryana State fluctuated between 12 percent and

22 percent of GSDP without following any particular trend and have been around 14

percent of GSDP during the last five years of the study period. It has been observed

from Table 3.2 that total revenue receipts of all general category low income States

except West Bengal have been more than the high income States including Haryana.

On an average, the contribution of State’s own revenue receipts (tax and non

tax) in total revenue receipts has been generally more than 85 percent, remaining

around 15 percent coming from central transfers (shared taxes and grants). This is

mainly a consequence of the relatively high per capita income of the State and the

successive Finance Commissions’ endeavor to make the statutory transfers

progressive in terms of per capita income of recipient States. Contribution of own

tax revenue in total revenue receipts is increasing continuously after dropping

marginally in the year 2002-03 without any increase in contribution of non tax

revenue. As compared to all other general category States also, except Maharashtra

and Tamil Nadu, tax revenue receipts as proportion of GSDP in Haryana has been

higher than all other low income and high income states (Table 3.2 (a)).

Haryana has consistently had relatively high own tax-GSDP ratio in

comparison to other general category States. To put the issue in perspective, its

figures from 2005-06 (9.7 percent) may be compared with those of Goa (10.4

percent), Karnataka (11 percent), Maharashtra (8.0 percent), Punjab (9.3 percent),

Tamil Nadu (11 percent) and Gujarat (8.1) among high income States on the one

hand, and Andhra Pradesh (8.5 Percent), Bihar (5.9 percent), Madhya Pradesh (8.4

percent), Orissa (7.9 percent), Kerala (8.7 percent), Rajasthan (8.14 percent), Uttar

Pradesh (7.3 percent) and West Bengal (4.5 percent) among low income States on

the other hand. It is clear that level of own tax-GSDP ratio, except Goa, Karnataka

and Tamil Nadu, in all other high and low income States have been lower than the

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level of Haryana State. In recent years state has overtaken Kerala, Gujarat and

Maharashtra in term of own tax-GSDP ratio.

Table 3.3 (a), (b) and (c) present the details of individual own tax revenues

of Haryana in absolute amount, their contribution in total own tax revenue and as

ratios of GSDP. In most of the years of the study period, total own tax revenue as a

proportion of GSDP has been around 7.5 percent (on an average), but from year

2001-02, tax-GSDP ratio in Haryana increased continuously and first time reached

to around 10 percent of GSDP in year 2005-06 which has been the highest during

whole study period.

As is usual, sales tax/VAT accounts for the largest part of own tax revenue

receipts. The State introduced VAT element into its sales tax structure in April 2003.

Haryana was the State that adopted VAT first among all other States of India. Post-

VAT revenue from sales tax does seem to be at a higher level on an average

compared to the pre VAT levels. Due to greater revenue raising potential of VAT,

share of other taxes in total own tax revenue receipts declined significantly. In

Haryana, the State levies only State sales tax and also collects the central sales tax;

other elements of sales tax (like turnover tax) were not in use in Haryana.

To encourage the States to introduce VAT, the centre provided the incentive

of compensating any revenue loss on a gradually reducing basis for a finite period

from 2005-06. It may also be noted that one part of the sales tax, central sales tax

(CST), is slated to be phased out. As per an agreed package of compensation, there

were monetary and non monetary incentives provided to the States by the GoI.

These include abolition of the facility of inter-State purchases by government

departments at concessional rates against form-D, levy of VAT on tobacco at the

rate of 12.5 percent by the States and transfer of the proceeds of tax on identified

services to the States; necessary legislations and amendments were also carried out.

In case these measures were inadequate to cover the revenue loss, cash

compensation was to be provided. The impacts of these are difficult to trace fully,

since that of abolition of Form-D and VAT on tobacco are subsumed under tax

devolutions from the central government. The cash compensations are included in

the central grants.

After sales tax, revenue from Excise Duty contributed a major part of total

tax revenue receipts till year 1995-96. The bulk of the collection in Haryana, as in

other States, is from country spirits and Indian-made foreign liquor (IMFL) in

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almost equal measures; it is believed that excise collections from country spirits are

riddled with evasion and illicit production. The major part of the collections is from

the duty levied, and to a much lower extent from the license fees. The heavy reliance

on duty levied makes the system over-susceptible to unrecorded

production/sales/transfer; an appropriate auction of vends could perhaps capitalize

some of the duty evasion in the license fees and augment revenues. However,

experience in other States shows that often the integrity of the auctions of vends are

compromised through cartelization of bidders, and hence this option may be a risky

one. In the year 1996-97, Government of Haryana prohibited the consumption of

liquor in the State because of which its contribution in total tax revenue receipts

decreased to only 2 percent. Even after removing prohibition after 2 years,

contribution of State excise duty increased to a level lower than that observed before

mid 1990s. Rapid increase in share of sales tax revenue in total tax revenue receipts

may be one of the reasons for the lower level of contribution of other taxes.

After Sales Tax and State Excise Duty, Stamp Duty and Registration Fees

(SDRF) contributes a substantial share in total tax revenue receipts of the State. The

contribution of SDRF in total tax revenue receipts has been between 7 percent and

13 percent without following any particular trend. Due to rapid industrialization and

land acquisition in the State, it was expected that collection under this head will

increase significantly, but its ratio to GSDP increased very marginally and has

always been below 1 percent of GSDP except in the year 2005-06. The expected

increase was offset by evasion of tax through undervaluation of property during

registration, reduction in tax rates and exemptions in rates given as incentives for

industrial growth were inter alia the reasons for the lower contribution of SDRF.

Land revenue collects a small part of the tax revenue receipts in Haryana

State like other States, although Haryana has relatively higher agricultural incomes.

It followed a declining trend from 1980-81 to 1999-00. Although there have been

some improvements subsequently, revenue impact of such improvements have been

marginal. Revenue from all other taxes contributed only marginal shares in total tax

revenue receipts and followed declining trend. Actually, performance of most of the

other taxes depends on economic development of the economy.

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The highlights of the above discussion may be summarized as follows:

(1) Level of own tax-GSDP ratio, except Goa, Karnataka and Tamil Nadu, in all

other high and low income States have been lower than the level of Haryana

State. In recent years state has overtaken Kerala, Gujarat and Maharashtra in

term of own tax-GSDP ratio.

(2) State receives more than 85 percent of its total revenue receipts from its own

revenue sources i.e. own tax revenue and non tax revenue sources and only

around 15 percent from central transfers (in form of shared taxes and grants),

(3) In own tax revenue receipts Sales tax, State Excise Duty and Stamp Duty

and Registration Fee occupied 1st, 2nd and 3rd position respectively and

together contribute around 90 percent of total own tax revenue receipts

although all taxes other than sales tax exhibit declining shares, and

(4) After implementation of VAT in year 2003, sales tax revenue increased so

rapidly that other sources of taxes could not increase their share of

contribution in total own tax revenue receipts in spite of increase in absolute

amount.

3.5 Buoyancy and Elasticity of Own Tax Revenue of HaryanaBuoyancy and elasticity of taxes could be taken as indicators of overall

performance of tax structure of the State. Tax revenue depends upon its base and any

possible changes in tax rate. The tax structure determines the extent to which the tax

actually covers the designated base; changes in the tax structure and or/effective rate

of tax (including exemptions, concessions etc.) are known as ‘discretionary

changes’. The widest possible tax base for a State level tax would normally be the

Gross State Domestic Product, since the base of any State level tax would be a part

of the GSDP. In other words, if the GSDP increases, the revenue from various taxes

should also increase, though possibly to varying degrees depending on the actual tax

base, as it is understood that tax revenue is a function of State Income. Buoyancy

coefficient represents the increase in tax revenue in account of not only increase in

the GSDP but also due to discretionary changes. If the tax series is cleaned for

discretionary changes, we get, what is known as ‘elasticity’ of the tax with respect to

change in GSDP (i.e. tax base) only. The difference between tax buoyancy and tax

elasticity can constitute a summary measure of the extent to which the government

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has been active to raise its tax collections. However, it could also be argued that a

good tax design can improve the elasticity of the tax, and hence the need for

undertaking regular discretionary changes is less. Thus, if difference between

buoyancy and elasticity is high, it means that the State government plays a very

important role in the policy making and in implementation of those policies to raise

its tax revenue receipts. However, there is no direct relationship between the

difference between buoyancy and elasticity and the performance of the government;

a small difference with high buoyancy could show the impact of a good tax design

and not necessarily poorer performance.

Buoyancies and Elasticities of various kinds of taxes during different study

periods have been given in Tables 3.4 and 3.5 respectively. Difference between

buoyancy and elasticity, to see the performance of the government to raise its

revenue receipts has been shown in Table 3.6.

3.5.1 Methodology to Estimate Buoyancy and Elasticity of Own Tax Revenue

Tax Revenue depends upon its base and any possible changes in tax rate. If

certain rate changes are introduced, they are known as ‘discretionary changes’,

normally, for many taxes, the base is the State Domestic Product. In other words, if

the GSDP increases, the tax revenue also increases as it is understood that tax

revenue is a function of State Income. Buoyancy coefficient represents the increase

in tax revenue in account of not only increase in the GSDP but also due to

discretionary changes. If the tax series is cleaned for discretionary changes, we get,

what is known as ‘elasticity’ of the tax with respect to change in GSDP (i.e. tax

base).

For calculation the elasticity coefficient, the yearly gross tax revenue data are

initially adjusted for the respective year’s discretionary changes and further for the

cumulative effects of the previous years’ discretionary changes. The detailed

adjustment method applied to Indian data is spelt out in Prest, A.R.(1962) and Rao,

V.G. (1979).

To estimate the buoyancy and the elasticity coefficient for the individual own

taxes, the following equations are used.

Log T= log a + b log Y + u…………………….. (1)

Log AT = log α + β log Y + v…………………. (2),

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where,

T = Acutal Tax Revenue;

AT = Adjusted Tax Revenue;

Y = Gross State Domestic Product and u and v are the error terms.

The coefficient, b, in equation (1) gives buoyancy and β, in equation (2)

gives elasticity of tax structure.

Buoyancy and elasticity of taxes, as indicators of overall revenue

performance of the tax system of the State, could be of significance in the context of

additional resource mobilization because different taxes behave in different ways

while responding to various policy measures. The growth of the tax revenue

corresponding to the growth of the State income is captured by the buoyancy

coefficient. But elasticity estimates show the response of tax revenue to the

automatic change in State income which, in other words, represents the built-in -

flexibility of the tax system itself.

3.5.2 Buoyancy and Elasticity during 1986-87 to 1995-96

During this phase, Government of Haryana made efforts to raise revenue

from sales tax only, but these efforts were not very fruitful. It may be recalled

[Chaudhuri (2000), briefly discussed in the review of literature in this Chapter] that

this was a period of ‘rate war’ among Indian States; Government of Haryana also

reduced sales tax rates due to which sales tax revenue increased in absolute amount

only marginally but the overall impact was that buoyancy has been less than unity

i.e. 0.986 despite these efforts.

The differences between buoyancy and elasticity for Sales Tax, Total Tax on

Commodities and Services, and Total Own Taxes were 0.02, 0.007 and 0.005

respectively during this phase and for all other taxes, the difference was nil. In fact

difference between buoyancy and elasticity for Total Tax on Commodities and

Services, and Total Own Taxes (sales tax is included in these taxes) has been due to

efforts made by government to raise sales tax revenue only.

Buoyancy and elasticity of all other individual taxes remained same implying

no special policy thrust by the State to raise its tax receipts from taxes other than

sales tax. However, in addition of sales tax, elasticity of Excise Duty, Taxes on

Vehicles and Stamp Duty and Registration Fee has been greater than unity,

indicating a stronger positive link between GSDP and the specific base for these

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taxes and vice versa in case of all other taxes. Buoyancy and elasticity of

Entertainment Tax has been negative, this was the tax which was in worsen

condition than all other taxes for which buoyancy and elasticity has been less than

unity.

During this period (1986-87 to 1995-96), Government of Haryana took only

the following measures to raise its tax revenue:

Sales Tax: Through possibly better tax compliance via reduction in tax rates

on various items, the government raised its tax revenue receipts by Rs. 15 Cr.

Non Tax Revenue: Through increase in passenger fare in road transport

services, non tax revenue receipts increased by Rs. 45 Cr.

Obviously, there was no great effort to mobilize additional revenues, except the

two instances noted above. The overall conclusion is that this was a phase in which

revenue performance of the State government was stagnated.

3.5.3 Buoyancy and Elasticity during 1996-97 to 2005-06

During this phase, elasticity of sales tax, taxes on goods and passengers,

State excise duty and entertainment tax increased whereas elasticity of electricity

duty, taxes on vehicles, and other taxes declined substantially. Positive elasticity of

other taxes during previous phase became negative during this phase. In the case of

land revenue, elasticity has always been below 1 but in this phase, it increased to

1.878. In the case of SDRF, although elasticity has always been above 1, in this

phase it increased to 1.329, which was higher as compared to previous phase.

Elasticity of SDRF increased due to acquisition of land by GoH and establishment

of industries in Faridabad and Gurgaon districts of the State, resulting in

significant rise in number of land transactions that drove the growth of SDRF

without any discretionary change in the tax structure (including rates).

This phase of the revenue performance of Haryana State was better in

comparison to the previous phase. This was the phase in which elasticities of total

taxes on commodities and services, and total own taxes increased to 1.46 and 1.444

respectively - greater than the elasticities of previous phase. But when we come to

the government’s performance in taking tax policy initiatives in this phase to raise

tax revenue, the results show that the government did nothing much except for

‘other’ taxes; the gap between elasticities and buoyancies of all the rest of the

individual taxes were zero. During this phase, elasticity increased due to change in

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specific tax base only. During this phase, the tax performance improved, but more as

a result of the pattern of development that expanded the taxable base and less

because of government initiatives in tax policy. This is borne out by the fact that

during this phase, the difference between buoyancy and elasticity of total taxes on

commodities and services and total own taxes was 0.001 in both the cases, which

was negligible and is a symbol of inactive government.

3.5.4 Buoyancy and Elasticity during 1980-81 to 2005-06

During 1980-81 to 2005-06 (a fairly long period) as a whole, barring

elasticity of Sales Tax and SDRF, elasticity of all other taxes are estimated to be less

than unity. Clearly, There is scope for the government to raise its revenue receipts

by taking suitable steps with respect to the above said taxes in which government’s

effort has been nil during the whole study period. In the case of electricity duty and

entertainment tax, elasticity has been negative. This particular result is not

uncommon among States in India, mainly because the specific tax base of

entertainment tax (tickets sold in cinema halls primarily) has been shrinking over the

years, while the poor financial performance and liquidity problems of State

Electricity Boards resulted in non-remission of the electricity duty collected from

consumers to the government accounts on a regular basis.

3.6 Tax Effort in Haryana: A Detailed ExerciseTo examine the tax effort of Haryana, a cross section analysis of 15 major

General Category States on the basis of average data of 3 years, and a time series

analysis for Haryana State government alone during the entire study period have

been done. These two analyses are discussed and their results are reported below.

3.6.1 Tax Efforts and Taxable Capacity of State Governments (2002-03 to

2004- 05): A Cross Section Analysis

Taxable Capacity and Tax Effort are two different concepts. Taxable

Capacity denotes to which extent government can possibly draw funds from its

available resources whereas tax effort denotes to which extent government is

actually exploiting its available resources. Since it is difficult to estimate taxable

capacity in an absolute sense (any such estimation is certain to be arbitrary), relative

taxable capacity is estimated in empirical studies on the basis of a norm derived

90

from actual data. Relative tax effort index may be then defined as a ratio of actual

tax revenue to the estimated relative taxable capacity of the concerned tax.

At the national level tax-GDP ratio, or in the case of States tax-GSDP ratio,

is a simple and often used measure to evaluate tax performance of the government.

The implicit assumption involved in using such ratios for the purpose of comparing

tax performance is that GDP (or SDP) is an indicator of taxable capacity and thus

suitable for normalizing the tax collection for comparison across government units.

This assumption, however, ignores various capacity indicators or factors such as size

of population, administrative capability, degree of monetization, availability of tax

handles etc. The second problem relates to the implicit assumption involved in any

simple ratio -- that the relationship between the broad tax bases adopted and tax

revenue is linear and proportional, which is not necessarily the case. So, GDP, SDP

or any other broad indicator is an imperfect proxy for the tax base, especially when

the tax structure consists of a combination of a number of different taxes falling on

distinct tax bases. Therefore it is necessary to take into account these independent

variables or proxies (other than GDP/SDP) also which affect taxable capacity of a

particular tax significantly, directly or indirectly.

In the past, a number of methods have been used to estimate relative taxable

capacity and tax effort. However the following two methods were used extensively:

(i) The Aggregate Regression method, and

(ii) The Representative Tax System method.

The Aggregate Regression Method

Aggregate Regression Method is based on the estimation of a (usually

multiple) regression equation which attempts to explain the variations in a tax

revenue variable across different entities or units (like countries or State), which is

either in absolute or normalized i.e., standardized in some form, using independent

variables, hypothesized to be the ‘ultimate determinants’ of taxable capacity. The

choice of independent variables depends partly on the theory and the supposed

nature of relationship of the tax in question and partly on their ability to explain the

variations in the dependent variable. The choice of from of equation, however,

depends entirely in the fit. The purpose generally is to explain the variations as far as

possible due to the capacity variables which are beyond the control of the tax

authorities and ascribe the rest of the variations to tax effort by the government

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concerned. This method is normally used for aggregate tax effort for both inter-

county and inter-State analyses, but its use for more disaggregated analysis is also

possible. The limitation of this method is that it mixes up pure statistical error with

tax effort; the implicit assumption is that the errors are not large enough to invalidate

the comparison of relative tax efforts.

This aggregate regression method has been used in a number of studies like

Lotz and Morse (1967), Bahl (1971), Chelliah (1971), Reddy (1975), Dwivedi

(1985), and Oommen (1987) to study the inter-State or inter-Country tax effort.

The Representative Tax System Method

This is essentially a method applicable to disaggregated analysis only. This

method was popularized by the U.S. Advisory Commission on Intergovernmental

Relations (ACIR) in 1962. It involved identifying actual bases, or when the actual

bases cannot be easily designated, suitable proxy bases for individual taxes and then

calculating an effective tax rate for each tax as a ratio of actual tax revenue to the

actual/proxy base. A normative tax rate is then derived from this effective tax rate

over the observations (e.g. an average) and applied to the actual or proxy bases used.

This yields the taxable capacity or the tax potential for each tax. Taxable capacities

can be summed across taxes to arrive at the aggregate capacity; an index of

aggregate tax effort can then be arrived at by taking the ratio of the aggregate

collections against the aggregate capacity so derived. This method is used in a

number of studies e.g. ACIR (1962), Bahl (1972), Thimmaiah (1979), Chelliah and

Sinha (1982).

In this study, the Regression Method has been used, to estimate taxable

capacity of various States for aggregated as well as disaggregated taxes. The

Representative Tax System Method has been used only to estimate tax potential of

Other Taxes of Haryana in Time-Series Analysis.

3.6.2 The Cross-section Analysis

The first set of estimates is based on a cross section analysis and confines

itself to estimating tax effort for 15 major non special category States. These are:

Andhra Pradesh, Bihar, Goa, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh,

Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West

Bengal. Special Category States of the North East (Such as Manipur, Meghalaya,

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Mizoram, Nagaland, Sikkim and Tripura) have not been included in the study.

Similarly the newly formed States such as Chhattisgarh, Jharkhand and Uttaranchal

have been excluded (not clubbed) due to non-availability of data for many variables

used. States are ranked according to their tax effort, the State which has highest tax

effort index is assigned 1 and lowest tax effort index is assigned 15.

To avoid the impact of fluctuations in a particular year, the study uses three

year averages, using data for the period 2002-03 to 2004-05. Year 2005-06 has been

excluded from the study because data on several variables for many States were not

available for this year (2005-06).

Now we propose to define the variables and the functional form of

relationship which are being estimated in the study. In this study, State taxes which

are subjected to analysis have been grouped into seven categories. In what follows,

we describe each of them, along with the equation to be estimated for each category.

Land Revenue and Agricultural Income Tax

Land Revenue includes land tax, cesses based on the land revenue, special

crop cesses and surcharge and betterment levy. Agricultural income tax (AIT) is

levied on only one part of income, which is derived from agriculture. In practice,

individuals are not subject to this tax and only commercial income from the business

of agriculture is covered. Taxable capacity of Land Revenue and AIT has been

postulated to depend on: (i) productivity of land, which may be defined as the ratio

of SDP from agriculture to net sown area, (ii) percentage of small landholdings in

total rural landholdings, (iii) Net State Domestic product from Agriculture, and (iv)

income from plantations. This can be shown by the following equation:

LAT = f (PROD, SLH, NSDPa, D)

LAT = Land Revenue and Agricultural Income Tax;

PROD = Productivity of land or Ratio of State Domestic Product from Agriculture

to net sown area;

SLH = Percentage of Small Landholdings (below 5 acre) in Total Rural

Landholdings;

NSDPa = Net State Domestic Product from Agriculture;

D = Dummy variable for State with substantial amount of plantation income.

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Regressions were run using the postulated log linear relations. Co-efficients

of all the explanatory variables except NSDPa were found to be statistically

insignificant. Therefore, following equation has been used to estimate the tax

capacity for this particular tax:

Log (LAT) = a + b log (NSDPa)

Stamp Duty and Registration Fee

The State government gets revenues from Stamp Duty and Registration Fee

charged from persons when they transfer moveable and immovable property to

others or register various financial instruments. Government charges registration fee

or stamp duty at different rates on different types of instruments. By far, the bulk of

this tax is derived from transfer of real estate (or rights to it) through sales, lease or

mortgage. Hence, the base of the tax should be the market value of property bought

or sold in the State. But first of all, accurate data on various kinds of property

transacted are not available for all the States included, and the second is that there

are serious problems with the available data on this base; during registration people

show lower value of property than the real market value to evade registration fee and

stamp duty. If we use this variable as a base to estimate tax potential, the tax

potential will be under estimated.

Therefore, in this study we tried to use four other proxy explanatory

variables, viz. Urbanization, Per Capita Net State Domestic Product, Density of

Population and GSDP from Construction Activities. But in the estimated equation,

co-efficient of GSDP from construction activities was statistically insignificant;

therefore this variable has been dropped from the equation. While t-values of

estimated parameters of other variables were also not very significant, if we dropped

any other variable, value of R-square decreased significantly. Therefore other

variables were retained in the equation in spite of statistically insignificant parameter

values. The following log linear regression equation has been used to estimate tax

potential of stamp duty and registration fee:

Log (SDRF/POP) = a + b1 log (URBAN) + b2 log (PCNSDP) +b3log

(DENSITY)

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SDRF = Stamp Duty and Registration Fee collections;

POP = Population of States as per 2001 Census;

URBAN = ratio of Urbanization to Population as per 2001 Census;

PCNSDP = Per Capita Net State Domestic Product at Current Prices;

DENSITY = People Density (as per 2001 Census).

In this equation SDRF is divided by population to standardize the equation to

make comparison among States.

Sales Tax

Haryana gets approximately 70 percent of tax revenues from sales tax.

Haryana is the first State which introduced VAT in the place of sales tax in 2003. It

has since been replaced by VAT (in 2005 in almost all States). Sales tax is levied on

all sales and specified purchases in the States. Sales tax includes general sales tax

(GST), sales tax on motor spirit and lubricants, surcharge on sales tax, receipts of

turnover tax, other receipts and central sales tax.

Sales tax is levied in all the States. In general, there are four rate categories

for sales tax i.e. 0, 4, 8 and 12 percent which were introduced with VAT but the rate

structure of sales tax for different commodities varies from one State to another.

Tax potential of sales tax depends on the value of commodities actually sold

in the State excluding those sales immediately preceding exports. But data on these

variables are not available in the required form and hence, for this study we dropped

the idea of using the above variables and used per capita Net State Domestic

Product, urbanization as per 2001 census, ratio of agriculture in Net State Domestic

Product at Current Prices and number of Scheduled commercial bank branches in

States as an explanatory variables because these variables also represent influences

on the sales tax potential. As income and urbanization increases, size of sales

transactions also increase, while the use of banking facilities proxies monetization

and formalization of the State economy, which is necessary to bring the transactions

into the tax net. The share of agricultural income is essentially a dampening variable

because the agricultural sector is largely outside the sales tax coverage. However,

this is not uniformly the case in all States, and perhaps for that reason, during

estimation of the regression, parameter value of share of agriculture in NSDP was

not significant and was even adversely affecting the statistical significance of the

parameter values of other variables also. Therefore, this variable was dropped from

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the equation. The log linear equation given below has been used to estimate sales tax

potential:

Log (Sales Tax/POP) = a + b1 log (SCBB/POP) + b2 log(PCNSDP) +

b3 log(URBAN)

Sales Tax = Sales Tax including Central Sales Tax;

POP = Populations of State as per 2001 Census;

PCNSDP = Per Capita Net State Domestic Product at Current Prices;

URBAN = Percentage of Urban Population of the State in the Total Population as

per 2001 Census;

SCBB = Scheduled Commercial Bank Branches in the States.

State Excise Duty

State Excise Duty is mainly levied by the State governments on alcoholic liquor

for human consumption and opium, Indian hemp and other narcotic drugs and

narcotics as also medicinal and toilet preparations containing alcohol. A major part

of the revenue under this tax comes from production and consumption of spirituous

beverages of which alcohol is the most important component.

As consumption of alcohol is injuries to health, nobody is free to trade in this

commodity. Individuals have to take license or to follow system of auction to trade

in this commodity. Revenue from licensing etc. is also included in State excise.

Otherwise government has a monopoly in this area. Revenue from this tax in a

particular State depends on whether any kind of prohibition policy is adopted in that

State or not. If State government adopts restriction policy on consumption of

alcohol, the revenue from State excise will be low. Otherwise it is expected to grow

and depends on the choice or taste of the people of that State.

Governments can levy State excise on the production and/or consumption of

liquor. The tax potential of State excise duty, therefore, depends either directly or

indirectly on the consumption of alcoholic beverages like Beer, Indian Made

Foreign Liquor (IMFL) and Country Liquor but detailed data on these variables

could not be obtained for all the covered States. Therefore, Per Capita Net State

Domestic Product has been taken as an independent variable to measure tax

potential of State excise duty, with the underlying assumption that increase in per

96

capita income would influence the habits and taste of the people and hence influence

the consumption of liquor and revenue from excise duties. The following log Linear

equation has been used to estimate tax potential of State excise duty:

Log (Excise/POP) = a + b log (PCNSDP)

Excise = Revenue from Excise Duty

Motor Vehicle Tax and Taxes on Goods & Passengers

Motor Vehicles Tax (MVT) is levied under the Indian Motor Vehicle Act, 1939

on the registration of vehicle, for obtaining driving license, transferring ownership of

vehicles, issuance of permit & certificates for the fitness of transport vehicles and

issuance of trade certificate to manufacturers and dealers. This is supplemented by

the State level Motor Vehicles Act, providing for the main item of revenue in this

group, the road tax (nomenclature varies) and additional road tax (if any). Tax rates

for basic road tax/motor vehicle tax vary from one State to another depending on the

type of vehicles (Private automobile, taxies, stage carriage, contract carriage,

heavy/light goods vehicles etc.). Usually heavy commercial vehicles (buses and

trucks) are taxed at higher rate. The tax is levied in the following categories of

vehicles (1) Two Wheelers (2) Four Wheelers (3) Buses (4) Trucks, Taxies and (5)

Other Vehicles including Tractors, Auto Rickshaws etc.

Passenger and Goods Tax (TGP) is a levy on the movement of goods and

persons from one place to another. In some States the passenger and good tax is

levied as percentage of the gross revenue from passenger fares and goods freight of

transport companies but in others, it is levied as a lump sum tax calculated on the

basis of the seating capacity of the vehicles and length of the routes for buses, and

the registered laden weight in the case of trucks. In addition, the MVT and TGP are

levied independently in some States while both these taxes have been merged

together (as one tax) in some other States. It is not possible to obtain data on the

varying actual tax bases for each State. Therefore, number of registered motor

vehicles has been taken as an explanatory variable to estimate MVT and TGP tax

potential. MVT and TGP tax potential may also be a function of State Domestic

Product from transport other than railway but parameter values of this variable

during regression was not significant and hence this variable was dropped. In view

of the same tax base, in this study the tax effort is estimated for the two taxes

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together. The Log Linear equation has been used to estimate tax potential is given

below:

log (MVT+TGP) = a+ b1log (REGMV)

MVT= Motor Vehicle Tax

TGP= Revenue from Taxes on Goods and Passenger.

REGMV= No. of Registered Motor Vehicles.

Electricity Duty

States also get revenue from Electricity Duty. Government imposes electricity

duty on the consumption of electricity. The consumers are divided into different

categories such as Domestic Consumer, Commercial Consumer, Industrial

Consumer etc. Tax potential from electricity duty depends on category-wise

consumption of electricity but the parameter values of all above categories were not

significant. Therefore, instead of category-wise variables, total consumption of

electricity has been used as an explanatory variable to estimate tax potential of

electricity duty. The Log Linear equation to estimate tax potential is given below:

Log (Electricity Duty) = a + b log (Total Consumption of Electricity)

Other Taxes

Other Taxes include various small taxes like betting tax, receipts under the

Sugarcane (Regulation) Supply and Purchase Control Act., etc. In this study other

taxes include Entertainment Tax also. Given the miscellaneous nature of the

dependent variable and the varying tax bases, it was decided to use a suitably

general proxy independent variable, namely the per capita income of the State. The

Log Linear equation has been used to estimate tax potential of other taxes including

entertainment tax is given below:

Log (OT/POP) = a + b log (PCNSDP)

OT = Other Taxes including Entertainment Tax.

In this study taxes on profession, trade calling and employment have been

excluded from the study because the number of observations was small; not many

States were actually levying this tax during the study period.

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3.6.3 Results of the Empirical Estimation

In this section, results of the empirical exercise to estimate taxable capacity

and tax efforts of various kinds of taxes of the States are presented along with an

attempt to analyze the results on the basis of estimated taxable capacity and tax

efforts of the States for their individual taxes.

Land Revenue and Agricultural Income Tax

Tax potential of Land Revenue and Agricultural Income Tax has been

estimated together through the following equation:

Log (LR+AGR) = -3.392 + 0.763 log (NSDPa)(t- values) (-1.320) (2.927)

R square = .40 F = 8.570

Results from the above equation have been shown in Table 3.7. The results

show that in the case of Agricultural taxes, the tax effort index has a wide range

from a low of 7.69 in Punjab and 13.23 in Haryana to 460.55 in West Bengal.

Except West Bengal, Gujarat, Orissa and Maharashtra, tax effort index of all the

States are below 100 which imply that these States could not exploit this source of

revenue to its full capacity. It may be mentioned that in Haryana, Punjab and U.P.

(to a smaller degree) a substantial part of the revenue from agricultural sector is

collected through Mandi (Market) fees on sales in organized markets by surplus

farmers. These revenues, however, are not classified as taxes. In the case of West

Bengal, the soaring tax effort index has been probably due to the cesses on tea

plantations and coal mines (included in land revenue) unique to the State, which

garner a large amount of revenue.

Stamp Duty and Registration Fee

Tax potential of Stamp Duty and Registration Fee has been estimated by the

following log linear regression equation:-

Log (SDRF/POP) = 3.921 + 1.120log (URBAN) +.143log (PCNSDP)(t-values) (.837) 1.984) (.346)

+ .193log (DENSITY)(1.024)

R square = .708 F = 8.871

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Results from the above equation have been shown in Table 3.8. The results

show that Haryana, Karnataka, Rajasthan, Andhra Pradesh, Punjab, Maharashtra,

U.P. and Kerala could be regarded as eight top States in the country that put in

above average degree of effort to collect this tax whereas in the case of Bihar, Goa,

Gujarat, M.P., Orissa, Tamilnadu and West Bengal, the tax collections of these

States have been lower than their tax potentials. There was scope for these States to

raise their tax revenue by increasing their tax effort for this source of tax.

Sales Tax

A major part (approximately 70 percent of own tax revenues) of their own

tax revenue receipts in almost all States is raised through sales tax. Therefore, the

tax effort of sales tax is the main determinant of the overall tax effort of any State.

The tax potential of sales tax has been estimated by the following log linear

regression equation:-

Log (Sales tax/POP) = .459 +.275log (SCBB/POP) +.954log (PCNSDP)(t-values) (.077) (1.003) (2.666)

+.204log (URBAN)(.580)

R square = .924 F = 44.522

Results obtained from the above equation have been shown in Table 3.9. The

results show that the range of tax effort indices has not been so wide from a low of

61.83 in West Bengal to a high of 134.99 in Kerala. Most of the States (9 out of 15)

have higher actual sales tax revenue than their taxable capacity. These States were

Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Kerala, Maharashtra,

Rajasthan and Tamilnadu. Orissa and U.P. were the States that were very close to

exploiting this source of revenue to its full extent whereas, some States like Goa,

M.P., Punjab and West Bengal exhibited low tax effort, and had scope to increase

their tax receipts from sales tax. Haryana was at the third position after Kerala and

Tamilnadu, but it was collecting more than its relative potential which may be taken

as an indicator of its good performance in mobilizing resources.

State Excise Duty

The tax potential of Excise Duty has been estimated through the following

log linear regression equation:-

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Log (Excise/POP) = -5.614 + 1.106 log (PCNSDP)(t-values) (-2.159) (4.209)

R square = .596 F = 17.716

During the estimation of the regression to obtain the above equation, Gujarat

has been dropped from the list of States because of long-standing prohibition policy

in Gujarat. Even statistically, if this State is not dropped, the value of R square, F

and t statistics become insignificant. Results obtained from the above equation have

been shown in Table 3.10 which showed that the variation in tax effort was

significant, ranging from 36.02 in West Bengal to 201.02 in Karnataka. In majority

of the States, tax collection has been greater than their relative potential. In Kerala,

there was scope for the State to increase its revenue from this source but in the cases

of Bihar, Goa, Maharashtra, Orissa and West Bengal, the scope to raise revenue

from this source was much higher.

Motor Vehicle Tax (MVT) and Taxes on Goods & Passengers (TG&P)

Many State governments levy these two taxes together because both depend

on the number of registered motor vehicles in the State. The taxable capacity of

MVT and TG&P together has been estimated by following log linear equation:-

Log (MVT) = -3.098 + .646log (REGMV)(t-values) (-1.725) (5.395)

R square = .691 F = 29.106

Results obtained from this equation have been shown in Table 3.11. The

results show that Bihar, Andhra Pradesh, Haryana, Karnataka. M.P, Orissa,

Rajasthan and Tamilnadu were the States which have successfully exploited this

source of revenue to an extent greater than their relative capacity. Gujarat, Kerala

and Maharashtra were very close to the estimated relative capacity but in the cases

of Goa, Punjab, U.P and West Bengal, there was scope for these States to further

raise their tax receipts from this source.

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Electricity Duty

The tax effort index in the case of Electricity Duty is a reflection of tax effort

as well as the timeliness of the remittance of revenue collected by the State

Electricity Boards (SEBs) – they are often tardy in remitting the same to the

government. The taxable capacity of the States for Electricity Duty has been

estimated by the following log linear equation:-

Log (Electricity Duty) = -11.315 + 1.688log (CONSUMPTION)(t-values) (-3.889) (5.637)

R square = .710 F = 31.773

Results obtained from the above equation have been shown in Table 3.12.

The results show that Gujarat, M.P, Orissa, Rajasthan and West Bengal, which were

middle and low income States, were exploiting this source of revenue more than

their potential whereas in all other States, actual revenue has been much lower than

their taxable capacities. Therefore, tax effort index of these States has been lower

than the average tax effort of all selected States taken together.

Haryana which is the State with third highest per capita income after Goa

and Delhi exploited its electricity tax potential only to the extent of 32.69 percent.

This implies that the State had considerable scope to raise its revenue collections

from this source. In many States, revenue from this source has been low due to theft

of electricity and lower user charges. Therefore, State government should take

measures to check theft of electricity and to raise user charges especially in the

agricultural sector.

Other Taxes

Tax potential of Other Taxes including Entertainment Tax has been

estimated by the following log linear regression equation:-

OT/POP = -14.267 + 1.746 log (PCNSDP)(t-values) (-4.470) (5.421)

R square = .693 F = 29.390

The results drawn from the above equation have been shown in Table 3.13.

The results show that performance of Goa, Karnataka, Kerala, M.P, Maharashtra and

West Bengal has been better than the average of all States whereas Bihar and

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Gujarat were very close to the average. But in the cases of Haryana, Orissa, Punjab,

Rajasthan, Tamilnadu and U.P., there was ample scope to raise their revenue

receipts from this source because actual revenue has been much lower than their tax

potentials.

Total Own Taxes

The aggregate tax performance of all the States for all taxes put together has

been shown in Table 3.14. In terms of aggregate tax effort, Karnataka performed the

best with an index of 127.84. Other States which seem to have done well were:

Bihar (123), M.P. (121), Orissa (120), Gujarat (118), Haryana (115), Kerala (111)

and Maharashtra (101).

In the case of Gujarat, the tax effort index may be a little overestimated

as both tax revenue and tax potential for State Excise Duty were excluded.

However, it may be argued that the tax potential of other taxes ought to be higher in

Gujarat due to prohibition and some adjustments should be made to account for this.

We have not carried out any such adjustments in the tax potential estimates. States

that exhibit low tax effort include Goa (74.14) and U.P. (74.16).

Inferences

Even comparing the low income States of Bihar, M.P. and Rajasthan with

Haryana (Table 3.15), their tax effort has been better than that of or equal to

Haryana in spite of the fact that Haryana has higher Per Capita Income. Haryana

needs to identify areas for focusing higher tax effort; our analysis shows that the

State can raise its revenue receipts from three sources, viz. Agricultural Income Tax,

Electricity Duty and Other taxes (Including Entertainment Tax) as per the cross-

State comparison of tax effort reported above.

3.6.4 Tax Effort and Taxable Capacity of Haryana (1980-81 to 2005-06): ATime Series Analysis

Haryana is one of the prosperous States of India. Per capita income of

Haryana has been relatively high among all States except Goa and Delhi. 1987-88

was the year in which Haryana saw revenue deficit for the first time. Before this

year i.e. 1987-88, the revenue account of Haryana State Government was always in

surplus. After 1987-88, revenue deficits kept increasing and the State saw revenue

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surplus once again only in 1993-94, after which revenue deficit again set in. The

State saw revenue surplus once again in its revenue account after twelve years, in the

year 2005-06.

During this long time from 1980-81 to 2005-06, the fluctuations in revenue

account balance could have been caused by changes in revenue performance,

changes in expenditure levels or both. One way of examining the inter-temporal

revenue performance would be to compare the State’s performance each year to a

norm derived from its own performance across the years. The time-series analysis of

tax performance is intended to do just that in terms of estimating taxable capacity

and tax effort of each year of observations. Being based on the regression method,

this analysis is also subject to the same caveats as applicable to the cross-section

analysis; however, if the cross-section estimates are subject to State-specific errors,

the time-series analysis avoids that. On the other hand, it could be more susceptible

to auto-regression.

3.6.5 Specifications

Land Revenue and Agricultural Income Tax

Land Revenue has been a declining source of revenue. In our time series

analysis, the two variables used to estimate tax potential are:-

a) Per Capita Income from agriculture excluding forestry, minerals, and animal

husbandry, and

b) Share of agricultural income in total income.

These two variables have been taken with the expectation that a) will explain

year to year fluctuations, while b) will take care of the long term declining trend.

Income from agricultural income tax in Haryana has been nil as it is not levied in the

State. The equation which is used to estimate land revenue potential is given below:

Land Revenue/POP = a + b1log (PCNSDPa) + b2 log (Agri. Sh.)

POP = Population of Haryana from 1980-81 to 2005-06.

PCNSDPa = Per Capita Net State Domestic Product from Agriculture excluding

forestry, minerals, and animal husbandry, and

Agri. Sh. = Share of Agricultural Income in Total Income of the State.

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Stamp Duty and Registration Fee

Stamp Duty and Registration Fee (SDRF) tax potential is estimated by the

following equation:-

Log (SDRF/POP) = a + b1log (DENSITY) + b2log (PCNSDP) + b3log (URBAN)

Since all the variables in this equation are based on decadal Census figures,

annual data series are created using intrapolation and extrapolation of the Census

data. Annual data on population are taken from Center for Monitoring Indian

Economy (CMIE) publications and data on PCNSDP from Economic and Political

Weekly Research Foundation (EPWRF) from 1980-81 to 2004-05; for the year

2005-06, the value is estimated on the basis of growth of immediately preceding

years. The series on urbanization was created by us using the same method.

Sales Tax

Sales tax potential depends on agricultural share in NSDP (expected sign of

the coefficient is negative), per capita net state domestic product at current prices,

number of scheduled commercial bank branches and urbanization. The log-linear

regression equation used to estimate sales tax potential is given below:

Log (Sales Tax/POP) = a + b1log (Agri. Sh.) + b2log (PCNSDP) + b3log

(SCBB/POP) + b4log (URBAN)

Motor Vehicle Tax and Taxes on Goods and Passengers

The State levies different rates of tax on different types of vehicles. As such,

all vehicles are divided into following categories to accommodate their varying

weights in the determination of revenue:

Two wheelers, Four wheelers (includes Tractors, Auto rickshaws, Cars and Jeeps),

number of Buses, number of Taxies and number of Other Vehicles.

The log-linear equation used to estimate tax potential is given below:

Log (MVT&TGP) = a + b1log (NO2) + b2log (NO4) + b3log (NOB) +

b4log (NOT) + b5log (NOX) + b6log (NOO)

NO2 = Number of Two Wheelers

NO4 = Number of Four Wheelers

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NOB= Number of Buses

NOT= Number of Trucks

NOX= Number of Taxies

NOO= Number of Other Vehicles

Data on the independent variables used have been taken from various issues

of Statistical Abstract of Haryana from 1980-81 to 2005-06.

Excise Duty

Excise duty depends on both production and consumption of liquor, but in

the absence of data on production and also because liquor can be imported/exported

from other States, consumption of liquor is a much better variable to estimate tax

potential. The categories of liquor used are: country liquor (CL), India-made Foreign

Liquor (IMFL) and Beer. The log linear regression equation used to estimate excise

duty is given below:

Log (Excise) = a + b1log (CL) + b2log (IMFL) + b3log (BEER)

Other Taxes

Given the mixed nature of this group, other taxes have been taken as a ratio

of GSDP and the potential measured using effective rates thus derived.

3.6.6 Estimation of Taxable Capacity

Land Revenue

Land Revenue potential has been computed using the following regression

equation estimated by us:-

Land Rev/POP = 2.364- 1.253log (PCNSDPa) - 10.421log (Agri. Sh.)(t-values) (.456) (-1.486) (-4.070)

R square =.504 F = 11.695

Results obtained from the above equation have been shown in Table 3.16.

The results show that while the State’s exploitation of this source of revenue was

above the long-term average performance during 1980-81 to 1985-86, the

government could not exploit it to its full capacity from 1986-87 to 1999-00, except

in the years 1992-93 and 1993-94. 1987-88 was the year in which its tax effort was

at the minimum (8.77 percent of potential), but in the years 2000-01, 01-02 and 03-

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04, government once again improved its tax effort for land revenue above 100

percent only to drop again in 2004-05 and 2005-06 below the potential at 84 percent

and 75 percent respectively. This shows that there was scope for the State

government to raise its revenue from Land Revenue or agricultural income tax,

which is not levied in Haryana. It is the large and surplus farmers that have potential

to pay tax on agricultural income, since they get the largest benefits from various

government policies benefiting the agricultural sectors. Economic condition of small

and marginal farmers has not been very sound as they produce primarily for their

own consumption and therefore only they should be exempt from these taxes and

user charges.

Stamp duty and Registration Fee

Stamp Duty and Registration Fee is also an important source of revenue for

the State government. Stamp Duty and Registration Fee (SDRF) potential has been

estimated using the following log linear regression equation estimated:-

Log (SDRF) = -15.213+ 2.381log (DENSITY) +.633log (PCNSDP)(t-values) (-3.129) (2.300) (3.109)

+ .340(URBAN)(.620)

R square = .988 F = 612.171

Results from the above equation have been shown in Table 3.17. When we

analyse the performance of Haryana State government in comparison of other States

in cross section analysis we find that the tax effort index of Haryana has been 164

and rank assigned was 1. Its yearly tax effort estimates for this tax ranges between

80 and 120 percent with fluctuations, which are possibly linked to the activities in

the real estate market. The State has benefited from its proximity to Delhi with

regard to this tax substantially, since a large amount of real estate activities – both

residential and commercial – have actually spilled over from Delhi into adjoining

parts of Haryana (like Gurgaon, Faridabad, Rohtak and Sonepat) boosting its SDRF

collections. This is one area where the State is likely to continue its good

performance, given the continuing and even accelerating real estate activities; all it

has to do is to facilitate such activities, ensure that no exploitation of original

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landowners takes place and the developments are orderly, and provide

complementary services like roads, water supply, sewerage, and transport.

Sales Tax

The following equation has been estimated to compute Sales tax potential:

Log (Sales tax/POP) = 9.141 -.417log (Agri.Sh.) + .812log (PCNSDP)(t-values) (2.282) (-1.991) (11.783)

-.852log (SCBB/POP)+2.003log (URBAN)(2.433) (4.070)

R square = .992 F = 621.148

Results obtained from the above equation have been shown in Table 3.18,

which shows that tax effort index has been throughout stable within a narrow range

of 90 and 130, except one year (1990-91) in which tax effort index was only 80. In

comparison of other States, in cross section analysis, tax effort index of Haryana

government was 121, and going by the time-series evidence here, the State has been

a steady performer throughout. Given the predominance of sales tax in the total tax

collection of the State, this has more or less ensured a reasonable overall tax effort.

As long as the State is able to maintain this in future, it should be in a relatively

comfortable position with respect to its finances.

State Excise Duty

Excise Duty potential is based on the following estimated equation:

log (Excise) = 3.399 + .000000005824log(CL) +.00000005987log(FL)(t-values) (31.885) (12.834) (5.211)

-0000000110log(BEER)(-.627)

R square = .982 F = 364.409

Results obtained from the above equation have been shown in Table 3.19.

Tax effort of Excise Duty varied widely from 79 in 2001-02 to 141 in 1998-99.

During 1996-97 and 1997-98, the State government fully prohibited consumption of

liquor in Haryana; therefore, these two years have been dropped when regression

was run to estimate tax potential and effort for this particular tax. Except for the

years 1980-81, 81-82, 83-84, 89-90, 90-91, 92-93, 2000-01, 2001-02, 2002-03 and

2005-06, tax effort has been more than 100 indicating the good performance of

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Haryana government in exploiting this source of tax revenue receipts. In most of the

above mentioned years also tax effort has been more than 90, which is not bad. The

average tax effort index of last three years has been 106. In the cross section analysis

it was estimated at 137.

Motor Vehicle Tax and Taxes on Good and Passengers

The following estimated equation has been used to derive tax potential of

Motor Vehicle Tax and Taxes on Goods and Passengers:-

Log (MVT) = -6.173 +.656log (NO2) +.08503log (NO4) +.107log (NOB)(t-values) (-6.990) (4.315) (.456) (2.945)

+.176(NOT)+.008145log (NOX) +.150log (NOO)(1.521) (.429) (1.427)

R square = .984 F = 184.833

Results obtained from the above equation have been shown in Table 3.20.

Tax effort Index of Motor Vehicle Tax and Taxes on Goods and Passengers was the

lowest in year 1988-89 (79) and the highest in year 2002-03 (123). Broadly

speaking, the earlier years exhibit relatively low tax effort, which improved

considerably in the last five years. In the cross section analysis too, in comparison of

other States, tax effort has been 124 which implied that the performance of Haryana

State government to exploit revenue from this source in comparison of other State

governments has been better, it may be noted that the time period of the cross-

section analysis coincides with the period when the State’s performance was better

compared to its own performance in earlier years.

Other Taxes

Other Taxes included Electricity Duty and Entertainment Tax (Table 3.21).

The tax potential of this source of revenue has been estimated by the ratio of other

taxes and NSDP. The results show that up to year 1994-95, government’s

performance has been very good but after 1994-95, except 1996-97, government’s

effort to exploit this group of revenue sources declined to 42 percent. It may be

noted that although revenue from electricity duty is not as small as from the other

elements in this group, it has been included here mainly because of the large

fluctuations in collections. Further, entertainment tax has become much less

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productive as a revenue source in the State much in the same manner as across the

country, which is primarily responsible for the declining tax effort. The government

can do relatively little to resurrect this source of revenue because this is largely the

impact of an exogenous phenomenon (decline in the movie-going habits). As such,

the State may need to think about introducing other so far unused revenue sources

(like profession tax), if it really wants to mobilize additional resources from this

group.

Total Own taxes

The tax effort index of Total Own Taxes has been estimated by the

aggregated actual revenues and aggregated estimated tax potentials which have been

shown in Table 3.22. The results show that in most of the years, the State could

exploit its aggregate own taxes more than its tax potential. During many years, it has

been below but very close to 100 also. Although the overall tax effort has generally

been good, the State government must strive to maintain this level of performance in

future also.

Inferences

On the basis of time series analysis of tax capacity and tax effort of Haryana

State for whole study period, it may be inferred that:

(1) During the entire study period for most of the major taxes, tax effort of the

State has been fairly steady with some fluctuations; the taxes that exhibit

deteriorating and low tax effort (land revenue and other taxes including

electricity duty and entertainment tax) are those with lower revenue

significance, and the trends essentially follow the same taking place across

the country in other States as well.

(2) However, as and when additional revenue mobilization assumes importance,

the State could consider either a limited agricultural income tax on large

surplus farmers or a reform of the land revenue system to generate higher

revenues from agricultural incomes. It could also consider ways of garnering

higher revenues from minor taxes like entertainment tax, and consider

introducing unutilized taxes like the profession tax.

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3.7 Non-Tax Revenues: Size, Trends and Major ComponentsTable 3.1(a) shows the contribution of non-tax revenues (other than central

transfers) to be around 20-25 percent of total revenue receipts, barring the period

1993-94 to 1997-98 when their share appear to be much higher, sometimes higher

than even own tax revenues. This, however, is an accounting artifact because gross

receipts from sales of lottery tickets were included in the non-tax revenues without

netting out the costs (which appear in the accounts on the expenditure side and

similarly inflate expenditures). Besides, there are other such self-balancing artifacts

in interest receipts relating to irrigation and the State Electricity Board. As such, the

true non-tax revenues were far smaller, probably between 15 and 20 percent of total

revenue receipts, if only actual receipts were to be counted. And the bulk of these

true non-tax revenues were from the fees/charges etc. derived from various general,

social and economic services.

As can be seen from Table 3.23, 3.23(a) and 3.23(b), economic services have

been the largest single source of non tax revenue till year 1992-93 and general

services after year 1992-93, except some years in which economic services have

been largest source of revenue once again. This is again because lottery receipts

were accounted under general services.

Road Transport and Industries mobilize bulk of the revenue under Economic

Services. Under the same category, receipts from crop husbandry, animal husbandry,

fisheries, forestry & wild life, other agricultural programmes, power, water supply

(river project) etc. followed declining trend and contributed either a marginal or nil

share in total revenue under economic services. Some of these are the areas under

economic services which have revenue potential (for example, animal husbandry,

fishing, and water supply) but are yet to be exploited as a potential source of

revenue.

There is hardly any State in India that raises much revenue from social

services and like other States, revenue from social services in Haryana also has been

very low. Bulk of revenue under social services is raised under urban development

whereas contribution of all other sources under social services has been marginal

and has even followed a declining trend.

Lower user charges for various social and economic services provided by the

State government has also been responsible for the lower contribution of own non

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tax revenue receipts in total receipts. Recoveries from various services have been

shown in Table 3.24. From 1980-81 to 2003-04, recoveries from Social Services

have been below 10 percent. During last two years of the study period, recoveries

from Social Services increased marginally to 13.68 percent and 11.26 percent

respectively. Recoveries from economic services which were above 30 percent

before 1994-95, declined after 1993-94 and always have been below 30 percent.

Recoveries from (i) Education, Art, Sports and Culture, and (ii) Health, Family

Welfare and Water Supply have been below 4 percent and 8 percent respectively and

from Irrigations recoveries always have been below 20 percent, except some years.

Contribution of interest receipts, and dividend and profits has been low and has

declined marginally with time (Table 3.23(a)).

Investment and Returns in Public Sector Undertakings (PSUs)

Government invests in public sector undertakings like Statutory

Corporations, Joint Stock Companies and Co-operatives. Government’s return on

this investment has been meager at less than 0.25 percent whereas rate of interest on

government borrowings has been more than 6 percent. In year 2005-06, investment

of government in these companies increased by 21.5 percent whereas rate of return

decreased by 31 percent. The rate of return has been lower because there have been

losses in the most of the companies and profits of other companies have been eaten

up by the losses of sick units.

“One statutory corporation and 14 government companies with an aggregate

investment of Rs. 1832.69 Cr. up to 2005-06 were incurring losses and their

accumulated losses amounted to Rs. 1504.81 Cr. as per the accounts furnished by

these companies up to 2005-06”.1

The investment and returns of government enterprises or public sector

undertakings are shown in Table 3.25. Table 3.25 shows that due to negligible rate

of return from Public Sector Undertakings, receipts from dividends and profits of the

State government have been marginal on the one hand, and interest payment burden

of borrowings (which were taken to invest in PSUs) fell on State government, on the

other hand. Thus, the poor financial results of PSUs have hurt the State’s finances on

both the revenue side as well as the expenditure side.

1 CAG (Civil), GOH, 2005,2006.

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The largest public enterprise in the State in terms of capital invested (loan

and equity) is the State Electricity Board (SEB). It is clear from Table 3.26 that cost

ineffective price policy of the SEBs and the consequent mounting losses despite

regular subsidies (and other non-transparent assistance like conversion of loans into

equity) has also been responsible for the lower receipts from the power sector.

Benefits of the exemptions given by the State governments in relation to the

consumption of electricity in agricultural sector are going only to the large farmers

since only they can use modern electrical equipments on a large scale in their fields.

Small farmers, on the other hand, do not have potential, due to lack of resources, to

install modern electrical equipments in their fields. Small farmers produce food

grain mainly for domestic consumption whereas large farmers usually have

marketable surpluses and such exemptions only reduce their cost of production and

increase profits. Since large farmers do have the ability to pay electricity bills, there

is enough scope for the State government to raise its revenue receipts by increasing

user charges especially in such cases. In addition of agricultural sector, the

government may use price discrimination policy on the basis of cost benefit criterion

for the charges of electricity from the commercial and domestic sector as well.

Interest Receipts on Loan and Advances by State Government

Government gives loans and advances to local bodies, Public Sector

Undertakings, government servants etc. The government charges nominal rate of

interest on these loans and advances whereas it pays high rates of interest on such

loans. Therefore, almost all the loans advanced by the State have had a subsidy

attached to them, which would be difficult to justify in all the cases. Interest paid,

received and difference between interest paid and received has been shown in Table

3.27.

From the analysis of individual own Non Tax Revenue Receipts, it is found

that lower interest receipts (due to higher interest rates paid and lower interest rates

received by the State government), negligible and marginal dividend and profits

(due to losses or bad performance of PSUs and SEB) and lower revenue from Social

and Economic Services (due to low user charges) in comparison to the costs have

been responsible for the lower Non Tax Revenue Receipts during the study period.

As noted earlier, receipts from General Services in the 2nd phase of the study period

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has been higher only as a result of including gross receipts from State lotteries

instead of any effort made by the government.

3.8 Central Transfers to the StatesThe framers of the Constitution well understood the fact that the prescribed

federal system will create problems of vertical and horizontal imbalances, both due

to the assignment of inelastic and inadequate sources of revenue to the States in

comparison to their expenditure needs and the converse for the central government.

Therefore, they introduced provisions for the transfer of resources from the centre to

the States.

“In a federal fiscal system, on grounds both of equity and efficiency,

resources are generally assigned more to the central government whereas States

together with the local government have bigger responsibilities. The resultant

vertical imbalances require transfer of resources from the centre to the States. States

also have different capacities and needs, and this lends a horizontal dimension to the

issue of resource sharing”.2

To remove these vertical and horizontal imbalances in India, there are three

ways in which the transfer of resources takes place from the centre to the States,3

namely,

1. Statutory transfers through Finance Commission.

2. Plan transfers through the Planning Commission.

3. Discretionary transfers for Centrally Sponsored Schemes and for different

non plan purposes by various ministries, especially the Ministry of Finance.

3.8.1 Transfers through Finance Commission (FC)

Although the Constitution provides for central transfers, it neither indicates

the size of the share of the States in the divisible taxes nor prescribes any principle

for its distribution among the States. Framers of the Constitution consciously

avoided a permanent formula in this regard in view of expected changes in the

spheres of taxation and public expenditure. “Thus, the precise manner of sharing

taxes and the actual determination of grants is left to the deliberations of the Finance

2 Rangarajan, C (2004), “Issues before the Twelfth Finance Commission”, Economic and PoliticalWeekly, Vol-XXXIX, No-26, p.2707, June.3 The regional pattern of central expenditure also could be considered as resource transfer, but in aless formal manner. In any case, it would be a major task by itself to allocate central expendituresacross States.

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Commission which is appointed by the President (under Article 280) every

quinquennium, or earlier if necessary”.4 The Commission is required to make

recommendations on the following:

(a) The distribution between the Union and the States of the net proceeds of

shareable taxes and allocation between the States of the States’ share of

divisible taxes;

(b) The principles that should govern grants-in-aid of revenues of the States out

of the Consolidated Fund of India and the amount to be paid to the States in

need of assistance;

(c) The measures needed to augment the Consolidated Fund of a State to

supplement the resources of Panchayats (rural local governments) in the

State on the basis of recommendations made by the State Finance

Commissions;

(d) The measures needed to augment the Consolidated Fund of a State to

supplement the resources of municipalities on the basis of recommendations

by the State Finance Commissions;

(e) Any other matter referred to the commission in the interest of sound finance.

The approach of the FCs to determine transfers essentially consists of (i)

assessing the overall budgetary requirements of the Centre and States to determine

the volume of resources that can be transferred during the period of their

recommendation; (ii) forecasting States’ own current revenues and non-Plan current

expenditures; (iii) determining the States’ share in central tax revenues and

distributing them between the States based on a formula; (iv) filling the post

devolution projected gaps between non plan current expenditures and revenues with

the grants-in-aid. This is known as the “gap-filling” approach.

Tax devolution is a statutory transfer and every State gets a share in central

taxes according to the distribution criteria determined by the Finance Commission.

The main purpose of tax devolution is to supplement the resources of the States

according to their expenditure requirements. But if even after tax devolution any

4 Sury, M.M (2005), “Finance Commissions of India”, Indian Tax Foundation, New Delhi-07, FirstPublication, p.33.

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State still needs financial assistance, Finance Commission recommends transfer in

the form of grants, only to those States that have non-Plan revenue deficit.5

3.8.2 Transfers through Planning Commission (PC)

With the establishment of the Planning Commission in 1950, the Central

Government has been using Article 282 of the Constitution for making grants to the

States for Plan projects. Ever since the launching of the First Five Year Plan, these

grants have occupied an important place in central financial transfers to the States.

The Planning Commission, which for all practical purposes is a political body,

makes an assessment of the existing resources of the individual States and the

country as a whole and sets objectives in various fields and formulates Plans for

economic development in the light of requirements of each State. The details of the

Plan Assistance are schematically presented in the diagram below.

Planning Commission (Plan Assistance)

State Plan Scheme Various

Ministries

Special Category General CategoryStates States

Share in Central Plan Assistance – 30 percent - 70 percentShare of Loan and Grants – 10: 90 - 70: 30

Central PlanSchemes

Centrally SponsoredSchemes

Special PlanSchemes

5 Finance Commissions have confined their attention to the non-Plan account only and grants arerecommended only for those States that have post-devolution non-Plan revenue deficit. If there is nonon-Plan revenue deficit, no amount is transferred under the deficit grants. However, such Statesremain eligible for ad hoc grants for specific projects/programmes.

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3.8.3 Transfers through various Ministries

In addition to the assistance to the States through the Finance Commission and

the Planning Commission, various Ministries also transfer resources to the States

under various schemes of national importance. These schemes are launched by the

Central Ministries and implemented by the State governments with central

assistance. The central ministries concerned propose and formulate these schemes

which are approved by the Planning Commission and the Central Cabinet. The

States execute these schemes under the technical guidance and supervision of the

centre which also issues guidelines regarding the contents, coverage, and

expenditure pattern and staffing of such schemes. The assistance given for these

schemes is often on a matching basis and is over and above the assistance given for

State plans; provision for these is made in the budgets of the central Ministries.

3.9 Trends of Receipts from share in Central Taxes and Grants in

Aid from Centre to Haryana State GovernmentIt has already been stated that the State receives around 15 percent (on an

average) of its total revenue receipts in the form of central transfers (shared taxes

and grants in aid). It is clear from Table 3.1(a) and 3.1(b) that during the study

period, contribution of shared taxes and grants in total revenue receipts and as a

proportion of GSDP decreased significantly over the years. The contribution of

shared taxes in total revenue receipts which has been around and above 10 percent in

most of the years of the decade of 80s, decreased after that to 5 percent. Similar

trends may be seen for grants from the centre. At the end of the study period,

transfers (shared taxes and grants in aid) from the centre increased a little due to

declining contribution of own non-tax revenue receipts instead of any increase in

transfers.

Although declining contribution of central transfers may be taken as

declining dependency of the State on the centre, it could signify a lack of State

initiative also to some extent. Central transfers may be discretionary or formula-

based. Transfers from FC in form of shared taxes are formula based and depend on

various factors as determined by FC like population, per capita income, geographical

area, index of infrastructure, tax effort, and fiscal discipline. Similarly, transfers for

State Plan Schemes are largely formula based. But other transfers from the PC and

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from FC may be discretionary to some extent. Discretionary transfers, of course, are

discretionary by definition.

For formula based transfers, the States can possibly make efforts to achieve

financial and other outcomes that could raise its share in the total, but for

discretionary transfers the State can do little other than bring to bear political

pressure on the concerned agency of the centre.

In Haryana, the level of tax effort (measured in this chapter), fiscal

discipline, infrastructure etc. which are components of formulas adopted by various

FCs to distribute shareable taxes among States, have been better than other general

category States. The State has made its full efforts to have maximum amount in form

of central transfers on the basis of its fiscal and other conditions. However, since

recent Finance Commissions have placed larger weights on determinants based on

per capita income in the interest of progressivity in the transfers, the State has

received progressively smaller amounts as central transfers.

Thus, it may be inferred from the above discussion that contribution of

central transfers has been low because of exogenous factors; the significant increase

in the contribution of State’s own tax revenue receipts in total revenue receipts may

be taken as a symbol of soundness of State finances and of a relatively better

developmental status.

3.10 Dependency of the Haryana State Government on the

Transfers from the CentreShare of transfers from the centre to the State in total receipts of the State

and in total expenditure of the State indicates the extent to which the State depends

on the centre for the funds to fulfill its expenditure requirements.

Per capita transfers (tax share and grants) to the 15 major general category

States have been shown in Table 3.28 and their ranks (highest the transfer lowest the

rank and vice-versa) have been given within parentheses.

It is clear from Table 3.28 that during VIth plan (1980-85), per capita

transfers in Haryana (at 10th rank) were more than Punjab (14th rank),

Karnataka (at 13th rank), Maharashtra (at 12th rank) and West Bengal (at 11th

rank). During 7th plan, per capita transfers to Haryana declined and its

position improved to 11th rank. After 7th plan, the State has been at 13th and

118

14th rank which implies that after 7th plan, per capita transfers to Haryana has

been the lowest in comparison to all other major general category States,

except Maharashtra and Goa.

Share of central transfers in total receipts of the State during different plans

have been shown in Table 3.29. The Table shows that revenue transfers as a

percentage of total revenue receipts of the State, loan transfers as percentage

of total capital receipts of the State and aggregate transfers as percentage of

aggregate receipts of the State declined continuously with each successive

Plan.

Share of central transfers in the expenditure is another criterion to estimate

the dependency of the State on centre. Share of central transfers to Haryana

in the expenditures of the State government have been given in Table 3.30.

Revenue transfers as a percentage of total revenue expenditure of the State

government, loan transfers as a percentage of total capital expenditure of the

State government and aggregate transfers as a percentage of aggregate

expenditure of the State government declined continuously, implying

progressively lower reliance of Haryana on the central government for funds

to finance its expenditures.

119

Table 3.1: Composition of various kinds of Revenue Receipts of the Haryana State Government (Rs. in Cr.)

Year

1 2 3=1+2 4 5 6=4+5 7=3+6Own TaxRevenue

Own NonTax Rev

Total OwnRevenue

Share inCentral Taxes

Grant fromthe Center

TotalTransfers

Total RevReceipts

1980-81 233.91 119.31 353.22 61.23 45.49 106.72 459.9481-82 290.62 137.98 428.6 68.03 39.44 107.47 536.0782-83 336.68 159.88 496.56 72.61 42.45 115.06 611.6283-84 365.87 179.54 545.41 80.78 72.4 153.18 698.5984-85 405.41 214.48 619.89 93.54 77.02 170.56 790.4585-86 501.71 258.12 759.83 85.5 115 200.5 960.3386-87 565.86 296.62 862.48 97.21 170.49 267.7 1130.1887-88 664.4 378 1042.4 107.52 153.92 261.44 1303.8488-89 795.41 354.71 1150.12 120.62 170.34 290.96 1441.0889-90 910.12 445.93 1356.05 154.11 97.08 251.19 1607.2490-91 1069.54 511.1 1580.64 185.9 146.88 332.78 1913.4291-92 1300.2 546.1 1846.3 219.45 176.04 395.49 2241.7992-93 1446.87 460.27 1907.14 261.94 208.56 470.5 2377.6493-94 1588.91 1340.55 2929.46 282.45 269.54 551.99 3481.4594-95 1887.86 3473.41 5361.27 317.14 204 521.14 5882.4195-96 2168.96 2186.81 4355.77 360.47 298.49 658.96 5014.7396-97 2143.12 3132.67 5275.79 431.89 340.65 772.54 6048.3397-98 2368.63 2631.1 4999.73 539.31 358.73 898.04 5897.7798-99 3119.62 1518.02 4637.64 480.04 361.01 841.05 5478.6999-00 3517.61 1259.06 4776.67 525.27 464.82 990.09 5766.7600-01 4311.48 1439.39 5750.87 344.88 478.14 823.02 6573.89

2001-02 4972.43 1666.07 6638.5 449.01 513.04 962.05 7600.552002-03 5549.68 1807.85 7357.53 756.59 542.9 1299.49 8657.022003-04 6348.05 2223.06 8571.11 600.75 671.63 1272.38 9843.492004-05 7440.03 2544.37 9984.4 619.5 545.16 1164.66 11149.062005-06 8527.55 2188.28 10715.83 1021.55 908.42 1929.97 12645.8

80-86 15.02 16.34 15.46 8.12 22.77 14.78 15.2986-96 15.97 27.68 21.32 16.63 7.4 11.66 19.7296-06 16.71 -0.19 10 7.02 9.78 8.26 9.7880-06 15.21 13.84 14.96 11.53 11.84 11.6 14.39Source: RBI, State Finances: A Study of Budgets, Various Issues.Note: Last four bold lines represent the Annual Average Compound Growth Rates.

120

Table 3.1(a): Share of various kinds of Revenue Receipts in Total Revenue Receipts of the State Government

Year

1 2 3=1+2 4 5 6=4+5 7=3+6Own TaxRevenue

Own NonTax Rev

Total OwnRevenue

Sh. inCentral Taxes

Grant fromthe Center

Total NonOwn Rev

Total RevReceipts

1980-81 50.86 25.94 76.8 13.31 9.89 23.2 10081-82 54.21 25.74 79.95 12.69 7.36 20.05 10082-83 55.05 26.14 81.19 11.87 6.94 18.81 10083-84 52.37 25.7 78.07 11.56 10.36 21.92 10084-85 51.29 27.13 78.42 11.83 9.74 21.57 10085-86 52.24 26.88 79.12 8.9 11.98 20.88 10086-87 50.07 26.25 76.32 8.6 15.09 23.69 10087-88 50.96 28.99 79.95 8.25 11.81 20.06 10088-89 55.2 24.61 79.81 8.37 11.82 20.19 10089-90 56.63 27.75 84.38 9.59 6.04 15.63 10090-91 55.9 26.71 82.61 9.72 7.68 17.4 10091-92 58 24.36 82.36 9.79 7.85 17.64 10092-93 60.85 19.36 80.21 11.02 8.77 19.79 10093-94 45.64 38.51 84.15 8.11 7.74 15.85 10094-95 32.09 59.05 91.14 5.39 3.47 8.86 10095-96 43.25 43.61 86.86 7.19 5.95 13.14 10096-97 35.43 51.79 87.22 7.14 5.63 12.77 10097-98 40.16 44.61 84.77 9.14 6.08 15.22 10098-99 56.94 27.71 84.65 8.76 6.59 15.35 10099-00 61 21.83 82.83 9.11 8.06 17.17 10000-01 65.58 21.9 87.48 5.25 7.27 12.52 100

2001-02 65.42 21.92 87.34 5.91 6.75 12.66 1002002-03 64.11 20.88 84.99 8.74 6.27 15.01 1002003-04 64.49 22.58 87.07 6.1 6.82 12.92 1002004-05 66.73 22.82 89.55 5.56 4.89 10.45 1002005-06 67.43 17.3 84.73 8.08 7.18 15.26 100

Source: RBI, State Finances: A Study of Budgets, Various Issues.

121

Table 3.1(b): Composition of various kinds of Revenue Receipts of the State Government as a percentage of GSDP

YearOwn TaxRevenue

Own NonTax Rev

Total OwnRevenue

Share inCentral Taxes

Grant fromthe Center

Total NonOwn Rev

Total RevRec.

1980-81 6.4 3.3 9.7 1.7 1.2 2.9 12.681-82 6.9 3.3 10.2 1.6 0.9 2.5 12.782-83 7.0 3.3 10.3 1.5 0.9 2.4 12.683-84 6.9 3.4 10.3 1.5 1.4 2.9 13.284-85 7.0 3.7 10.7 1.6 1.3 2.9 13.685-86 7.1 3.7 10.8 1.2 1.6 2.8 13.686-87 7.6 4.0 11.6 1.3 2.3 3.6 15.287-88 8.0 4.5 12.5 1.3 1.8 3.1 15.688-89 7.4 3.3 10.6 1.1 1.6 2.7 13.389-90 7.6 3.7 11.3 1.3 0.8 2.1 13.490-91 7.3 3.5 10.7 1.3 1.0 2.3 13.091-92 7.4 3.1 10.5 1.2 1.0 2.2 12.792-93 7.7 2.5 10.2 1.4 1.1 2.5 12.793-94 7.2 6.1 13.2 1.3 1.2 2.5 15.794-95 7.2 13.2 20.4 1.2 0.8 2.0 22.495-96 7.3 7.3 14.6 1.2 1.0 2.2 16.896-97 6.0 8.8 14.8 1.2 1.0 2.2 17.097-98 6.1 6.8 12.9 1.4 0.9 2.3 15.398-99 7.1 3.5 10.6 1.1 0.8 1.9 12.699-00 7.2 2.6 9.8 1.1 1.0 2.0 11.800-01 7.8 2.6 10.5 0.6 0.9 1.5 12.0

2001-02 8.2 2.8 11.0 0.7 0.8 1.6 12.62002-03 8.4 2.7 11.1 1.1 0.8 2.0 13.12003-04 8.6 3.0 11.6 0.8 0.9 1.7 13.32004-05 9.0 3.1 12.0 0.7 0.7 1.4 13.42005-06 9.8 2.6 12.4 1.3 1.2 2.5 14.9

Source: Calculated by using data from (i) RBI, State Finances: A Study of Budgets, Various Issues, and(ii) Economic and Political Weekly Research Foundation (EPWRF), Domestic Product of Statesof India, Vol-1(2003) & Vol-2(2006).

122

Table 3.2: Revenue Receipts of States in India as a percentage of GSDP

StatesAndhra.

Pr Bihar Goa Gujarat HaryanaKar

nataka Kerala M.PMaha

rashtra Orissa PunjabRajasthan T.N U.P W.B

80-81 14.5 12.7 - 12.7 12.6 14.3 12.8 12.5 11.9 16.0 11.6 14.1 14.3 11.1 9.881-82 13.8 12.8 - 11.5 12.7 15.1 15.8 13.4 12.3 13.8 11.8 13.6 13.4 12.1 9.882-83 14.2 13.0 - 12.5 12.6 14.9 12.9 13.2 13.5 17.2 12.2 14.0 15.1 11.8 9.883-84 14.6 13.0 - 11.3 13.2 14.4 12.7 13.4 13.4 13.1 12.3 12.6 15.2 11.0 9.384-85 15.9 13.1 - 12.2 13.6 15.0 13.8 13.1 13.9 13.8 11.4 13.4 14.7 11.8 9.385-86 17.1 15.9 - 12.5 13.6 16.2 15.6 13.4 13.7 13.2 12.6 14.8 15.2 12.7 11.486-87 17.5 15.3 20.8 12.2 15.2 16.0 15.1 15.1 15.1 15.8 12.7 15.7 14.8 12.4 11.287-88 16.7 15.1 17.7 15.8 15.6 15.7 14.2 13.9 14.3 16.8 11.8 17.3 13.5 14.1 10.888-89 16.3 15.6 20.2 13.8 13.3 15.6 15.2 13.7 13.5 15.4 11.8 14.0 13.6 12.5 11.489-90 14.9 16.4 18.0 13.3 13.4 15.4 14.3 13.6 13.1 15.1 10.9 14.6 14.1 12.8 10.690-91 15.1 15.5 21.1 11.1 13.0 15.6 14.6 12.8 13.1 19.0 10.7 15.2 14.6 13.6 10.991-92 14.5 15.6 19.5 14.0 12.7 14.8 13.9 14.1 12.9 16.7 16.7 15.5 16.5 13.6 10.792-93 15.0 17.7 19.4 13.4 12.7 15.3 14.2 15.1 11.5 18.4 10.9 15.6 14.7 15.0 11.293-94 14.3 29.1 19.4 14.3 15.7 15.4 14.9 18.6 11.5 17.3 10.8 17.0 14.0 15.1 11.194-95 12.7 26.2 18.8 12.3 22.4 14.5 14.6 18.0 11.6 16.1 15.5 15.2 13.4 14.2 11.195-96 12.4 30.1 24.6 11.9 16.8 15.2 14.0 18.1 10.5 14.3 13.4 16.1 13.6 14.3 10.096-97 12.4 24.7 20.4 11.3 17.0 14.8 13.8 18.2 10.7 16.2 12.6 13.1 13.4 12.5 10.097-98 14.5 25.8 22.5 12.2 15.3 14.5 14.4 18.7 10.4 14.4 13.0 13.1 13.1 12.8 9.298-99 12.4 23.8 18.9 12.1 12.6 12.8 12.8 16.4 10.4 12.8 10.3 11.7 12.1 11.3 8.199-00 13.4 29.8 18.2 12.8 11.8 13.6 12.7 16.9 10.4 15.2 12.2 12.5 12.9 13.0 8.100-01 13.9 24.2 19.3 14.5 12.0 14.2 12.5 18.5 12.4 17.8 14.2 15.7 13.0 14.3 10.4

2001-02 14.4 21.7 23.2 13.2 12.6 14.1 12.5 13.2 11.3 16.8 12.6 13.8 13.1 14.1 9.42002-03 14.1 21.8 19.8 12.5 13.1 13.6 13.1 16.4 10.4 19.2 15.0 15.5 13.4 14.1 8.82003-04 14.6 25.9 16.8 11.0 13.3 16.0 13.2 14.6 10.5 17.4 15.0 14.7 14.1 14.7 8.92004-05 14.2 27.5 18.0 11.3 13.4 17.9 13.4 19.2 11.0 20.0 15.6 16.1 15.1 16.0 9.62005-06 15.4 29.4 20.6 12.9 14.9 17.9 13.5 18.9 11.5 22.2 17.6 17.0 16.0 17.6 10.3

Source: Calculated by using data from (i) RBI, State Finances: A Study of Budgets, Various Issues, and (ii) Economic and PoliticalWeekly Research Foundation (EPWRF), Domestic Product of States of India, Vol-1(2003) & Vol-2(2006).

123

Table 3.2 (a): Own Tax Revenue Receipts of States as a percentage of GSDP

StatesAndhra.

Pr Bihar Goa Gujarat HaryanaKar

nataka Kerala M.PMaha

rashtra Orissa PunjabRajasthan T.N U.P W.B

80-81 6.7 3.6 – 6.6 6.4 7.1 6.7 4.2 6.6 3.4 7.1 4.3 7.1 3.8 4.681-82 6.6 3.7 – 6.5 6.9 7.9 6.9 4.8 7.2 3.7 7.5 4.9 7.8 4.4 4.982-83 7.0 3.7 – 7.1 7.0 7.8 7.0 4.9 7.9 3.7 7.6 5.4 9.1 4.3 4.583-84 7.2 3.8 – 6.4 6.9 7.4 6.6 4.8 7.5 3.4 7.6 4.9 8.9 4.1 4.784-85 8.1 3.4 – 6.8 7.0 7.8 7.6 5.1 7.5 3.8 7.0 5.3 8.6 4.3 4.985-86 8.9 3.8 – 7.0 7.1 8.7 8.3 5.1 7.8 4.0 7.2 5.6 8.9 4.2 5.586-87 9.0 3.8 7.4 7.2 7.6 8.5 8.2 5.7 8.5 4.4 7.9 5.7 9.1 4.5 5.487-88 8.7 4.1 5.6 8.6 8.0 8.7 8.3 5.2 8.3 4.9 7.7 6.1 7.7 5.3 5.488-89 8.1 3.7 5.9 8.0 7.4 8.9 8.5 5.3 8.2 4.4 7.6 5.3 7.8 4.6 5.989-90 7.9 3.9 5.8 8.0 7.6 8.9 8.6 5.5 7.7 4.6 7.4 5.9 8.3 4.7 5.990-91 7.5 4.1 6.3 7.9 7.3 9.3 8.1 4.9 7.7 5.9 7.0 5.1 9.0 5.2 5.791-92 7.1 4.2 6.9 8.7 7.4 9.0 8.2 5.6 7.9 4.6 6.9 5.8 9.1 4.9 5.692-93 7.2 4.6 7.2 7.9 7.7 8.7 8.1 5.5 7.0 4.8 6.9 5.5 8.7 5.0 5.693-94 6.6 7.7 7.8 8.0 7.2 9.3 8.9 7.1 6.8 4.6 7.1 5.9 8.3 5.1 5.594-95 6.1 7.1 8.0 7.5 7.2 9.0 8.8 6.8 7.3 4.2 7.6 5.6 8.5 5.2 6.095-96 5.2 8.1 8.2 7.4 7.3 9.4 8.7 7.4 6.9 4.2 6.9 5.8 9.1 5.1 5.696-97 5.4 6.9 7.6 7.1 6.0 8.8 8.8 7.5 6.5 5.1 6.2 5.4 8.9 4.9 5.297-98 7.4 7.1 7.4 7.2 6.1 8.8 9.1 7.6 7.0 4.4 6.3 5.6 8.4 5.1 4.698-99 6.9 6.8 5.9 7.2 7.1 7.9 8.3 7.4 6.8 4.2 5.9 5.4 8.1 5.1 4.199-00 7.2 8.6 6.8 7.5 7.2 8.2 8.3 7.4 7.1 4.4 6.5 5.8 8.6 5.7 4.000-01 7.5 6.2 6.7 8.3 7.8 8.6 8.4 7.7 8.3 5.6 7.4 6.7 8.7 6.3 4.2

2001-02 8.3 5.2 7.1 7.6 8.2 9.1 8.2 5.6 8.0 5.9 6.8 6.4 9.1 5.7 4.22002-03 7.7 5.2 6.5 6.8 8.4 8.8 9.0 7.6 7.6 6.5 7.7 7.4 9.2 6.5 4.32003-04 7.5 6.4 7.4 6.7 8.6 9.7 9.0 6.9 7.7 6.1 7.6 6.9 9.5 6.3 4.72004-05 8.0 5.8 8.5 7.2 9.0 10.8 8.9 7.5 8.2 7.0 7.9 7.6 10.2 6.7 4.82005-06 8.5 5.9 10.4 8.1 9.7 11.0 8.7 8.4 8.0 7.9 9.3 8.1 11.0 7.3 4.5

Source: Calculated by using data from (i) RBI, State Finances: A Study of Budgets, Various Issues, and (ii) Economic and PoliticalWeekly Research Foundation (EPWRF), Domestic Product of States of India, Vol-1(2003) & Vol-2(2006).

124

Table 3.3: Sources and Distribution of Own Tax Revenue Receipts of the Haryana Government (Rs. in Cr.)

YearLand

Revenue SDRF

Total incomefrom

Property &Capital

StateExciseDuty

SalesTax

Taxeson

Vehicles

Goods&

Passengers

Taxeson

Electricity

EntertainmentTax

OtherTaxes

Total Taxon

Commodities& Services

TotalOwn

Tax Rev1980-81 3.93 18.35 24.28 42.98 106 9.73 32.94 14.04 5.92 0 211.61 233.91

81-82 3.64 25.37 30.01 51.99 138.37 10.75 39.65 12.7 7.29 0.85 261.6 290.6282-83 3.38 25.18 28.56 61.91 160.48 11.54 46.26 19.77 8.16 0 308.12 336.6883-84 3.76 28.08 31.84 68.4 167.46 12.65 51.34 26.19 7.99 0 334.03 365.8784-85 3.95 32.1 36.05 90.52 183.86 14.16 54.83 17.45 7.6 0.94 369.36 405.4185-86 3.79 37.39 41.18 110.96 234.35 15.01 66.16 22.4 7.99 3.66 460.53 501.7186-87 2.33 45.68 48.01 132.74 256.24 15.57 73.31 27.21 9.03 3.75 517.85 565.8687-88 0.53 50.23 49.76 158.54 314.93 16.25 80.64 27.67 9.01 6.61 613.65 664.488-89 0.73 70.71 71.44 192.87 370.56 19.11 94.46 33.36 8.17 5.44 723.97 795.4189-90 0.73 92.55 93.28 236.68 415.18 21.39 100.87 29.43 7.97 5.32 816.84 910.1290-91 0.94 101.5 102.44 286.35 494.7 35.78 102.1 34.36 7.83 5.98 967.1 1069.5491-92 1.09 97.72 98.81 341.87 620.3 68.47 119.82 38.49 8.27 4.17 1201.39 1300.292-93 1.35 104.72 106.07 393.84 676.41 71.15 141.02 43.43 8.8 6.15 1340.8 1446.8793-94 1.35 119.64 120.99 431.76 768.51 52.17 161.52 39.06 8.51 6.39 1467.92 1588.9194-95 1.34 163.81 165.15 529.35 890.08 45.58 194.8 48 9.52 5.38 1732.71 1887.8695-96 1.31 244.63 245.94 552.96 1055.41 52.82 201.16 46.46 0 14.21 1923.02 2168.9696-97 2.43 273.1 275.53 64.13 1380.07 61.59 259.64 35.48 2.29 64.39 1868.29 2143.1297-98 3.93 301.67 305.6 49.63 1552.69 67.11 331.21 40.53 13.05 8.81 2063.03 2368.6398-99 3.88 294.54 298.42 774.63 1599.38 71.39 315.81 44.53 11.94 3.52 2821.2 3119.6299-00 4.29 309.92 314.21 765.36 1967.38 84.77 323.85 46.08 10.76 5.2 3203.4 3517.6100-01 11.73 419.24 431.9 840.56 2573.39 85.69 366.66 0.68 9.62 2.98 3879.58 4311.48

2001-02 19.29 488.29 508.82 875.39 2944.81 103.63 498.56 29.48 7.99 3.75 4463.61 4972.432002-03 9.87 541.39 551.26 878.72 3337.43 114.39 652.75 0.87 5.46 8.8 4998.42 5549.682003-04 20.01 695.63 715.64 923.28 3838 132.39 660.36 59.06 9.77 9.55 5632.41 6348.052004-05 11.7 726.58 738.28 1013.16 4760.91 140.41 705.16 61.74 9.15 11.21 6698.14 7440.032005-06 11.95 950 961.95 1135 5521 150 680 59.1 14 6.5 7565.6 8527.551980-86 0.49 13.31 11.55 20.43 14.9 9.22 13.93 10.74 4.69 134.4 15.37 15.021986-96 3.94 17.31 17.02 17.79 16.61 18.31 12.28 6.73 -30.62 7.17 15.85 15.971996-06 22.27 15.3 15.41 34.01 17.37 11.09 12.92 0.49 6.63 -7.10 16.9 16.721980-06 7.44 16.84 16.28 12.63 16.93 12.25 13.35 0.15 -0.18 20.23 15.09 15.21

Source: RBI, State Finances: A Study of Budgets, Various Issues.Note: Last four bold lines represent the Annual Average Compound Growth Rates.

125

Table 3.3(a): Share of various kinds of Own Tax Revenues Receipts in Total Own Tax Revenue Receipts of GoH

Year

LandRev

-enue

Stamp &Regis-

trationFee

Total incomefrom

Property &Capital

StateExciseDuty

SalesTax

Taxeson

Vehicles

Goods&

Passengers

Taxeson

Electricity

EntertainmentTax

OtherTaxes

Total Taxon

Commodities

& Services

TotalOwn

Tax Rev1980-81 1.68 7.84 9.53 18.37 45.32 4.16 14.08 6.00 2.53 0.00 90.47 100

81-82 1.25 8.73 9.99 17.89 47.61 3.70 13.64 4.37 2.51 0.29 90.01 10082-83 1.00 7.48 8.48 18.39 47.67 3.43 13.74 5.87 2.42 0.00 91.52 10083-84 1.03 7.67 8.70 18.70 45.77 3.46 14.03 7.16 2.18 0.00 91.30 10084-85 0.97 7.92 8.89 22.33 45.35 3.49 13.52 4.30 1.87 0.23 91.11 10085-86 0.76 7.45 8.21 22.12 46.71 2.99 13.19 4.46 1.59 0.73 91.79 10086-87 0.41 8.07 8.48 23.46 45.28 2.75 12.96 4.81 1.60 0.66 91.52 10087-88 0.08 7.56 7.64 23.86 47.40 2.45 12.14 4.16 1.36 0.99 92.36 10088-89 0.09 8.89 8.98 24.25 46.59 2.40 11.88 4.19 1.03 0.68 91.02 10089-90 0.08 10.17 10.25 26.01 45.62 2.35 11.08 3.23 0.88 0.58 89.75 10090-91 0.09 9.49 9.58 26.77 46.25 3.35 9.55 3.21 0.73 0.56 90.42 10091-92 0.08 7.52 7.60 26.29 47.71 5.27 9.22 2.96 0.64 0.32 92.40 10092-93 0.09 7.24 7.33 27.22 46.75 4.92 9.75 3.00 0.61 0.43 92.67 10093-94 0.08 7.53 7.61 27.17 48.37 3.28 10.17 2.46 0.54 0.40 92.39 10094-95 0.07 8.68 8.75 28.04 47.15 2.41 10.32 2.54 0.50 0.28 91.25 10095-96 0.06 11.28 11.34 25.49 48.66 2.44 9.27 2.14 0.00 0.66 88.66 10096-97 0.11 12.74 12.86 2.99 64.40 2.87 12.12 1.66 0.11 3.00 87.14 10097-98 0.17 12.74 12.90 2.10 65.55 2.83 13.98 1.71 0.55 0.37 87.10 10098-99 0.12 9.44 9.57 24.83 51.27 2.29 10.12 1.43 0.38 0.11 90.43 10099-00 0.12 8.81 8.93 21.76 55.93 2.41 9.21 1.31 0.31 0.15 91.07 10000-01 0.27 9.72 10.02 19.50 59.69 1.99 8.50 0.02 0.22 0.07 89.98 100

2001-02 0.39 9.82 10.23 17.60 59.22 2.08 10.03 0.59 0.16 0.08 89.77 1002002-03 0.18 9.76 9.93 15.83 60.14 2.06 11.76 0.02 0.10 0.16 90.07 1002003-04 0.32 10.96 11.27 14.54 60.46 2.09 10.40 0.93 0.15 0.15 88.73 1002004-05 0.16 9.77 9.92 13.62 63.99 1.89 9.48 0.83 0.12 0.15 90.08 1002005-06 0.14 11.14 11.28 13.31 64.74 1.76 7.97 0.69 0.16 0.08 88.72 100Source: RBI, State Finances: A Study of Budgets, Various Issues.

126

Table 3.3(b): Sources and Distribution of Own Tax Revenue Receipts of Haryana Government as a percentage of GSDP

Year

LandRev

-enue

Stamp &Regis-

trationFee

Total incomefrom

Property &Capital

StateExciseDuty

SalesTax

Taxeson

Vehicles

Goods&

Passengers

Taxeson

Electricity

EntertainmentTax

OtherTaxes

Total Taxon

Commodities

& Services

TotalOwn

Tax Rev1980-81 0.11 0.50 0.66 1.18 2.90 0.27 0.90 0.38 0.16 0.00 5.79 6.40

81-82 0.09 0.60 0.71 1.23 3.28 0.25 0.94 0.30 0.17 0.02 6.20 6.8982-83 0.07 0.52 0.59 1.28 3.32 0.24 0.96 0.41 0.17 0.00 6.37 6.9683-84 0.07 0.53 0.60 1.30 3.18 0.24 0.97 0.50 0.15 0.00 6.33 6.9484-85 0.07 0.55 0.62 1.56 3.17 0.24 0.94 0.30 0.13 0.02 6.36 6.9885-86 0.05 0.53 0.58 1.57 3.32 0.21 0.94 0.32 0.11 0.05 6.52 7.1086-87 0.03 0.61 0.65 1.79 3.45 0.21 0.99 0.37 0.12 0.05 6.97 7.6287-88 0.01 0.60 0.60 1.90 3.77 0.19 0.97 0.33 0.11 0.08 7.35 7.9688-89 0.01 0.65 0.66 1.79 3.43 0.18 0.87 0.31 0.08 0.05 6.70 7.3689-90 0.01 0.77 0.78 1.97 3.45 0.18 0.84 0.24 0.07 0.04 6.79 7.5790-91 0.01 0.69 0.70 1.95 3.36 0.24 0.69 0.23 0.05 0.04 6.58 7.2791-92 0.01 0.55 0.56 1.94 3.52 0.39 0.68 0.22 0.05 0.02 6.82 7.3892-93 0.01 0.56 0.57 2.11 3.62 0.38 0.75 0.23 0.05 0.03 7.17 7.7493-94 0.01 0.54 0.55 1.95 3.47 0.24 0.73 0.18 0.04 0.03 6.63 7.1894-95 0.01 0.62 0.63 2.02 3.39 0.17 0.74 0.18 0.04 0.02 6.60 7.1995-96 0.00 0.82 0.83 1.86 3.54 0.18 0.68 0.16 0.00 0.05 6.46 7.2896-97 0.01 0.77 0.77 0.18 3.87 0.17 0.73 0.10 0.01 0.18 5.24 6.0197-98 0.01 0.78 0.79 0.13 4.02 0.17 0.86 0.10 0.03 0.02 5.34 6.1398-99 0.01 0.67 0.68 1.77 3.66 0.16 0.72 0.10 0.03 0.01 6.46 7.1599-00 0.01 0.63 0.64 1.56 4.02 0.17 0.66 0.09 0.02 0.01 6.55 7.1900-01 0.02 0.76 0.79 1.53 4.68 0.16 0.67 0.00 0.02 0.01 7.05 7.84

2001-02 0.03 0.81 0.84 1.45 4.86 0.17 0.82 0.05 0.01 0.01 7.37 8.212002-03 0.01 0.82 0.83 1.33 5.04 0.17 0.99 0.00 0.01 0.01 7.55 8.392003-04 0.03 0.94 0.97 1.25 5.19 0.18 0.89 0.08 0.01 0.01 7.62 8.582004-05 0.01 0.88 0.89 1.22 5.74 0.17 0.85 0.07 0.01 0.01 8.07 8.962005-06 0.01 1.02 1.03 1.22 5.93 0.16 0.73 0.06 0.02 0.01 8.12 9.15Source: Calculated by using data from (i) RBI, State Finances: A Study of Budgets, Various Issues, and (ii) Economic and

Political Weekly Research Foundation (EPWRF), Domestic Product of States of India, Vol-1(2003) & Vol-2(2006).

127

Table 3.4: Buoyancy Co-efficient of Own Taxes in Haryana

Own Taxes

1986-87 to 1995-96 1996-97 to 2005-06 1980-81 to 2005-06

Buoyancy R-Square t- value F- value BuoyancyR-

Squaret-

value F- value BuoyancyR-

Squaret-

value F- valueSale Tax 0.986 0.995 39.575 1566.186 1.497 0.99 27.58 760.653 1.161 0.993 59.081 3490.561Taxes onGoods andPassengers 0.737 0.963 14.411 207.676 1.123 0.893 8.158 66.555 0.928 0.985 39.098 1528.636Excise Duty 1.054 0.992 31.38 984.73 2.759 0.582 3.336 11.128 0.875 0.655 6.748 45.541Electricity Duty 0.42 0.906 8.759 76.725 0.032 0 0.017 0 0.02 0 0.091 0.008Taxes onVehicles 1.089 0.741 4.784 22.889 0.981 0.983 21.539 21.539 0.864 0.95 21.441 459.729EntertainmentTax -3.021 0.247 -1.622 2.63 0.457 0.103 0.956 0.956 -0.07 0.002 -0.197 0.039Other Taxes 0.418 0.305 1.873 3.509 -0.694 0.066 -0.75 -0.75 0.471 0.264 2.744 7.531Total Tax onCommoditiesand Services 0.945 0.995 39.225 1538.613 1.461 0.99 27.635 27.635 1.043 0.992 54.592 2980.275Land Revenue 0.243 0.073 0.796 0.633 1.878 0.674 4.063 4.063 0.509 0.256 2.875 8.264Stamp Duty andRegistrationFee 1.027 0.924 9.857 97.151 1.329 0.955 13.039 13.039 1.158 0.99 49.868 2486.836Total tax fromproperty andcapital 1.011 0.924 9.845 96.927 1.338 0.956 13.155 13.155 1.121 0.989 45.592 2078.619Total OwnTaxes 0.952 0.997 49.949 2494.928 1.445 0.994 36.554 36.554 1.051 0.993 59.972 3596.625

Source: Calculated by using data from (i) RBI, State Finances: A Study of Budgets, Various Issues, and (ii) Economic and Political WeeklyResearch Foundation (EPWRF), Domestic Product of States of India, Vol-1(2003) & Vol-2(2006).

128

Table 3.5: Elasticity Co-efficient of Own Taxes in Haryana

Own Taxes

1986-87 to 1995-96 1996-97 to 2005-06 1980-81 to 2005-06

Elasticity R-Square t- value F- value ElasticityR-

Squaret-

value F- value ElasticityR-

Squaret-

value F- valueSale Tax 0.966 0.995 40.835 1667.482 1.497 0.99 27.58 760.653 1.087 0.985 39.879 1590.309Taxes onGoods andPassengers 0.737 0.963 14.411 207.676 1.123 0.893 8.158 66.555 0.879 0.976 31.399 985.91Excise Duty 1.054 0.992 31.38 984.73 2.759 0.582 3.336 11.128 0.85 0.645 6.602 43.586Electricity Duty 0.42 0.906 8.759 76.725 0.032 0 0.017 0 -0.066 0.004 -0.307 0.095Taxes onVehicles 1.089 0.741 4.784 22.889 0.981 0.983 21.539 21.539 0.864 0.95 21.441 459.729EntertainmentTax -3.021 0.247 -1.622 2.63 0.457 0.103 0.956 0.956 -0.07 0.002 -0.197 0.039Other Taxes 0.418 0.305 1.873 3.509 -1.443 0.25 -1.64 2.691 0.3111 0.119 1.683 2.832Total Tax onCommoditiesand Services 0.938 0.995 38.869 1510.832 1.46 0.99 27.606 762.108 0.98 0.989 45.841 2101.387Land Revenue 0.243 0.073 0.796 0.633 1.878 0.674 4.063 4.063 0.509 0.256 2.875 8.264Stamp DutyandRegistrationFee 1.027 0.924 9.857 97.151 1.329 0.955 13.039 13.039 1.158 0.99 49.868 2486.836Total tax fromproperty andcapital 1.011 0.924 9.845 96.927 1.338 0.956 13.155 13.155 1.121 0.989 45.592 2078.619Total OwnTaxes 0.947 0.997 51.376 2639.514 1.444 0.994 36.519 1333.617 0.996 0.991 51.062 2607.339

Source: Calculated by using data from (i) RBI, State Finances: A Study of Budgets, Various Issues, and (ii) Economic and Political WeeklyResearch Foundation (EPWRF), Domestic Product of States of India, Vol-1(2003) & Vol-2(2006).

129

Table 3.6 Haryana Government's Efforts to raise Tax Revenue Receipts(difference between Buoyancies and Elasticities)

Own Taxes1986-87 to1995-96

1996-97 to2005-06

1980-81 to2005-06

Sale Tax 0.02 0 0.074Taxes on Goods and Passengers 0 0 0.049Excise Duty 0 0 0.025Electricity Duty 0 0 0.086Taxes on Vehicles 0 0 0Entertainment Tax 0 0 0Other Taxes 0 0.749 0.1599Total Tax on Commodities and Services 0.007 0.001 0.063Land Revenue 0 0 0Stamp Duty and Registration Fee 0 0 0Total tax from property and capital 0 0 0Total Own Taxes 0.005 0.001 0.055

Source: Calculated by using data from (i) RBI, State Finances: A Study ofBudgets, Various Issues, and (ii) Economic and Political Weekly ResearchFoundation (EPWRF), Domestic Product of States of India, Vol-1(2003) &Vol-2(2006).

130

Table: 3.7Tax Effort of Selected States : Land Revenue and Agriculture Income Tax

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 51.43 105.75 25.58 13Bihar 54.87 56.75 50.85 9Goa 4.4 3.82 60.66 6

Gujarat 152.3 70.14 114.2 4Haryana 13.87 55.12 13.23 14

Karnataka 83.33 64.02 68.26 5Kerala 47.65 44.08 56.85 7

Madhya Pradesh 43.6 74.00 30.99 12Maharashtra 369.2 96.05 202.15 2

Orissa 105.7 48.66 114.25 3Punjab 11.9 81.40 7.69 15

Rajasthan 66.1 66.02 52.65 8Tamil Nadu 33.79 55.68 31.91 10

Uttar Pradesh 94.77 156.86 31.77 11West Bengal 929.69 106.17 460.55 1

All States 2062.6 1084.72 100 -Source: Calculated

Table: 3.8Tax Effort of Selected States : Stamp Duty and Registration Fee

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 153.05 145.03 101.31 8Bihar 52.58 51.16 98.66 9Goa 225.82 346.47 62.57 14

Gujarat 160.34 209.31 73.54 11Haryana 309.55 180.34 164.77 1

Karnataka 266.84 185.72 137.92 2Kerala 189.65 172.78 105.37 6

Madhya Pradesh 107.06 122.27 84.05 10Maharashtra 354.18 255.14 133.26 4

Orissa 44.10 66.34 63.81 13Punjab 308.43 214.95 137.74 3

Rajasthan 114.75 104.9 105.01 7Tamil Nadu 213.65 279.91 73.27 12

Uttar Pradesh 141.54 115.53 117.61 5West Bengal 104.83 186.31 54.01 15

All States 2746.37 2636.16 100 -Source: Calculated

131

Table: 3.9Tax Effort of Selected States : Sales Tax

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 1248.73 1077.05 115.61 4Bihar 221.40 219.24 100.70 8Goa 3731.88 4528.95 82.17 14

Gujarat 1429.50 1403.38 101.57 7Haryana 1881.70 1534.50 122.28 3

Karnataka 1313.31 1239.49 105.66 5Kerala 1888.08 1394.77 134.99 1

Madhya Pradesh 558.51 643.08 86.60 12Maharashtra 1638.86 1579.70 103.45 6

Orissa 538.03 541.31 99.11 10Punjab 1395.35 1686.07 82.52 13

Rajasthan 720.91 714.24 100.62 9Tamil Nadu 1794.20 1357.84 131.76 2

Uttar Pradesh 475.26 485.17 97.68 11West Bengal 612.75 988.27 61.83 15

All States 19448.45 19393.03 100 -Source: Calculated

Table: 3.10Tax Effort of Selected States : State Excise Duty

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 256.6 222.28 115.27 8Bihar 32.23 50.77 63.41 11Goa 385.11 686.5 56.04 13

Gujarat - - - -Haryana 443.80 322.39 137.51 5

Karnataka 456.24 226.71 201.02 1Kerala 216.28 263.99 81.81 9

Madhya Pradesh 175.02 130.46 134.01 7Maharashtra 223.03 317.76 70.11 10

Orissa 73.28 119.92 61.04 12Punjab 599.14 309.08 193.63 2

Rajasthan 211.28 150.06 140.64 4Tamil Nadu 337.56 251.25 134.21 6

Uttar Pradesh 154.71 104.23 148.26 3West Bengal 77.27 214.28 36.02 14

All States 3641.36 3369.67 100 -Source: Calculated

132

Table: 3.11Tax Effort of Selected States : Motor Vehicle Tax and Taxes on Goods & Passengers

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 1099 1050.78 101.18 8Bihar 524.18 291.76 173.81 1Goa 107.03 191.42 54.10 14

Gujarat 1049.47 1204.08 84.31 10Haryana 801.83 622.44 124.62 4

Karnataka 1465.17 828.31 171.12 2Kerala 569.87 659.75 83.56 11

Madhya Pradesh 860.83 805.75 103.35 7Maharashtra 1409.63 1402.52 97.23 9

Orissa 650.2 446.88 140.75 3Punjab 412.2 766.91 52.00 15

Rajasthan 930.83 809.89 111.19 5Tamil Nadu 1519.63 1361.04 108.01 6

Uttar Pradesh 770.27 1134.13 65.70 13West Bengal 437.97 621.57 68.16 2

All States 12608.11 12197.22 100 -Source: Calculated

Table: 3.12Tax Effort of Selected States : Electricity Duty

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 128.8 564.22 19.25 14Bihar 10.03 13.48 62.77 10Goa 0 3.60 0 15

Gujarat 1601.7 611.41 220.96 3Haryana 40.57 104.66 32.69 12

Karnataka 261.03 288.43 76.34 8Kerala 130.73 59.05 186.73 4

Madhya Pradesh 735.2 153.96 402.78 2Maharashtra 1150.9 1128.31 86.04 7

Orissa 211.5 40.59 439.47 1Punjab 224.7 266.46 71.13 9

Rajasthan 320.97 148.38 182.45 5Tamil Nadu 202.07 695.15 24.52 13

Uttar Pradesh 224.8 364.19 52.06 11West Bengal 270.43 207.81 109.77 6

All States 5513.43 4649.69 100 -Source: Calculated

133

Table: 3.13Tax Effort of Selected States : Other Taxes

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 17.87 22.80 63.26 10Bihar 2.55 2.22 92.75 8Goa 196.14 135.21 117.09 6

Gujarat 39.35 32.30 98.35 7Haryana 8.51 41.00 16.76 15

Karnataka 38.92 23.52 133.58 5Kerala 57.12 29.91 154.18 4

Madhya Pradesh 19.82 9.83 162.80 1Maharashtra 77.73 40.07 156.56 3

Orissa 4.82 8.61 45.19 14Punjab 22.80 38.36 47.97 13

Rajasthan 8.37 12.26 55.11 11Tamil Nadu 17.27 27.66 50.39 12

Uttar Pradesh 6.14 6.90 71.85 9West Bengal 42.12 21.51 158.03 2

All States 559.53 452.13 100 -Source: Calculated

Table: 3.14Tax Effort of Selected States : Total Own Taxes

StatesActual

Revenue(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

Ranks

Andhra Pradesh 2955.37 3187.89 87.14 12Bihar 897.83 685.68 123.13 2Goa 4650.39 5895.96 74.14 15

Gujarat 4432.66 3530.60 118.01 5Haryana 3499.83 2860.45 115.01 6

Karnataka 3884.83 2856.37 127.84 1Kerala 3099.32 2624.33 111.01 8

Madhya Pradesh 2500.05 1939.34 121.07 3Maharashtra 5223.52 4819.54 101.87 9

Orissa 1627.62 1272.31 120.24 4Punjab 2974.51 3363.24 83.13 13

Rajasthan 2373.21 2005.75 111.22 7Tamil Nadu 4118.16 4028.53 96.09 11

Uttar Pradesh 1867.48 2376.01 74.16 14West Bengal 2475.06 2345.92 99.17 10

All States 46579.86 43782.61 100 -Source: Calculated

134

Table: 3.15

Tax Effort of Selected States : Summary Results

StatesTax

EffortIndex

Area of weak tax efforts

Andhra Pradesh 12 Agricultural Income Tax, Electricity Duty andOther taxes.

Bihar 2 Agricultural Income Tax, Electricity Duty andExcise Duty.

Goa 15 Agricultural Income Tax, Stamp Duty andRegistration Fee, Motor Vehicle tax & taxes onGoods and Passengers, Sale Tax, Excise Duty

and Electricity Duty.Gujarat 5 Stamp Duty and Registration Fee and Motor

Vehicle tax & taxes on Goods and Passengers.Haryana 6 Agricultural Income Tax, Electricity Duty and

Other taxes.Karnataka 1 Agricultural Income Tax and Electricity Duty

Kerala 8 Agricultural Income Tax, Excise Duty andMotor Vehicle tax & taxes on Goods and

Passengers.Madhya Pradesh 3 Agricultural Income Tax, Stamp Duty and

Registration Fee and Sales Tax.Maharashtra 9 Electricity Duty and Excise Duty

Orissa 4 Stamp Duty and Registration Fee, Excise Dutyand Other taxes.

Punjab 13 Agricultural Income Tax, Motor Vehicle tax &taxes on Goods and Passengers, Sale Tax and

Electricity Duty.Rajasthan 7 Agricultural and Other taxes.

Tamil Nadu 11 Agricultural Income Tax, Stamp Duty andRegistration Fee, Electricity Duty and Other

taxes.Uttar Pradesh 14 Agricultural Income Tax, Motor Vehicle tax &

taxes on Goods and Passengers, Electricity Dutyand Other taxes.

West Bengal 10 Stamp Duty and Registration Fee, MotorVehicle tax & taxes on Goods and Passengers,

Sale Tax and Excise Duty.Source: Calculated

135

Table: 3.16

Tax Effort of Haryana State: Land Revenue

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 3.07 0.70 438.261981-82 2.78 1.39 200.541982-83 2.51 1.59 158.571983-84 2.73 1.64 166.761984-85 2.80 1.97 142.371985-86 2.62 2.06 127.581986-87 1.57 2.54 62.011987-88 0.34 3.77 8.971988-89 0.47 2.43 19.351989-90 0.46 2.08 22.051990-91 0.58 1.59 36.361991-92 0.65 1.19 54.951992-93 0.79 0.77 102.591993-94 0.77 0.76 101.351994-95 0.75 0.90 82.731995-96 0.71 2.19 32.491996-97 1.29 1.63 78.911997-98 2.03 2.61 77.941998-99 1.96 2.62 74.751999-00 2.11 3.14 67.312000-01 5.62 3.73 150.982001-02 9.01 4.80 187.962002-03 4.54 5.08 89.442003-04 9.04 5.43 166.572004-05 5.20 6.18 84.242005-06 5.22 6.92 75.54

All Years 69.62 69.73 100Source: Calculated

136

Table 3.17

Tax Effort of Haryana State: Stamp Duty and Registration Fee

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 14.35 15.12 94.361981-82 19.35 17.29 111.341982-83 18.74 19.68 94.731983-84 20.39 21.63 93.781984-85 22.75 23.86 94.871985-86 25.88 28.19 91.321986-87 30.84 30.37 101.051987-88 31.97 36.75 86.561988-89 45.50 41.98 107.841989-90 58.13 46.98 123.111990-91 62.27 58.20 106.441991-92 58.59 52.94 110.101992-93 61.39 57.40 106.381993-94 68.25 85.66 79.271994-95 91.21 99.87 90.851995-96 132.88 112.69 117.301996-97 144.73 131.91 109.151997-98 155.98 144.79 107.181998-99 148.53 163.51 90.371999-00 152.37 183.45 82.632000-01 200.98 218.58 91.472001-02 228.17 242.71 93.532002-03 248.91 264.42 93.652003-04 314.20 293.07 106.652004-05 322.78 325.69 98.592005-06 415.02 361.33 114.27

All Years 3094.16 3078.04 100Source: Calculated

137

Table 3.18

Tax Effort of Haryana State: Sales Tax

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 82.88 84.25 98.091981-82 105.55 100.37 104.851982-83 119.40 115.76 102.841983-84 121.61 128.50 94.361984-85 130.30 141.95 91.531985-86 162.18 172.57 93.701986-87 173.02 178.53 96.631987-88 200.46 194.64 102.691988-89 238.46 245.35 96.911989-90 260.79 261.09 99.601990-91 303.50 376.33 80.411991-92 371.88 304.23 121.881992-93 396.49 306.94 128.801993-94 438.40 474.31 92.161994-95 495.59 512.49 96.421995-96 573.28 581.91 98.231996-97 731.36 692.62 105.291997-98 802.84 756.60 105.801998-99 806.55 821.99 97.841999-00 967.25 889.79 108.392000-01 1233.65 1346.88 91.332001-02 1376.08 1484.06 92.452002-03 1534.45 1607.07 95.202003-04 1733.51 1773.85 97.442004-05 2115.02 2014.64 104.672005-06 2411.97 2267.24 106.07

All Years 17886.46 17833.97 100Source: Calculated

138

Table 3.19

Tax Effort of Haryana State: Excise Duty

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 42.98 49.05 87.471981-82 51.99 57.06 90.951982-83 61.91 61.8 100.001983-84 68.4 74.5 91.651984-85 90.52 79.28 113.981985-86 110.96 105.84 104.651986-87 132.74 115.44 114.781987-88 158.54 157.59 100.431988-89 192.87 164.01 117.391989-90 236.68 292.01 80.911990-91 286.35 386.66 73.931991-92 341.87 327.77 104.121992-93 393.84 414.19 94.921993-94 431.76 422.78 101.941994-95 529.35 502.7 105.121995-96 552.96 515.07 107.171998-99 774.63 549.12 140.821999-00 765.36 729 104.802000-01 840.56 875.03 95.892001-02 875.39 1104.52 79.122002-03 878.72 984.9 89.062003-04 923.28 898.81 102.542004-05 1013.16 856.67 118.062005-06 1135 1146.78 98.80

All Years 10889.8 10870.6 100Source: Calculated

139

Table 3.20

Tax Effort of Haryana State: Motor Vehicle Tax and Taxes on Goods and Passengers

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 42.67 36.68 92.511981-82 50.4 43.82 91.471982-83 57.8 44.32 103.711983-84 63.99 49.44 102.921984-85 68.99 58.46 93.851985-86 81.17 63.58 101.531986-87 88.88 75.05 94.191987-88 96.89 92.84 83.001988-89 113.57 113.61 79.501989-90 122.26 87.17 111.541990-91 137.88 114.07 96.131991-92 188.29 153.06 97.831992-93 212.17 157.43 107.181993-94 213.69 146.06 116.351994-95 240.38 163.81 116.701995-96 253.98 242.89 83.161996-97 321.23 270.14 94.571997-98 398.32 275.87 114.831998-99 387.2 350.35 87.901999-00 408.62 378.16 85.932000-01 452.35 403.38 89.182001-02 602.19 449.46 106.552002-03 767.14 494.19 123.452003-04 792.75 596.86 105.632004-05 841.97 656.20 102.042005-06 830.00 714.30 92.41

All Years 7834.78 6231.23 100Source: Calculated

140

Table 3.21

Tax Effort of Haryana State: Other Taxes(Including Electricity Duty & Entertainment Tax)

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 19.96 11.0 343.951981-82 20.84 12.7 310.921982-83 27.93 14.5 363.381983-84 34.18 15.8 407.851984-85 25.99 17.4 281.751985-86 34.05 21.2 303.211986-87 39.99 22.3 338.711987-88 43.29 25.0 326.381988-89 46.97 32.4 273.641989-90 42.72 36.1 223.611990-91 48.17 44.1 206.121991-92 50.93 52.9 181.871992-93 58.38 56.1 196.411993-94 53.96 66.4 153.441994-95 62.9 78.7 150.821995-96 60.67 89.4 128.171996-97 102.16 106.9 180.381997-98 62.39 115.9 101.591998-99 59.99 130.9 86.501999-00 62.04 146.7 79.822000-01 13.28 165.0 15.192001-02 41.22 181.7 42.832002-03 15.13 198.5 14.392003-04 78.38 221.9 66.692004-05 82.1 249.0 62.252005-06 79.6 279.0 53.86

All Years 1267.22 2391.6 100Source: Calculated

141

Table 3.22

Tax Effort of Haryana State: Total Own Taxes

YearsActual Tax Revenue

(Rs. In Cr.)

TaxPotential

(Rs. In Cr.)

TaxEffortIndex

1980-81 205.91 196.8 103.18351981-82 250.91 232.63 106.36781982-83 288.29 257.65 110.34621983-84 311.3 291.51 105.31341984-85 341.35 322.92 104.24681985-86 416.86 393.44 104.48871986-87 467.04 424.23 108.57021987-88 531.49 510.59 102.65511988-89 637.84 599.78 104.87641989-90 721.04 725.43 98.021571990-91 838.75 980.95 84.32251991-92 1012.21 892.09 111.89731992-93 1123.06 992.83 111.55421993-94 1206.83 1195.97 99.513871994-95 1420.18 1358.47 103.09821995-96 1574.48 1544.15 100.55541996-97 1300.77 1203.2 106.61551997-98 1421.56 1295.77 108.1921998-99 2178.86 2018.49 106.45361999-00 2357.75 2330.24 99.782622000-01 2746.44 3012.6 89.905542001-02 3132.06 3467.25 89.084622002-03 3448.89 3554.16 95.697412003-04 3851.16 3789.92 100.21192004-05 4380.23 4108.38 105.14392005-06 4876.81 4775.57 100.709

All Years 41042.07 40475.02 101.40Source: Calculated

142

Table 3.23 Table 3.23(a) Table 3.23(b)

Year

Composition of Own Non Tax Revenue Receipts of the StateGovernment (Rs. in Cr.)

Percentage Share various kinds of Own Non TaxRevenue in Total Own Non Tax Revenue Receipts of

the State Govt.Various kinds of Own Non Tax Revenue Receiptsof the State Government as a percentage of GSDP

InterestReceipts

Dividend&

ProfitsGeneralServices

Social&

CommunityServices

EconomicServices

TotalOwn

Non TaxRevenue

InterestReceipt

s

Dividend&

ProfitsGeneralServices

Social&

Community

Services

Economic

Services

TotalOwn

Non TaxReven

ue

Interest

Receipts

Dividend &

Profits

General

Services

Social&

Community

Services

Econ-omicServices

TotalOwnNonTax

Revenue1980-81 34.54 1.12 6.84 7.38 69.43 119.31 28.95 0.94 5.73 6.19 58.19 100 0.95 0.03 0.19 0.20 1.90 3.27

81-82 39.88 1.08 9.23 5.88 81.91 137.98 28.90 0.78 6.69 4.26 59.36 100 0.95 0.03 0.22 0.14 1.94 3.2782-83 46.95 0.4 14.32 10.19 88.02 159.88 29.37 0.25 8.96 6.37 55.05 100 0.97 0.01 0.30 0.21 1.82 3.3183-84 53.03 0.33 19.32 10.08 96.78 179.54 29.54 0.18 10.76 5.61 53.90 100 1.01 0.01 0.37 0.19 1.84 3.4084-85 67.93 0.3 26.24 12.61 107.4 214.48 31.67 0.14 12.23 5.88 50.07 100 1.17 0.01 0.45 0.22 1.85 3.6985-86 73.86 0.46 40.4 14.46 128.94 258.12 28.61 0.18 15.65 5.60 49.95 100 1.05 0.01 0.57 0.20 1.82 3.6586-87 80.71 0.33 47.99 15.04 152.55 296.62 27.21 0.11 16.18 5.07 51.43 100 1.09 0.00 0.65 0.20 2.05 3.9987-88 161.94 0.97 48.79 17.54 148.76 378 42.84 0.26 12.91 4.64 39.35 100 1.94 0.01 0.58 0.21 1.78 4.5388-89 77.33 0.31 87.44 18.29 171.34 354.71 21.80 0.09 24.65 5.16 48.30 100 0.72 0.00 0.81 0.17 1.59 3.2889-90 114.18 0.6 121.96 20.94 188.25 445.93 25.60 0.13 27.35 4.70 42.22 100 0.95 0.00 1.01 0.17 1.57 3.7190-91 127.05 0.39 151.78 20.47 211.41 511.1 24.86 0.08 29.70 4.01 41.36 100 0.86 0.00 1.03 0.14 1.44 3.4891-92 139.79 0.67 149.46 32.67 223.51 546.1 25.60 0.12 27.37 5.98 40.93 100 0.79 0.00 0.85 0.19 1.27 3.1092-93 95.09 0.85 53.09 29.04 282.2 460.27 20.66 0.18 11.53 6.31 61.31 100 0.51 0.00 0.28 0.16 1.51 2.4693-94 116.53 0.95 862.72 40.22 320.13 1340.55 8.69 0.07 64.36 3.00 23.88 100 0.53 0.00 3.90 0.18 1.45 6.0694-95 476.09 7.02 2599.04 41.37 349.89 3473.41 13.71 0.20 74.83 1.19 10.07 100 1.81 0.03 9.90 0.16 1.33 13.2395-96 256.93 3.14 1520.98 52.3 353.46 2186.81 11.75 0.14 69.55 2.39 16.16 100 0.86 0.01 5.11 0.18 1.19 7.3496-97 237.56 4.53 2390.93 73.49 426.16 3132.67 7.58 0.14 76.32 2.35 13.60 100 0.67 0.01 6.71 0.21 1.20 8.7997-98 237.07 2.38 1809.81 139.37 442.47 2631.1 9.01 0.09 68.79 5.30 16.82 100 0.61 0.01 4.68 0.36 1.14 6.8198-99 183.72 2.21 706.05 128.25 497.79 1518.02 12.10 0.15 46.51 8.45 32.79 100 0.42 0.01 1.62 0.29 1.14 3.4899-00 202.23 7.78 395.85 140.95 512.25 1259.06 16.06 0.62 31.44 11.19 40.69 100 0.41 0.02 0.81 0.29 1.05 2.5700-01 236.23 1.81 479.72 132.62 589.01 1439.39 16.41 0.13 33.33 9.21 40.92 100 0.43 0.00 0.87 0.24 1.07 2.62

2001-02 332.87 0.4 518.34 146.14 668.32 1666.07 19.98 0.02 31.11 8.77 40.11 100 0.55 0.00 0.86 0.24 1.10 2.752002-03 334.27 1.73 641.78 154.69 675.38 1807.85 18.49 0.10 35.50 8.56 37.36 100 0.51 0.00 0.97 0.23 1.02 2.732003-04 478.01 4.11 678.35 266.34 796.25 2223.06 21.50 0.18 30.51 11.98 35.82 100 0.65 0.01 0.92 0.36 1.08 3.012004-05 472.41 2.35 838 440.13 791.49 2544.38 18.57 0.09 32.94 17.30 31.11 100 0.57 0.00 1.01 0.53 0.95 3.072005-06 568.43 3.01 330.41 475.37 811.07 2188.29 25.98 0.14 15.10 21.72 37.06 100 0.61 0.00 0.35 0.51 0.87 2.35

80-86 17.08 -21.53 42.17 17.49 12.12 16.3486-96 12.59 28.45 50.88 14.69 11.49 27.6896-06 12.42 -3.97 -12.42 19.13 8.31 -0.2080-06 10.45 8.87 8.87 17.93 10.72 13.84

143

Table 3.24: Recoveries through user charges on various services provided by StateGovernment (as a percentage of Total Expenditure)

Year

Recoveriesfrom Social

andCommunity

Services

Recoveriesfrom

EconomicServices

Education,Art, Sports

andCulture

Health,FamilyWelfare

and WaterSupply Irrigation

Recoveriesfrom

GeneralServices

1980-81 5.57 40.88 - - 0 6.9881-82 3.72 39.74 - - 0 7.6482-83 5.26 38.02 - - 0 10.1383-84 4.43 40.02 - - 0 12.6184-85 4.78 36.09 - - 0 13.1785-86 4.87 40.47 - - 14.61 16.9786-87 4.65 43.32 - - 15.67 16.4787-88 3.92 30.90 - - 8.48 13.6488-89 3.23 37.24 - - 13.84 21.0389-90 3.47 34.46 - - 9.64 22.2990-91 3.17 32.56 2.74 4.93 11.65 24.1991-92 4.60 28.30 2.75 4.48 8.64 19.5892-93 3.57 34.91 2.55 3.65 8.54 7.1193-94 4.60 36.53 2.62 7.17 9.07 52.4894-95 3.54 21.69 2.31 2.68 3.69 74.5895-96 3.29 29.52 2.08 3.86 7.72 59.2996-97 5.27 25.12 2.43 4.63 9.81 65.1997-98 8.84 24.87 2.16 5.54 9.47 55.5098-99 6.15 23.10 1.56 3.66 20.45 25.4199-00 6.24 28.59 1.70 4.90 12.45 13.6400-01 5.29 38.18 1.64 4.61 16.72 15.39

2001-02 5.36 27.68 1.45 5.02 16.16 14.872002-03 5.51 26.67 1.94 4.46 10.98 16.062003-04 8.89 29.42 2.13 4.56 43.93 15.532004-05 13.68 24.74 2.40 5.94 23.20 17.112005-06 11.26 20.20 3.77 4.40 12.26 6.81

Source: Calculated by using data from RBI, State Finances: A Study of Budgets, VariousIssues.

Table 3.25: Investment and Return on Public Sector Undertakings

YearInvestment(Rs. In Cr.) Return Rate of Return

Rate of Intereston Government

Borrowings00-01 2844 1.81 .06 11.2601-02 2906 .4 .01 9.02502-03 3067 1.73 .06 7.0803-04 1690 4.11 0.24 6.1404-05 1861 2.35 0.13 6.5605-06 2261 1.92 0.09 7.54

Source: CAG (Civil), GOH, 2005, 2006

144

Table 3.26: Financial Performance of State Electricity Boards (SEBs)

Year

Rate ofReturn on

Capitalemployed

withSubsidy(percent)

Rate ofReturn on

CapitalemployedwithoutSubsidy(percent)

CommercialLosses(-)/Profits(+)

withSubsidy

(Rs. in Cr.)

CommercialLosses(-)/Profits(+)withoutSubsidy

(Rs. in Cr.)Subsidy

(Rs. In Cr.)92-93 -23.8 -26.1 -368 -404 3593-94 -27.5 -31.2 -447 -507 6094-95 -0.8 -27.9 -13 -468 45595-96 2.6 -31.8 46 -554 599.796-97 0.41 -38.97 7 -635 641.797-98 -2.02 -47.79 -32 -765 432.498-99 -20.89 -43.25 -340 -704 364

99-00 (Pro) -36.81 -54.96 -835 -1247 41200-01 (RE) -67.51 -85.47 -1548 -1960 41201-02 (AP) -62.05 -78.68 -1537 -1949 412

Source: Annual Report on the Working of State Electricity Boards and ElectricityDepartment, May, 2002.

Table 3.27: Interest Rates Received and Paid byState Government on Loan and Advances

Year

Average interestrates received on

loan and advancesby state government

Average interestrates paid on loanand advances bystate government

Difference betweenrate of interest paid

and received00-01 .85 11.4 -10.5501-02 .63 10.5 -9.8702-03 .43 10.74 -10.3103-04 2.43 10.2 -7.7704-05 5.21 9.62 -4.4105-06 1.22 8.19 -6.97

Source: CAG (Civil), GOH, 2005, 2006.

145

Table 3.28: Per Capita Total Transfers (Tax and Grants) to the States from the Centre(in Rs.)

States

VIPlan

(1980-85)

VIIPlan

(1985-90)APS

(1990-92)

VIIIPlan

(1992-97)

IXPlan

(1997-02)

XPlan

(2002-07)Andhra Pr. 88.0 (7) 190.9 (9) 313.5 (5) 492.4 (5) 723.8 (5) 1146.7 (4)

Bihar 87.7 (8) 199.5 (6) 311.3 (7) 558.1 (3) 840.2 (3) 1247.4 (2)Goa 0.0 (-) 58.5 (15) 104.5 (15) 121.7 (15) 117.5 (15) 162.6 (15)

Gujarat 84.3 (9) 158.3 (14) 145.8 (14) 371.5 (11) 566.2 (11) 859.5 (11)Haryana 80.6 (10) 169.6 (11) 220.7 (13) 330.6 (14) 446.9 (13) 665.3 (13)Karnataka 78.6 (13) 173.1 (10) 255.2 (10) 403.2 (9) 684.6 (8) 1163.5 (3)

Kerala 89.3 (6) 200.5 (4) 309.9 (8) 471.2 (7) 704.7 (6) 1066.9 (7)M.P 89.7 (5) 199.8 (5) 315.7 (4) 570.3 (2) 862.4 (2) 1104.6 (6)

Maharashtra 80.0 (12) 163.5 (13) 241.5 (11) 342.7 (13) 410.7 (14) 582.3 (14)Orissa 130.4 (1) 268.8 (1) 446.8 (1) 610.2 (1) 915.2 (1) 1548.2 (1)Punjab 75.1 (14) 164.3 (12) 233.3 (12) 344.6 (12) 490.6 (12) 759.6 (12)

Rajasthan 90.2 (3) 232.0 (2) 388.7 (2) 543.7 (4) 764.3 (4) 1111.6 (5)T.N 89.8 (4) 197.2 (7) 313.0 (6) 448.5 (8) 649.8 (10) 985.2 (10)U.P 91.1 (2) 203.8 (3) 339.2 (3) 484.5 (6) 655.7 (9) 1016.5 (9)W.B 80.2 (11) 196.7 (8) 275.1 (9) 392.6 (10) 695.2 (7) 1051.8 (8)

Source: Calculated by using data from RBI, State Finances: A Study of Budgets, Various Issues andCenter for Monitoring Indian Economy (CMIE), Statistics on IndianEconomy/Infrastructure, Various Issues.

Note: Figure in ( ) are ranks. Higher rank lower transfers and vice-versa.

Table 3.29Share of Central Transfers in the Total Receipts of Haryana State Government

(During {1980-81 to 2006-07} different Plan Periods)(Figures in Percentages)

Plan Periods

Particulars

VIPlan

VIIPlan APS

VIIIPlan

IXPlan

XPlan

(1980-85) (1985-90) (1990-92) (1992-97) (1997-02) (2002-07)Revenue Transfersas a Percentage of

Revenue Receipts ofthe State 21.11 20.09 17.52 14.08 14.58 14.01

Loan Transfers asa Percentage of

Capital Receipts ofthe state 56.79 60.03 52.42 36.80 22.81 2.58

Aggregate Transfersas a Percentage ofAggregate Receipts

of the state 29.74 29.77 24.54 18.47 16.93 5.10Source: RBI, State Finances: A Study of Budgets, Various Issues.

146

Table 3.30Dependency of Haryana State Government on Central Transfers

(During {1980-81 to 2006-07} different Plan Periods)(Figures in Percentages)

Plan Periods

Particulars

VIPlan

VIIPlan APS

VIIIPlan

IXPlan

XPlan

(1980-85) (1985-90) (1990-92) (1992-97) (1997-02) (2002-07)Revenue Transfers as aPercentage of Revenue

Expenditure of theState 23.23 21.29 17.39 13.64 12.49 13.91

Loan Transfers asa Percentage of

Capital Expenditure ofthe state 39.00 53.44 59.47 61.27 37.85 7.29

Aggregate Transfers asa Percentage of

Aggregate Expenditureof the state 28.58 29.77 25.00 19.92 16.80 12.32Source: RBI, State Finances: A Study of Budgets, Various Issues.