Non Tax Revenue Report - Madhya Pradesh · 2010-11-12 · CDMC Clean Development Mechanism Cell NOC...
Transcript of Non Tax Revenue Report - Madhya Pradesh · 2010-11-12 · CDMC Clean Development Mechanism Cell NOC...
Financing Growth
Study on Avenues for Enhancing Non Tax Revenue
Strengthening Performance Management in Government, Government of Madhya Pradesh
Government Reforms & Infrastructure Development (GRID) Public Finance
DFID Supported Strengthening Performance Management in Government Programme
Long Term Consultant, Government of Madhya Pradesh
Study on avenues for enhancing non tax revenue
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Table of contents
1 Executive Summary ........................................................................................................................................ 7
2 Introduction ..................................................................................................................................................... 9
2.1 Objective ............................................................................................................................................................... 9 2.1.1 Interstate comparisons – Ratio of ONTR to Total Revenues of States ...................................................... 11 2.1.2 Interstate comparisons – Recovery Rates for Various Sectors .................................................................. 11
3 Mining Sector ................................................................................................................................................ 14
3.1 Regulatory Overview .......................................................................................................................................... 14 3.2 As-Is Analysis ..................................................................................................................................................... 14
3.2.1 Stakeholder Analysis ................................................................................................................................... 14 3.2.2 Sources and Composition of Revenue from Minor Minerals ...................................................................... 15 3.2.3 Auction Mechanism for Extraction of Minor Minerals ................................................................................. 16 3.2.4 Monitoring Mechanism for Extraction of Minor Minerals ............................................................................ 17 3.2.5 Role of State Mining Corporation (SMC) .................................................................................................... 17
3.3 Good Practice Benchmarking ............................................................................................................................. 18 3.3.1 Auction Mechanism ..................................................................................................................................... 19 3.3.2 Monitoring Mechanism ................................................................................................................................ 19 3.3.3 Inter-State Comparison of Royalty Rates for Minor Minerals ..................................................................... 19 3.3.4 Revision of Royalty Rates ........................................................................................................................... 20
3.4 Estimates of Revenue Loss from Minor Minerals ............................................................................................... 20 3.5 Issues and Recommendations ........................................................................................................................... 21
4 Forest ............................................................................................................................................................ 24
4.1 As-Is Analysis ..................................................................................................................................................... 24 4.1.1 Stakeholder Analysis ................................................................................................................................... 24 4.1.2 The Mechanism for Sale of Forest Produce ............................................................................................... 25
4.2 Good Practice Benchmarking ............................................................................................................................. 26 4.2.1 Marketing Strategy and Demand Generation ............................................................................................. 27 4.2.2 Ecotourism .................................................................................................................................................. 27 4.2.3 Land Usage ................................................................................................................................................. 27
4.3 Issues and Recommendations ........................................................................................................................... 29
5 Water Resources .......................................................................................................................................... 32
5.1 As-Is Analysis ..................................................................................................................................................... 32 5.1.1 Stakeholders Analysis ................................................................................................................................. 32 5.1.2 Revenue composition and trends ............................................................................................................... 32 5.1.3 Revenue Collection Mechanism ................................................................................................................. 33
5.2 Good Practice Benchmarking ............................................................................................................................. 34 5.3 Issues and Recommendations ........................................................................................................................... 36
6 Education ...................................................................................................................................................... 39
6.1 As-Is Analysis ..................................................................................................................................................... 39 6.1.1 Stakeholder Analysis ................................................................................................................................... 39 6.1.2 Revenue Trends .......................................................................................................................................... 39 6.1.3 School Education ........................................................................................................................................ 40 6.1.4 Higher Education ......................................................................................................................................... 41
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6.1.5 Technical Education .................................................................................................................................... 41 6.2 Good Practice Benchmarking ............................................................................................................................. 42 6.3 Issues and Recommendations ........................................................................................................................... 44
7 Water Supply and Sanitation ......................................................................................................................... 46
7.1 As-Is Analysis ..................................................................................................................................................... 46 7.1.1 Stakeholder Analysis ................................................................................................................................... 46 7.1.2 Trend and Composition of Revenue ........................................................................................................... 46 7.1.3 Service Delivery .......................................................................................................................................... 47 7.1.4 Operations and Maintenance ...................................................................................................................... 47 7.1.5 Revenue Collection Mechanism ................................................................................................................. 48
7.2 Issues and Recommendations ........................................................................................................................... 50
8 Cooperatives ................................................................................................................................................. 52
8.1 As-Is Analysis ..................................................................................................................................................... 52 8.1.1 Stakeholder Analysis ................................................................................................................................... 52 8.1.2 Sources and Composition of Revenue ....................................................................................................... 53 8.1.3 Sources of Revenue – Audit Fees and Other Minor Sources .................................................................... 53 8.1.4 Procedure for Conducting Audit .................................................................................................................. 54 8.1.5 Levy of Audit Fees ...................................................................................................................................... 54
8.2 Good Practice Benchmarking ............................................................................................................................. 55 8.3 Issues and Recommendations ........................................................................................................................... 56
9 Appendices ................................................................................................................................................... 57
9.1 Appendix I - Mining ............................................................................................................................................. 57 9.1.1 Estimate of Revenue Increase from Auction Reforms................................................................................ 57 9.1.2 Estimate of Revenue Increase from Inflation Indexing ............................................................................... 57 9.1.3 Estimates of Revenue Increase from SMC Reforms .................................................................................. 57 9.1.4 Estimating Lost Revenues through the Consumption Method ................................................................... 58
9.2 Appendix II – Forest ............................................................................................................................................ 60 9.2.1 Note on Forest Certification ........................................................................................................................ 60 9.2.2 Estimate of Revenue Increase from e – auction and Forest Certification .................................................. 60 9.2.3 Estimated Increase in Revenue from Development of Ecotourism ............................................................ 61 9.2.4 Case Studies - Carbon Trading ................................................................................................................. 61
9.3 Appendix III – Water Resources ......................................................................................................................... 67 9.3.1 Collection Efficiency of the WRD (in %) for 2008-09 .................................................................................. 67 9.3.2 Estimates of Increase in Revenues from Recommendations (WRD) – Three Scenarios .......................... 67 9.3.3 Note on Pricing of Water Resources .......................................................................................................... 68
9.4 Appendix IV - Education ..................................................................................................................................... 71 9.4.1 Estimates of Revenue Increase from Sharing Revenues of the Secondary Education Board .................. 71 9.4.2 Revenue Estimates from Alternative Utilisation of the Schools/Institutions Infrastructure ......................... 71 9.4.3 Note on School Sponsorship Scheme ........................................................................................................ 72
9.5 Appendix V – Water Supply and Sanitation ....................................................................................................... 74 9.5.1 Comparative Indicators across Cities ......................................................................................................... 74 9.5.2 Comparative Indicators across cities- water coverage and connections metered ..................................... 74 9.5.3 Note on KUWASIP Water Supply Model .................................................................................................... 75
9.6 Appendix VI - Cooperatives ................................................................................................................................ 78 9.6.1 Case Study – Sources of Revenue for the Cooperative Department ......................................................... 78
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List of Tables
Table 1: Summary of Recommendations and possible revenues ................................................................................................ 7
Table 2: Revenue Collections from the sectors under study ........................................................................................................ 9
Table 3: Ratio of ONTR to Total Revenues of States (Five Year Average 2000-01 to 2005-06) .............................................. 11
Table 4: Recovery Rates for Various Sectors in Major States ................................................................................................... 11
Table 5: Major States Ranked According to Recovery Rates (All Sectors) ............................................................................... 12
Table 6: Stakeholders Analysis - Mining .................................................................................................................................... 14
Table 7: Minor Minerals- Administrative Authority for Auction .................................................................................................... 16
Table 8: Production Figures and Estimated Royalty for Select Minor Minerals (2007-08)......................................................... 16
Table 9: Major Mines of the SMC ............................................................................................................................................... 17
Table 10: Share of Revenue of SMC in Overall Revenue from Sand ........................................................................................ 18
Table 11: Royalty Rates of Minor Minerals (Various States) ...................................................................................................... 19
Table 12: Details of Revenue from Forest (Figures in Rupees Thousand) ................................................................................ 24
Table 13: Stakeholders Analysis – Forest .................................................................................................................................. 24
Table 14: Stakeholder Analysis - Water Resources ................................................................................................................... 32
Table 15: User charges for Agriculture ....................................................................................................................................... 33
Table 16: User Charges for Industries ........................................................................................................................................ 33
Table 17: Stakeholder Analysis - Education ............................................................................................................................... 39
Table 18: Details of Revenue from Education (Rs. Thousand) .................................................................................................. 40
Table 19: Fees and charges levied by the Board of Secondary Education, M.P ....................................................................... 40
Table 20: Number of Technical Education Institutions by Subject ............................................................................................. 42
Table 21: Stakeholder Analysis- Water Supply and Sanitation Sector....................................................................................... 46
Table 22: Trend and Composition of Revenue – Water Supply & Sanitation ............................................................................ 46
Table 23: Key Indicators (Water Supply) for Bhopal, Indore and Jabalpur ................................................................................ 47
Table 24: NPRE on Sewerage in MP ......................................................................................................................................... 48
Table 25: Water Supply Charges, Bhopal Municipal Corporation .............................................................................................. 48
Table 26: Water Supply Charges, Indore Municipal Corporation ............................................................................................... 48
Table 27: Average Tariff across ULBs (Bhopal, Indore and Jabalpur) ....................................................................................... 49
Table 28: Stakeholder Analysis- Cooperatives Sector ............................................................................................................... 53
Table 29: Composition of Revenue - Cooperatives .................................................................................................................... 53
Table 30: Calculation Chart for Value of Audit fees.................................................................................................................... 54
Table 31: Revenue Estimates – Auction Reforms ...................................................................................................................... 57
Table 32: Revenue Estimates- Inflation Indexing ....................................................................................................................... 57
Table 33: Revenue Estimates – SMC Reforms .......................................................................................................................... 57
Table 34: Potential Loss of Revenue from Sand- Conservative Scenario ................................................................................. 58
Table 35: Potential Loss of Revenue from Sand - Aggressive Scenario.................................................................................... 59
Table 36: Revenue Estimates: e-auction and Forest Certification ............................................................................................. 60
Table 37: Revenue Estimate – Development of Ecotourism ...................................................................................................... 61
Table 40: Chief Engineer-wise Collection Efficiency (in %) for 2008-09 .................................................................................... 67
Table 41: Source-wise Collection Efficiency (in %) for 2008-09 ................................................................................................. 67
Table 42: Scenarios for Estimates of Increase in Revenue ....................................................................................................... 67
Table 43: Revenue Receipts Trend – WRD (2003-04 to 2007-08) ............................................................................................ 68
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Table 44: Projection of Revenue Receipts – WRD (2009-10 to 2013-4).................................................................................... 69
Table 45: Past Expenditure Data of the WRD (2003-04 to 2007-08) ......................................................................................... 69
Table 46: Trend Projections of Maintenance Expenditures of the WRD (2009-10 to 2013-14) ................................................. 69
Table 47: Ratio of Maintenance Expenditure to Revenue Receipts - WRD ............................................................................... 69
Table 48: Revenue Estimates from Sharing Revenues Secondary Education Board (SEB), MP ............................................. 71
Table 49: Estimate of Revenue from Alternative Utilization of School Infrastructure ................................................................. 71
Table 50: Sample Format of Certification ................................................................................................................................... 72
Table 51: Rate for Sponsorship of Schools ................................................................................................................................ 73
Table 52: Water Supply Indicators- Various Cities ..................................................................................................................... 74
Table 53: Water Coverage and Connections Metered - Various Cities...................................................................................... 74
Table 54: KUWASIP - New Revised Water Tariffs for Hubli-Dharwad and Belgaum w.e.f November 1, 2009 ......................... 76
Table 55: Revenue Break-up for Kerala Cooperative Department from 1997-8 to 2001-2 (Rs. crore) ...................................... 78 List of Figures Figure 1: Quadrant Analysis of Non Tax Revenue on Buoyancy w.r.t and as share of GSDP .................................................. 10 Figure 2: Own Non Tax Revenue (ONTR) of M.P (2003-4 to 2007-8) ....................................................................................... 11 Figure 3: Minor Minerals Value and Royalty Revenues (in Rs. crore) ....................................................................................... 15 Figure 4: Composition of Production (value terms) from Minor Minerals (2007-08) ................................................................. 15 Figure 5: Recovery Rates in Mining, Various States .................................................................................................................. 18 Figure 6: Revenue Collection Trend - Forest ............................................................................................................................. 24 Figure 7: Recovery Rates in Forest, Various States (2007-08) .................................................................................................. 26 Figure 8: Revenue and composition of revenue from water resources, MP .............................................................................. 32 Figure 9: Recovery Rates in Irrigation, Various States .............................................................................................................. 34 Figure 10: Revenue Collection Trend – Education ..................................................................................................................... 39 Figure 11: Recovery Rates in Education, Various States .......................................................................................................... 42 Figure 12: Revenue Collection Trend- Cooperatives ................................................................................................................. 53 Figure 13: Revenue from Cooperatives, Various states (2007-8) .............................................................................................. 55 Figure 14: Recovery Rates in Cooperatives, Various States ..................................................................................................... 56 Figure 15: Sector-Wise Break-Up: Investment done in host country approved CDM projects .................................................. 62 Figure 16: Project cycle of a Forestry CDM Project ................................................................................................................... 64
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Acronyms
AFPRO Action for Food Production MTEF Medium Term Expenditure Framework
AFRC Admission and Fee Regulatory Committee MoU Memorandum of Understanding
AR Afforestation and Reforestation MMRDA Mines and Minerals (Development and Regulation)
Act, 1957
BE Bachelor of Engineering NABARD National Bank for Agricultural and Rural
Development
BSE Board of Secondary Education, Madhya
Pradesh
NCDC National Cooperative Development Cooperation
CER Certified Emission Reductions NTPC National Thermal Power Corporation
CDMC Clean Development Mechanism Cell NOC No Objection Certificate
CDM Clean Development Mechanism NTR Non Tax Revenue
CE Collection Efficiency NPRE Non-Plan Revenue Expenditure
CAGR Compound Annual Growth Rate NGO Non-Governmental Organisation
CCS Co-operative Credit Structure O&M Operation and Maintenance
DNA Designated National Authority PRI Panchayati Raj Institution
DOE Designated Operational Entity PACS Primary Agricultural Credit Societies
DMO District Mining Officer PSP Private Sector Player
DPEP District Primary Education Program PDD Project Design Document
ETDB Eco-Tourism Development Board PIN Project Idea Note
EPRA Emission Reduction Purchase Agreement PPP Public-Private Partnership
EB Executive Board PDS Public Distribution System
GIS Geographic Information System PHED Public Health Engineering Department
GoI Government of India PWD Public Works Department
GoK Government of Karnataka RGPV Rajiv Gandhi Proudyogiki Vishwavidyalaya, Bhopal,
MP
GoMP Government of Madhya Pradesh RBI Reserve Bank of India
GSDP Gross State Domestic Product RE Revised Estimates
HCFP Haryana Community Forestry Project REDD Reducing Emissions from Deforestation and Forest
Degradation
JLR Jungle Lodges and Resorts SED School Education Department
KUWASIP Karnataka Urban Water Sector
Improvement Project
SEB Secondary Education Board
KP Kyoto Protocol ST CCS Short- Term Cooperative Credit Structure
LULUCF Land Use, Land-Use Change and Forestry SMC State Mining Corporation
LoA Letter of Approval TEQIP Technical Education Quality Improvement Project
LoE Letter of Endorsement tCER temporary Certified Emission Reduction
LoI Letter of Intent UNFCCC United Nations Framework Convention on Climate
Change
lCER Long-term Certified Emission Reduction USD United States Dollars
MPEB/M.
P.S.E.B
Madhya Pradesh State Electricity Board ULB Urban Local Body
MIS Management Information System WRD Water Resources Department, Madhya Pradesh
MCA Masters in Computer Applications WUAs Water User Associations
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Preface
An interim presentation was made to the Finance Department, GoMP on the 15th of January 2010 on our findings and
emerging recommendations. Based on feedback received, analysis and benchmark information for all sectors selected
for the study was incorporated in the Draft Report on Avenues for Improvement in Non Tax Revenue. The Draft Report
was submitted on April 16th 2010. A presentation on the Draft Report was made to Finance Department and concerned
department officials on 24th April 2010.
The key comments and suggestions received during the presentation are tabulated below along with remarks on how
they have been addressed in this Final Report.
Comments/Suggestions from GoMP Remarks
Forest
Department officials stated that the increase in revenue assumed is probably on the higher side.
Expected benefit from a band of 2%-4% has been reduced to 1% - 2% of receipts from auction of timber based on further discussions with the department.
Department officials requested for an international case study on feasibility of Carbon Trading
A sub-section with International example has been added in this report. There has been a recent clarification of Government of India that Government Forest Land does not qualify for Clean Development Mechanism projects. Therefore, the recommendation related to this point has been dropped in this report.
Water Resources
Department officials informed during the presentation that Water Users Association are being made responsible for revenue collection
The option of revenue collection through revenue department officials accordingly has been dropped in the Final Report.
Department officials also informed that the pending revision of Water charges had been approved by GoMP.
The issue identification relating to “Non revision of rates since 2005” has accordingly been dropped from section 5.3 in the Final Report
Mining
Department officials informed that since the interim presentation of the report, penalty for illegal extraction has been increased from “maximum of twice the market value of illegally extracted mineral or ten times the applicable royalty amount” to “maximum of ten times the market value of illegally extracted mineral or forty times the applicable royalty rate”
Accordingly, the recommendation for making penalty for illegal extraction prohibitive has now been excluded in this Final Report.
Water Supply and Sanitation
Department officials agreed to the recommendations made and remarked that most of them are under various stages of implementation
The same has been acknowledged in the Final Report
Department officials asked for elaboration of acronym RPI-X used in section 7.2
Explanatory text has been added in section 7.2 of this Final Report.
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1 Executive Summary
The purpose of this report is to identify avenues for enhancement of Non Tax Revenue (NTR) for Government of
Madhya Pradesh (GoMP).
The coverage of the analysis as per given scope of work includes the following sectors
• Mining
• Forest
• Water Resources
• Education
• Water Supply and Sanitation
• Cooperatives
In Madhya Pradesh (MP) while Non tax revenue remains an important source of income, the growth rate of non tax
revenue for MP is below the All India average rate of growth for non tax revenue1 underlining the scope for
improvement. Our analysis reveals that states like Orissa and Andhra Pradesh have performed well in collection of Non
Tax Revenue and Non Tax revenue is a significant source of income for them.
Our approach in this exercise has been to focus on stakeholder consultations as a first step (see the stakeholder
analysis section for a list of stakeholders) combined with desk based research. The next step involved using tools to
identify issues that limit revenue potential and to identify good practices in other states. The recommendations and their
revenue potential have then been derived from such benchmarking and quantitative analysis.
A summary of the recommendations have been shown below in Table 1. Wherever possible, we have also presented
an estimate of possible increase in annual revenue owing to the recommendations.
Table 1: Summary of Recommendations and possible revenues
Sectors Recommendation Estimate of annual
Increase in NTR (Rs. crore)
Mining
Revision of sand royalty of department mines 35
Pre-assessment of mines at directorate level to set floor price 8
Indexation of royalty rates to inflation 3
Reforms by State Mining Corporation (SMC) [increasing sand price] 2
Strengthening Monitoring Mechanism 3
Mining Total 51
Forests
e-Auction 8
Forest Certification 4
Eco-tourism Development 0.2
Carbon trading
Marketing Strategy and Information Cell * -
Forest Total 12
Water Resources
Recovery Mechanism & Water User Association (WUA) Reforms (Conservative Scenario)
4
Revision of Rates 3
Water Resources Total 7
1 Base data: Finance & Accounts of respective states.
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Sectors Recommendation Estimate of annual
Increase in NTR (Rs. crore)
Education
Sharing revenues of the M.P Secondary Education Board 4
Alternate uses of physical infrastructure 0.45
Ceiling on corpus fund* -
School Adoption/Sponsorship* -
Education Total 4
Water Supply & Sanitation
Tariff Indexation 5
Metering of water supply* -
Sewage treatment maintenance* -
Water Supply & Sanitation Total 5
Cooperatives
No major source of revenue augmentation has been identified within the cooperative sector
-
The table to determine audit fees, as given in the M.P Cooperative Societies Rules, should be simplified
-
A functional review of the department is warranted owing to the societies now having an option to get audited by chartered accountants.
-
Cooperatives Total -
Total for all recommendations 79
Note: * Revenue enhancement directly attributable to this measure is not estimated
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2 Introduction
2.1 Objective
Madhya Pradesh is one of the low income States in the country. The Government of Madhya Pradesh has been taking
steps to reduce poverty and improve human development.
The Department of Finance, GoMP is looking for ways and means to improve its Non Tax Revenue collection in an
effort to increase the resource base and create fiscal space for its developmental efforts. The purpose of this report is
to identify avenues for enhancement of Non Tax Revenues for GoMP. The focus of this report is therefore on the
financial aspects of the sectors identified.
The coverage of the analysis as per given scope of work includes the following sectors:
• Mining
• Forest
• Water Resources
• Education
• Water Supply and Sanitation
• Cooperatives
The current status of revenue collections from the above sectors is given in Table 2:
Table 2: Revenue Collections from the sectors under study
Sector Revenues
in Rs. crore (2007-08)
Share of
States Own NTR (%)
Mining 1125.392 41.09
Forestry and Wildlife 608.89 22.23
Water Resources 50.82 1.85
Cooperation 29.28 1.06
Education, Sports, Art & Culture 13.74 0.50
Water Supply and Sanitation 5.91 0.21
Total for the above six sectors 1834.05 66.98
State Own Non-tax Revenue 2738.18 100
Source: Finance & Accounts, M.P, 2007-08
The non-tax revenue of the State Governments consists of a wide range of receipts ranging from interest receipts on
the loans provided by the State Governments, dividends and profits received by the State Governments, revenue from
general services such as state lotteries and revenue from user charges imposed on different social and economic
services provided by the State Governments. Das Gupta describes Non-tax revenue as “government revenue that is
2 This amount includes revenues from coal and other major minerals worth Rs. 950 crore.
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either requited or voluntary or both. In the case of voluntary requited payments a further distinction is made between
revenue from assets and revenue from sale of goods and services”3
Benefits of Non Tax Revenue –
• User specificity- Non Tax Revenue in the form of user charges follows the principle of equity as user charges
will enable the State Governments to pass on the cost of providing the services either fully or partially to the
public. This can prevent the financing of these services from the tax revenue of the Government, whose
benefits accrue to specific individuals rather than the society as a whole.
• Non Tax Revenue in the form of user charges for specific goods or services offered may also be useful in
limiting the usage of that good or service reducing the cost for provision, for example, tolls on roads can be
differentiated based on peak and off-peak hours. This will encourage the public to reduce the use of a particular
road or bridge during the peak hours, thus, reducing congestion.
• Non Tax Revenue in terms of user charges also forces the government to provide good quality of goods or
services
However, it should be noted that
imposition of user charges has to be for
private or non-merit goods and services
and for merit goods and services such as
healthcare and education, the State may
forego imposition of charges in public
interest.
In the absence of firm data on cost
recovery, the ratio of non-tax revenue to
non-plan revenue expenditure is taken as
a proxy for the cost recovery from these
services. This ratio stands at 4 % for the
social services and 32.3 % for economic
services in 2007-08 (RE), indicating low
cost recovery in respect of both these
services4. Figure 1 shows a scatter plot
for select states with Non Tax Revenue Buoyancy with respect to GSDP (Gross State Domestic Product) on Y-axis and
Non Tax revenue as % of GSDP on X-axis.
Figure 1 reveals that the states like Orissa and Andhra Pradesh have performed well in collection of Non Tax Revenue and Non Tax revenue is a significant source of income for them. The non tax revenue remains an important source of income for Madhya Pradesh. The growth rate of non tax revenue for MP is below the All India average rate of growth for non tax revenue indicating the scope for improvement.
3 Das-Gupta, Arindam (2005), „Non-Tax Revenues in Indian States: Principles and Case Studies‟, Paper prepared for Asian
Development Bank, „Policy Research Networking to Strengthen Policy Reform‟ 4 RBI Study on “State Finances: A Study of Budgets of 2008-09”
Andhra Pradesh
Assam
ChattisgarhJharkhand
Madhya Pradesh
Maharashtra
Orissa
Tamil Nadu
West Bengal
0
0.5
1
1.5
2
2.5
3
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%
No
n-t
ax r
eve
nu
e B
uo
yan
cy
Non-tax revenue as % of GSDP
Figure 1: Quadrant Analysis of Non Tax Revenue on Buoyancy w.r.t and as share of GSDP
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Figure 2: Own Non Tax Revenue (ONTR) of M.P (2003-4 to 2007-8)
For the state of Madhya Pradesh, as
Figure 2 shows, own non tax revenue has
grown at a Compound Annual Growth
Rate (CAGR) of 7.40% over the period
2003-04 to 2007-08. The jump in 2004-05
relates to accounting adjustments, as the
state government took back a grant (of Rs.
2,800 crore) given to The MP State
Electricity Board (that it later gave as a
loan) which was accounted for under Non
tax revenue. If we ignore the year, we can
see that the revenue from non tax has
grown at a slower pace.
2.1.1 Interstate comparisons – Ratio of ONTR to Total Revenues of States The states chosen are those whose total own revenues (from Tax and Non- Tax) are comparable to that of Madhya
Pradesh. The indicator used for this study is the ratio of ONTR to Total (own) revenues collected by the state. The
index obtained is a simple average of this ratio for the six years from 2000-01 to 2005-06.
Table 3: Ratio of ONTR to Total Revenues of States (Five Year Average 2000-01 to 2005-06)
State Ratio
Orissa 0.2389
Madhya Pradesh 0.2385
Punjab 0.2152
Rajasthan 0.2150
Haryana 0.2024
West Bengal 0.1025
Kerala 0.0726
As is evident from Table 3, among the states, Madhya Pradesh ranks second only to Orissa that too by a small margin.
This implies the importance of NTR for M.P as it forms a considerable part of the total revenue receipt.
2.1.2 Interstate comparisons – Recovery Rates for Various Sectors Since recovery rates (defined as the own non tax revenue divided by the revenue expenditure on that line item) show
considerable fluctuations from one year to another, an alternate analysis was carried out. This involved taking a long-
term average to smooth out any fluctuations. Even after this normalization, the recovery rates for different states are
found to be widely divergent.
Table 4: Recovery Rates for Various Sectors in Major States
Sector Forestry and Wildlife Cooperatives Mining
State/Year 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08
Andhra Pradesh 0.98 0.33 0.30 0.11 0.29 0.27 84.33 72.69 120.70
Bihar 0.76 0.24 N/A 0.05 0.13 N/A 101.80 40.30 N/A
Gujarat 0.29 0.15 0.30 0.05 0.27 0.42 64.52 37.18 57.18
Haryana 0.25 0.46 0.16 0.26 0.31 0.06 22.32 13.53 15.93
Karnataka 0.67 0.37 0.34 0.36 0.33 0.02 13.82 25.36 53.06
-
1,000
2,000
3,000
4,000
5,000
2003-04 2004-05 2005-06 2006-07 2007-08Own Non Tax Revenue
Rs.
cr
ore
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Sector Forestry and Wildlife Cooperatives Mining
State/Year 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08
Kerala 2.14 1.06 0.97 0.30 0.52 0.45 3.97 6.68 6.89
Madhya Pradesh 1.53 0.75 0.74 0.22 0.41 0.29 82.92 66.51 10.71
Maharashtra 0.71 0.42 0.47 0.40 0.32 0.15 36.43 51.46 9.33
Orissa 1.72 0.93 0.27 0.07 0.05 0.05 16.33 28.39 41.31
Punjab 0.27 0.14 0.28 0.14 0.09 0.09 2.43 3.51 12.67
Rajasthan 0.14 0.30 0.29 0.06 0.35 0.65 6.42 13.74 29.29
Tamil Nadu 1.33 1.43 0.83 0.18 0.17 0.05 27.31 104.41 91.22
Uttar Pradesh 1.23 0.41 0.80 0.11 0.14 0.07 14.88 24.58 24.29
West Bengal 0.45 0.14 0.27 0.12 0.09 0.09 6.83 5.20 7.65
Average 0.89 0.51 0.46 0.17 0.25 0.20 34.59 35.25 36.94
Sector Water Supply & Sanitation Education Irrigation
State/Year 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08
Andhra Pradesh 0.023 0.053 0.004 0.022 0.033 0.010 0.153 0.010 0.010
Bihar 0.018 0.005 N/A 0.002 0.003 N/A 0.096 0.112 N/A
Gujarat 0.008 0.002 0.004 0.014 0.011 0.016 0.054 0.072 0.719
Haryana 0.106 0.126 0.115 0.028 0.017 0.044 0.103 0.189 0.167
Karnataka 0.006 0.002 0.003 0.015 0.012 0.012 0.047 0.030 0.209
Kerala 0.000 0.010 0.000 0.020 0.018 0.024 0.049 0.041 0.027
Madhya Pradesh 0.055 0.023 0.017 0.004 0.005 0.004 0.191 0.150 0.129
Maharashtra 0.045 0.005 0.005 0.009 0.004 0.007 0.097 0.037 0.385
Orissa 0.080 0.104 0.136 0.014 0.012 0.016 0.074 0.137 0.285
Punjab 0.110 0.100 0.168 0.009 0.006 0.020 0.121 0.045 0.196
Rajasthan 0.216 0.207 0.216 0.003 0.008 0.005 0.094 0.087 0.071
Tamil Nadu 0.008 0.036 0.004 0.015 0.013 0.027 0.037 0.031 0.046
Uttar Pradesh 0.000 0.000 0.000 0.013 0.030 0.007 0.199 0.243 0.091
West Bengal 0.008 0.008 0.007 0.003 0.004 0.004 0.040 0.020 0.056
Average 0.049 0.049 0.052 0.012 0.012 0.015 0.097 0.086 0.184
The following analysis uses a ten year average recovery rate (defined as the own non tax revenue divided by the
revenue expenditure on that line item), from 1998-99 to 2007-08, to rank the various major states in descending order
of recovery rates. This exercise has been carried out for all the key revenue areas.
The results are presented in Table 5:
Table 5: Major States Ranked According to Recovery Rates (All Sectors)
Forestry & Wildlife
Cooperatives Mining Water Supply & Sanitation
Education Irrigation
Tamil Nadu Kerala Andhra Pradesh Rajasthan Uttar Pradesh Gujarat
Kerala Rajasthan Tamil Nadu Punjab Haryana Maharashtra
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Forestry & Wildlife
Cooperatives Mining Water Supply & Sanitation
Education Irrigation
Orissa Madhya Pradesh
Gujarat Haryana Andhra Pradesh Haryana
Madhya Pradesh Gujarat Madhya Pradesh
Orissa Tamil Nadu Orissa
Uttar Pradesh Karnataka Orissa Madhya Pradesh Kerala Madhya Pradesh
Karnataka Maharashtra Karnataka Tamil Nadu Gujarat Uttar Pradesh
Andhra Pradesh Haryana Bihar Andhra Pradesh Orissa Karnataka
Maharashtra Andhra Pradesh Uttar Pradesh Maharashtra Karnataka Punjab
Haryana Uttar Pradesh Rajasthan West Bengal Punjab Bihar
Rajasthan Tamil Nadu Maharashtra Bihar Bihar Rajasthan
Bihar West Bengal Haryana Kerala Rajasthan Kerala
West Bengal Punjab Punjab Gujarat Maharashtra West Bengal
Gujarat Bihar Kerala Karnataka Madhya Pradesh
Tamil Nadu
Punjab Orissa West Bengal Uttar Pradesh West Bengal Andhra Pradesh
As is evident from Table 5, Madhya Pradesh is well placed compared to most states in terms of recovery rates, with
one exception being the education sector.
We have undertaken sector wise analysis for analysing non tax revenue for each of the six sectors under this study.
The key sources of data used in the study were through stakeholder consultations and desk based research. Our
stakeholder consultations helped us to gain a deeper insight into the issues as well as for data requirements. Data was
also sourced from reliable secondary sources. The next step in this study was to identify issues that limit revenue
potential and good practices adopted in other states. A combination of benchmarking analysis, quantitative analysis of
the data collected, stakeholder consultations and certain assumptions have been used to make recommendations and
quantify the potential revenue gains from the implementation of such recommendations. The sector wise analysis and
recommendations are presented in the following sections.
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3 Mining Sector
Madhya Pradesh is one of the major mineral producing states in the country ranking fourth in value terms after Orissa,
Chhattisgarh and Jharkhand. Madhya Pradesh has deposits of bauxite, coal, copper, diamond, dolomite, diaspore,
limestone, manganese, pyrophylite and rock phosphate. Besides, the state is fast emerging as a producer of
dimensional stone, which includes multi-coloured granite, marble, flag stone and sand stone.
3.1 Regulatory Overview
• The Constitution Seventh Schedule, List II (State List) Entry 50, includes taxes on mineral rights;
o Entry 53, List I gives the Centre power to regulate and develop oilfields and mineral development; and
o Entry 54, List I provides for Parliamentary regulation of this activity.
• The legal framework is given in the Mines and Minerals (Development and Regulation) Act, 1957. In particular,
this act distinguishes between major and minor minerals.
• The Centre has royalty rate setting powers for major minerals and the states for the minor minerals. Major
mineral rates are specified in the Second Schedule of this Act.
• The (Central) Mineral Concession Rules, 1960 under this Act lays down procedures for permits and licenses for
prospecting and operating mining leases on both government and private land – for major minerals.
• For states, a similar function is served by state-wise Minor Mineral Concession Rules, where they exist. Receipts
from minor minerals in Madhya Pradesh are regulated under Minor Minerals Rules (MM Rules), 1996 and
Madhya Pradesh Minerals (Prevention of illegal mining, transportation and storage) Rules, 2006 apart from the
rules and laws as prescribed under MMRD and other laws mentioned above.
Mining receipts comprise application fees for lease/permit/ prospecting license, royalty, dead rent, surface rent,
fines and penalties and interest for belated payment of dues. Given that states have limited influence on major
minerals (since it falls under the purview of Govt. of India), the focus of this study has been limited to minor
minerals.
3.2 As-Is Analysis
3.2.1 Stakeholder Analysis The institutions concerned with mining in Madhya Pradesh are the Department of Mineral Resources under which there
is a Directorate of Geology and Mining & State Mining Corporation, which is a Govt. of Madhya Pradesh undertaking.
The stakeholder analysis is presented in Table 6 outlining the responsibility of the institutions and the relevant revenue
streams for the government from them.
Table 6: Stakeholders Analysis - Mining
Stakeholder Responsibility Relevant Revenue Stream for the state
Government
Department of Mining/
Directorate of Geology &
Mining
The overall administrative body acting as the
custodian of mines in the state of Madhya
Pradesh
Monitoring of mining activities in the state
Royalty from Major and Minor Minerals
Other Income from fee and penalty
Contribution from State Mining
Corporation
Madhya Pradesh State
Mining Corporation (SMC) Mining of minor minerals
Most of the productive minor mineral mines
For sand, the SMC pays a fixed amount
as royalty to the department apart from
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Stakeholder Responsibility Relevant Revenue Stream for the state
Government
are under the jurisdiction of State Mining
Corporation
additional duty over and above the
royalty
For other minor minerals the SMC pays
royalty to the government.
3.2.2 Sources and Composition of Revenue from Minor Minerals
Figure 3 shows the trend of mineral production and revenue from minor minerals in MP over the last few years.
Figure 3: Minor Minerals Value and Royalty Revenues (in Rs. crore)
As can be seen from Figure 4 „Stone/
Gitti’ and Sand are the major
contributors of revenue from minor
minerals accounting for more than 75%
of the revenue in 2007-08.
2004-5 2005-6 2006-7
Value 231.90 391.04 440.18
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.00
500.00
Rs.
cro
re
2004-05 2005-06 2006-07
Revenues 51.2 92.48 128
0
20
40
60
80
100
120
140R
s. c
rore
Stone/Gitti39%
Sand35%
Murrum19%
Marble3%
Flag-Stone2%
Granite1%
Clay1% Lime Stone
0%
Fuller Earth0%
Figure 4: Composition of Production (value) from Minor Minerals (2007-08)
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3.2.3 Auction Mechanism for Extraction of Minor Minerals The auction process for minor minerals is described in the Minor Mineral Concession Rules. The auction mechanism
for minor minerals has the following key features:
• Auction is conducted for a lease period of two years.
• The auction amount of last auction is fixed as the upset price (floor price) for the next auction. In case no bid is
made above the upset price, a representation can be made to the state government to lower the upset price.
• Table 7 presents the administrative authority for auction of each mineral. As can be seen from the table, the
Mineral Resources Department is responsible for auction of high value minor minerals. Directorate of Geology
and Mining administers the auction of mines, that are spread over large areas and the district administration is
responsible for auction of small mines.
Table 7: Minor Minerals- Administrative Authority for Auction
Authority Mineral Powers
Department of Mineral Resources
Dimensional stone- granite, dolerite and other igneous and metamorphic rocks used for cutting & polishing purpose
Full Powers
Marble which is used for cutting & polishing purpose for making blocks, slabs, and tiles of specific dimension
Full Powers
Marble stone for other purposes Full Powers
Flagstone used for flooring, roof top etc and used in cutting and polishing industry
Where the area applied for is more than 4 Hectares
Director- Geology and Mining
Limestone when used in kilns for manufacture of lime used as building material.
Where the area applied for is more than 4 Hectares
Stone for making gitti by mechanical crushing (i.e. use of crusher) Where the area applied for is more than 4 Hectares
Bentonite/ Fuller's earth. Where the area applied for is more than 4 Hectares
District Administration
Limestone when used in kilns for manufacture of lime used as building material.
Where the area applied for is NOT more than 4 Hectares
Stone for making gitti by mechanical crushing (i.e. use of crusher) Where the area applied for is NOT more than 4 Hectares
Bentonite/ Fuller's earth. Where the area applied for is NOT more than 4 Hectares
Ordinary clay for making bricks, pots, tiles etc. Full Powers
All schedule 2 Minerals as well as the mineral number 1,3,4 (schedule unclear) within Panchayat/Nigam/Nagar Nigam/Special Area and Nagar Panchayat
Full Powers
The rates of royalty and estimated revenue for 2007-08 from various minor minerals are presented in Table 8. The
department also receives additional royalty from State Mining Corporation for the extraction of minor minerals
undertaken by the Corporation.
Table 8: Production Figures and Estimated Royalty for Select Minor Minerals (2007-08)
Name of Mineral Production (Cu.M) Applicable Rate of Royalty 5 6
(Rs./ Cu.M) Royalty Amount (Rs. crore)
Building Stones 14,273,833 28 39.97
5 Suitable assumptions made in case more than one rate is applicable depending upon sub categories
6The rates have been revised subsequent to our analysis
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Name of Mineral Production (Cu.M) Applicable Rate of Royalty 5 6
(Rs./ Cu.M) Royalty Amount (Rs. crore)
Ordinary Clay 765,787 17 1.30
Ordinary Sand 10,660,061 33 35.18
Murrum 8,366,656 17 14.22
Fuller's earth 15,440 17 0.03
Marble 99,061 700 6.93
Stone 18,624 800 1.49
Quartzite & sandstone N/A 400 N/A
Total (in Rs. crore) 99.12
3.2.4 Monitoring Mechanism for Extraction of Minor Minerals
The monitoring mechanism for extraction of minor minerals is as follows:
• The District Mining Officer is responsible for administering the auctions and monitoring the extraction of minor
minerals at each district collector‟s office
• The District Minor Officer is supported by mining inspectors
• At present, the department/ directorate does not have any check post
• The officials from the department visit mines and have mobile monitoring squads for monitoring purposes
• The penalty for unauthorized extraction and transportation is the maximum of 10 times the estimated royalty or
twice the market price of the unauthorized mineral extracted.
• The rates of royalty applicable are given in Table 8. These rates for minor minerals are currently in the process
of revision.
3.2.5 Role of State Mining Corporation (SMC) The SMC is a PSU that mines major and minor minerals and precious stones in the state of Madhya Pradesh. It
acquires mines, by purchase or grant, mining and other rights in the lands within the state of Madhya Pradesh. The
corporation depends on private contractors for extraction.
Table 9: Major Mines of the SMC
Mineral Name of Mines Districts
Rock Phosphate Meghnagar Jhabua
Rock Phosphate Hirapur Sagar, Chhatarpur
Bauxite Tamar and Narohill Satna
Bauxite Chachandih Anuppur
Diaspore & Pyrophylite Kari Tikamgarh
Dolomite Mugdhara Mandla
Granite Kathera, Hardwar, GarhiMalhara, Madwa and Ratanpara
Chhatarpur
Flag Stone Dongari Shivpuri
Sand Under suboffices Hoshangabad, Jabalpur,Katni, Harda, Dhamod, Morena, Dabra
Hoshangabad, Sehore, Raisen, Jabalpur, Narsinghpur, Morena, Dhar, Khargone, Khandwa, Barwani, Katni, Umaria, Dewas, Harda, Gwalior, Datia,
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Mineral Name of Mines Districts
and Bhind
About 90% of the income of State Mining Corporation is through extraction of sand. The SMC conducts auction
process for extraction of sand from its mines. Under the current process, the rate of extraction for minerals is fixed and
the bidding parameter is quantity of extraction.
Table 10: Share of Revenue of SMC in Overall Revenue from Sand
Year Sand Revenue Share of SMC Revenue from Private
Contractors
% Share of SMC
2006-07 50.21 30.76 19.45 61
2007-08 55.80 30.09 25.70 54
2008-09 65.11 29.08 36.03 45
Source: Directorate of Geology and Mines, (All fig. in Rs. crore)
3.3 Good Practice Benchmarking
The states that have significant non- tax
revenue from minor minerals have
been selected for undertaking the inter-
state comparisons.
The states of Andhra Pradesh, Tamil
Nadu and Maharashtra have done
consistently well in revenue collections
with a high recovery rate (defined as
the own non tax revenue divided by the
revenue expenditure on that line item)
as seen in Figure 5). We have
undertaken a study of the practices in
these states towards identification of
success stories in generating revenue
from mining.
Figure 5: Recovery Rates in Mining, Various States
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
1993-94
2000-01
2007-08
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3.3.1 Auction Mechanism Government of Punjab and Tamil Nadu do not auction their mines but allocate leases on preferential basis to
communities or contractors, based on their past performance. The advantage with this approach is that in such a
scenario, many mines which may be „non-working‟ and not generating any revenue could be possibly utilised for
generating royalty.
3.3.2 Monitoring Mechanism Outsourcing of check post function to Department of Commercial Taxes has been undertaken in the states of Kerala,
Tamil Nadu and Andhra Pradesh. This has resulted in better monitoring without additional cost of maintaining separate
check posts.
3.3.3 Inter-State Comparison of Royalty Rates for Minor Minerals See the table for a comparison of royalty rates of minor minerals in Rajasthan, Chhattisgarh, Karnataka, Maharashtra
and Uttar Pradesh.
Table 11: Royalty Rates of Minor Minerals (Various States)
# Minor Mineral M.P Rajasthan Chhattisgarh
Type Rs./Cu.M Type Rs./Cu.M Type Rs./Cu.M
1 Dimensional Stone-Granite, Dolerite and other Igneous and Metamorphic rocks which are used for cutting and polishing purpose for making blocks, slabs tiles of specific dimensions.
(a)Black Colour
1500 Big block (>70 Cm)
450 (a)Black Colour
750
(b)Other Colour
800 Small Block 120 (b)Other Colour
400
2 Marble (a)Block 700 Block (>35 Cm) 1080 (a)Block 200
(b)Other 200 Block (<35 Cm) 742.5 (b)Other 75
3 Flagstone-natural Sedimentary rock which is used for flooring, roof top etc.
(a)Black Colour
200 Cutting/Polishing 228 - 75
(b)Other Colour
150 Other 96-120 - 75
4 Ordinary sand, Bajri 33 - 22.4 - 15
5 Murrum 17 - 14 - 15
6 Stone (a) Boulder
22 - - - 30
(b) Gitti, road metal
28 - 14-22.4 - 40
(c) Dressed stone, Khanda, Dhoka
44 - 14-22.4 - 40
# Minor Mineral Uttar Pradesh Maharashtra Karnataka
Type Rs./Cu.M Type Rs./Cu.M Type Rs./Cu.M
1 Dimensional Stone-Granite, Dolerite and other Igneous
Granite (>1 m)
1500 - - (a)Black Colour
30000
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# Minor Mineral Uttar Pradesh Maharashtra Karnataka
Type Rs./Cu.M Type Rs./Cu.M Type Rs./Cu.M
and Metamorphic rocks which are used for cutting and polishing purpose for making blocks, slabs tiles of specific dimensions.
Granite (<1 m)
1000 - - (b)Other Colour
2500
2 Marble
- - All colours 240 - 1200
Marble/ Marble Chips
135 - - - -
3
Flagstone-natural Sedimentary rock which is used for flooring, roof top etc.
All colours 180 All colours 288 - -
- - - - - -
4 Ordinary sand, bajri - 17 - 35 - 42
5 Murrum - 17-23 - 35 - 14
6 Stone
- 30 - 35 - 44
- 32-45 - 35 - -
- 30 - 35 - -
Source Data: Directorate of Geology and Mining
3.3.4 Revision of Royalty Rates
Even though department of water resources, Government of Madhya Pradesh fixes user charges every 3-4 years, it
increases the user charge nominally each year to keep pace with inflation. A similar practice can be followed for royalty
rates of minor minerals.
3.4 Estimates of Revenue Loss from Minor Minerals
The minor mineral that we have considered for the purpose of this study is sand. Sand royalties have been susceptible
to widespread leakage and an attempt has been made to quantify the potential revenue lost in the last few years. We
have developed two different scenarios and obtained the following results:
• Moderate Scenario: Estimates the loss at about Rs. 28 crore per year based on a four year average
• Conservative scenario: Estimates the loss at about Rs. 11 crore per year based on a four year average
The details of the methodology and calculations can be found in section 9.1.4.
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3.5 Issues and Recommendations
Area Issues Identified Recommendations Estimate of annual Increase in NTR
(Rs. crore)
Royalty rate for departments sand mines
Comparatively low rate of royalty compared to other
states and to the rates at which sand is offered by SMC –
e.g. Sand price to contractors:
o SMC mines = Rs. 95/ Cu.m
o Department mines = Rs. 33/ Cu.m (Royalty)7
See Table 11 for royalty rates of minor minerals for other
states
Case for revising royalty to at least Rs. 66 / Cu.m
It is important to link this with recommendation 2
~ Rs. 35 crore (100% increase in Royalties for the department. The departments revenues from sand were around Rs. 35 crore in 2008-09)
Auction Mechanism
Upset price is fixed as the last auction price. In many
cases, if the last auction price is extremely high due to
intense competition in that auction the upset price for
the next auction is so high that the minerals cannot be
auctioned off. The table below details the large number
of such pending representations to the state
government which has not been disposed off. It is to be
noted that illegal extraction may be continuing in such
mines
Concession type Pending applications till 1st May 09
Mining Lease 1,317
Prospecting 4,366
Quarrying Lease 1,847
Collusion among local contractors has been recognized
by the department as an issue. Collusion among
contractors can often lead to very low (uncompetitive)
bids at auctions.
Given the degree of collusion and weak monitoring, it is
recommended that the process of granting lease should be
based on pre-assessment and a fixed price. This price
should be based on physical assessment and be determined
at the state level. The use of new technology such as GIS
(Geographic Information System) can be undertaken
assessment purposes. For quarrying, the capacity of the
crusher can be used for assessment. This approach is
expected to have the following advantages:
It will reduce local level collusion and corruption
It will allow the government to achieve fair revenue
realization
While a fair price may mean that some contractors may
not extract, it is fair to assume that department have an
overall gain given the current level of leakage from
operational mines.
As a supplementary option to auction, current lease holders
may be given an option to renew the lease on an agreement
of automatic 10% rise. The model of excise department may
be followed to draft guidelines
~Rs. 8 crore (10% of Auction Revenue) See section 9.1.1 for assumptions and method of estimation
7 Royalty rates for Sand have been subsequent to this analysis revised to Rs 53/Cu. M
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Area Issues Identified Recommendations Estimate of annual Increase in NTR
(Rs. crore)
The royalty rates can be inflation indexed ~ Rs. 3 crore (At about 3% of annual revenue from royalty) See section 9.1.2 for assumptions and method of estimation
Monitoring Mechanism
Monitoring of Extraction (in Minor minerals, especially)
is weak. Minor minerals are often subject to thefts and
payments are often made on a per tonne basis, while
the amount being mined is not monitored.
During 5th - 20th October, 2009 drive to catch
offenders, 865 offenses were registered.
However, normally only 350-400 offenses are
registered per month. This gives an indication
of the level of cases going un-detected.
There is no state level analysis of production and
revenue data as detailed data for each district is not
collated at the state level
See section 9.1.4 for an estimate of the loss that weak
monitoring and extensive leakages cause, using the
example of sand royalties
Outsourcing of monitoring function through check posts to
Commercial Taxes Department.
~ Rs. 3 – 6 crore
Creating a MIS (Management Information System) in which
district level data is collated centrally. This may be useful in
analysing/comparing the district-wise data. Several issues
may become clearer through even a cursory analysis of such
data.
The accountability of the District Mining Officer (DMO) is
crucial for the transparency and efficiency of operations. The
tenure of the DMO and Mining Inspector at a particular district
should be fixed and there should be periodic rotation of the
district mining officials.
Reforms by State Mining Corporation (SMC)
The SMC has not revised the rate of sand from Rs.
95/ Cubic Metre for the last 5-6 years. The focus has
been more on enhancing extraction towards greater
revenue generation.
Presently, SMC asks bidders to bid on the amount of
minerals that they can extract while fixing the base
price. This provides wrong incentives in terms of
excessive extraction and SMC has not been able to
gain from increase in price of sand over the past few
It is recommended that the SMC may revise the rate of sand
at regular intervals and link the periodic revision to price index
of cement or inflation
~ Rs. 2 crore
(assuming the Govt‟s share also increases on a pro rata basis) See section 9.1.3 for assumptions and method of
The SMC may also revise its auction mechanism and ask
bidders to bid on rates as done by the department.
Such a system will not only allow periodic revision of rate of
extraction, it will also discourage excessive extraction.
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Area Issues Identified Recommendations Estimate of annual Increase in NTR
(Rs. crore)
years. Table 10 shows the declining share of SMC in
overall revenue from sand.
estimation
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4 Forest
Forest products play an important part in the socio-
economic development of the state. In addition to
meeting the bonafide needs of the villagers residing in
and around forest areas, sale of forest products
contributes substantially to the state exchequer.
Important forest products are timber, fuel wood, bamboo
and many non-wood forest products like Tendu Patta,
Harra, Sal seed etc. Figure 6 presents the overall trend
of growth in revenue from forests in M.P. The growth in
revenue has been nominal at 2.63% over the period
2002-03 to 2007-08.
As is evident from Figure 6 and Table 12, Madhya
Pradesh earned over Rs. 600 crore of revenue from
forests giving it the distinction of the highest revenue earner from this source.
Table 12: Details of Revenue from Forest (Figures in Rupees Thousand)
Source of Revenue 2005-06 2006-07 2007-08
Forestry 4,903,960 5,362,992 6,088,938
Sale of timber and other forest produce 374,332 584,173 179,006
Receipts from social and farm forestries 11 42,838
State Trading in Tendu Patta 1,974 2,888 2,463
State Trading in minor forest produce 175 1 135
State Trading in Timber 3,787,659 3,880,806 4,822,956
State Trading in Bamboos 218,275 265,394 362,329
State Trading in Khair 11,641 8,124 3,905
Other Receipts 509,904 621,642 675,312
Deduct-Refunds - 47 - 6
4.1 As-Is Analysis
4.1.1 Stakeholder Analysis The primary institution concerned with forest management in the state is the Department of Forest. The Department is
also supported by four state enterprises in its effort. The Stakeholder analysis is presented in Table 13 outlining the
responsibilities of the department and the state enterprises as well as their revenue streams for the State Government.
Table 13: Stakeholders Analysis – Forest
# Stakeholder Responsibility Relevant Revenue Stream for the state
Government
1. Department of Forest The overall administrative body acting
as the custodian of forest reserves in
the state of Madhya Pradesh
Sale of Teak, Bamboo and other major
forest produce
Transit permit (For Mineral and Other
Goods)
Receipt from wildlife and forest reserves
2. M.P State Minor Produce
Federation
Responsible for coordination with local
community and production and
marketing of minor forest produce
No revenue accrues to the state
government. (As per the latest state
policy, all the profits are distributed to the
Figure 6: Revenue Collection Trend - Forest
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Revenue 497.30 496.74 559.10 490.39 536.49 608.89
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
In R
s. c
rore
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# Stakeholder Responsibility Relevant Revenue Stream for the state
Government
local community).
It is to be noted that the federation does
collect commercial tax on sale
3. Madhya Pradesh Eco-Tourism
Development Board (ETDB)
Responsible for development and
promotion of Eco Tourism in the state
of Madhya Pradesh
No revenue accrues to the state
government.
4. Rajya Van Vikas Nigam Limited Responsible for up-gradation and
afforestation of degraded forests
State Government receives a share of
profit from auction of timber and other
produce from the reforested land
5. State Forest Research Institute,
Jabalpur
Responsible for conducting research
and providing technical inputs to
various stakeholders
No revenue accrues to the state
government.
The focus of study in the forest sector has been limited to the institutions from which revenue accrues to the
government as presented in Table 13.
4.1.2 The Mechanism for Sale of Forest Produce
The normal procedure for sale of timber and other produce is a stepwise process involving harvesting, registration and
finally the actual sale of the produce through an auction mechanism. This process is detailed below:
4.1.2.1 Harvesting
• Working plans are prepared for management of natural forest areas. Normally, a forest division is the unit
for preparation of working plan. A working plan is prepared for a period of ten years after which it is revised.
• Disposal of forest products like timber, poles, fuel wood, bamboo, etc., is done through auction in
commercial depots.
• The harvesting operations are carried out based on scientific principles of forestry. The trees which are to
be felled are marked in the coupes which are due for felling.
• After marking, the coupes are handed over to the production divisions for felling.
• There are 42 commercial timber depots and 22 industrial bamboo depots in the state in which the forest
produce is stored
4.1.2.2 Registration
• Any person can purchase forest products from the depot after getting himself registered as a trader in the
office of local Divisional Forest Officer.
• A person residing outside the State can register himself in any Forest Division of the State,
• Local traders have to apply to the concerned Divisional Forest Officer where the trader actually resides.
• Registration fee is nominal (Rs. 200) and is collected annually. The registration is valid for the calendar
year.
4.1.2.3 Auction
• Before purchasing, there is provision for inspection of depots and lots to be traded.
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• The approximate quantity which will be put to auction in each of the depot is also notified. The upset price
approved by Conservator of Forests (once every six months) is based on the rates obtained for different
species by length, girth and grades during the last six months in various depots
• Dates of auction for different depots are notified well in advance taking due care that dates of auction in a
particular depot, as far as possible, do not coincide with the dates of auction in the depots of neighbouring
areas. Auctions are normally conducted every alternate month in each depot. To ensure wider participation
and encourage competition, auction notices are issued in regional dailies before each auction in a depot.
• After arrival of the material in the depots, it is graded and lots of specific size and grade are put to auction.
The size of the lots may vary from 0.5 cu. m. to 5 cu. m
• Before bidding for a lot, the purchaser is required to deposit Rs.1,000 or 10% of the proposed bid amount,
whichever is higher.
• Purchaser has to deposit 25% of the sale value on the date of auction.
• The balance 75% of the sale amount has to be deposited within 45 days. However 30 days extra time can
be given under special circumstance, after recovering interest @ 18%. The material purchased has to be
lifted from the depot within a period of 120 days.
4.2 Good Practice Benchmarking
Madhya Pradesh has been an above average performer in generating revenue from its forests. However, states like
Kerala and Tamil Nadu have shown better recovery ratio in the forestry sector. We have analyzed the select practices
in Kerala and Tamil Nadu to identify success stories in generating revenue from forest sector.
0 0.2 0.4 0.6 0.8 1 1.2
HARYANA
ORISSA
WEST BENGAL
PUNJAB
RAJASTHAN
ANDHRA PRADESH
GUJARAT
KARNATAKA
Average
MAHARASHTRA
MADHYA PRADESH
UTTAR PRADESH
TAMIL NADU
KERALA
Figure 7: Recovery Rates in Forest, Various States (2007-08)
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4.2.1 Marketing Strategy and Demand Generation Given below are examples from other states on successful marketing strategy and demand generation in the forest
sector.
• Kerala and Karnataka have e-Auction Mechanism for forest produce
• Karnataka and West Bengal have a marketing strategy and personnel for acting on the strategy are
deployed
• Tamil Nadu advertises their high quality timber on international tender websites
• In Kerala, forest department interacts with foreign customers to provide high quality produce and
commands a premium for the same.
4.2.2 Ecotourism The state of Madhya Pradesh has not developed a ecotourism development strategy and its focus on Ecotourism as a
potential source of revenue has been very recent as compared to other states. Two examples of good practices in
other states are given below:
• Periyar Tiger Reserve: Tiger Trails and camping trips are organised by reformed poachers which have been
hugely successful and have helped attract tourists in areas with dwindling tiger population.
• Jungle Lodges and Resorts (JLR)-Karnataka - JLR is more focused on interpretation of wilderness and
hence does not target a high number of tourists. Moreover, these tourists are usually the elite and ready to
pay a premium price, which reflects in JLR's tariffs.
4.2.3 Land Usage
4.2.3.1 Example 1: The Case of Uttarakhand
Uttarakhand has been making efforts to obtain certification from the UN Framework Convention on Climate Change
(UNFCCC) for carbon credits needed for carbon trading at the international level for zero carbon emissions and
protecting the environment. The state hopes to get its carbon credit validation on forests in the near future as the
inquiry process on the claims have started. Government of Uttarakhand has already set up a Clean Development
Mechanism Cell (CDMC) to coordinate work for earning carbon credits from international bodies.
4.2.3.2 Example 2: Haryana Community Forestry Project
The Haryana Community Forestry Project, co-funded by the European Commission, was implemented by Haryana
Forest Department, under which nearly 370 hectares of sand-dune affected lands, belonging to 227 farmers from eight
villages, were selected. The project helped stabilize shifting sand-dunes and wind-blown sandy soil, substantially
reducing dust storms and subsequent soil erosion. In addition to the ecological benefits, the project will benefit farmers
by creating over 11,500 carbon credits annually for a period of 20 years. It has been estimated that the net revenue per
hectare per year with these carbon credits will be Rs. 6,350 as compared to Rs. 1,196 per hectare per year without the
certification.
A detailed note on carbon trading is provided in section 9.2.4. The note introduces the concept of carbon trading before
outlining the status of forestry Clean Development Mechanism (CDM) projects in India in general while focusing on the
potential of Madhya Pradesh in particular. The note also includes further details on the above two projects apart from
the costs and revenues involved in carbon trading. The note concludes by outlining the basic procedures for earning
carbon credits.
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4.2.3.3 Example 3: Returns to carbon abatement through biological sequestration, Nepal
B.S. Karky and M. Skutsch have estimated8 the economic returns to carbon abatement through biological sequestration
in community managed forest under future Reducing Emissions from Deforestation and Forest Degradation (REDD)
policy. For the estimation, the research relies on forest inventory data together with other socio-economic and
resources use data collected from forest users in three sites of Nepal Himalayas. The paper estimates the incremental
carbon from forest enhancement on a yearly basis over a five-year period using the value of $ 1 and $ 5 per tCO2 for
conservative analysis. The results based on the three sites indicate that community forest management may be one
of the least cost ways to abate carbon with a break-even price which ranges from $ 0.55 to $ 3.70 per tCO2.
However, bringing community forests into the carbon market may entail high opportunity costs as forests provide
numerous non-monetary benefits to the local population, who regard these as the main incentive for conservation and
management. An important finding of the research is that if forest resources use by local communities is not permitted,
then carbon trading will not be attractive to them as revenue from carbon will not cover the cost foregone by not
harvesting forest resources. (See section 9.2.4 for a detailed note on carbon trading)
8 Karky, B.S., Skutsch, M., The cost of carbon abatement through community forest management in Nepal Himalaya,
Ecological Economics (2009), doi:10.1016/j.ecolecon.2009.10.004
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4.3 Issues and Recommendations
Area Issues Identified Recommendations Estimate of annual Increase
in NTR (Rs. crore)
Marketing Strategy and Demand Generation
At present, the auction is conducted at the depot. There
have been instances of insects degrading the produce to
be auctioned.
It has been observed that for non- timber/ non-bamboo
produce, many depots do not have a critical mass of
produce to attract specific merchants.
There is no e-Auction mechanism at present. Also the
department does not publish the auction prices for specific
grades and lots. Inadequate transparency in pricing has
an impact on the revenue maximization through the
auction.
At present there is no certification of forests and region for
high quality produce.
Presently, no concerted effort is made to market the
timber produce by the department with the Policy Analysis
Unit of the department playing a marginal role.
There is inadequate pro-active association with timber
merchants to ascertain the needs of the consumers.
Madhya Pradesh timber, inspite of superior brand image
receives 10% lower revenue per cubic meter of timber
compared to Kerala.
Implementing E-Auction:
Photograph of lots can be made available
The portal of the forest department providing grade wise depot
wise auction rates for the last year
Bid winner through E-Auction to be provided with information on
possible transport issues and cost involved
For high value lot, Tender process can be initiated with the help
of E-Tendering process at the initial stage.
~ Rs. 8 crore (See section
9.2.2 for assumptions and method of estimation)
Undertaking an exercise for Forest Certification
In order to meet the growing demand for forest certification in the
global market, the Indian industry has to look for certified
forests/plantations to source their raw materials. The increased
demand for forest certification is likely to affect the economic
prospects of many farm forestry/agro-forestry areas in India unless
these areas are certified.
Get higher international prices as demand is growing for wood for
certified areas e.g. IKEA has a long-term goal to source all wood
from forests certified as responsibly managed
See section 9.2.1 for more details on the procedure of Forest
Certification
~ Rs. 4 crore (See section 9.2.2 for assumptions and method of estimation)
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Area Issues Identified Recommendations Estimate of annual Increase
in NTR (Rs. crore)
Average auction price (Rs./Cu.M)
Kerala 59,870
Madhya Pradesh 53,957
Source: Forest department, Kerala and MP (for 2009)
Marketing Strategy and Information Cell
There is a need for a marketing strategy and information cell to be
formed with the following mandate:
Marketing the forest produce to a wider international target
segment as MP Teak is considered to be premium quality
product
Impress upon the high value customers that MP timber is of
higher value and deserves premium over timber from other
states
Follow up on certification of MP Timber products to generate
premium for its produce
The revenue enhancement directly attributable to this measure is not estimated
Ecotourism Madhya Pradesh has started focusing recently on
ecotourism development and needs to catch up with many
other states which have managed to develop ecotourism
spots which not only generate revenue for the government
but also help maintain its many exotic locales. The state
has immense scope in this regard.
Madhya Pradesh Government has not yet developed an
ecotourism development strategy or an institutional
mechanism to develop the same.
Development of Eco-Tourism Destinations:
Though the revenue potential from eco-tourism is limited and there
are investment requirements to be able to get some additional
revenue, the following measures could be explored by GoMP as
these could have several positive economic spin off effects on
income of people in forest areas:
Using “Hides” and “Watch towers” for wildlife viewing, full day
permits for camping sites. Madhya Pradesh can focus on
creating the Forsyth Trail, Kipling Trail, Research tourism,
Angling, Elephant safari expedition.
Inland Navigation - Rafting Safaris at various locations in
Madhya Pradesh can be successful. Private cruises on these
inland navigation canals can also be considered. Mountain
biking is another possible option.
The ETDB should take membership of various well-known national
and international organizations and build partnerships and even
compete for global awards e.g. Green Globe and International
~Rs. 20 lakh
(See section
9.2.3 for assumptions and method of estimation)
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Area Issues Identified Recommendations Estimate of annual Increase
in NTR (Rs. crore)
Ecotourism Society.
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5 Water Resources
The state of Madhya Pradesh has 12 major rivers, namely, Mahanadi, Mahi, Narmada, Tapti, Chambal, Betwa, Sone,
Wainganga, Indrawati, Sabri, Ken and Pench. The state has a total net sown area of 150 lakh hectares comprising
48.97 percent of the total geographical area with more than 49 percent of the population dependent on agriculture.
Water resources comprise the third largest source of Non Tax revenue of the six sectors considered for this study.
5.1 As-Is Analysis
5.1.1 Stakeholders Analysis The primary institution concerned with the management of water resources in the state is the Department of Water
Resources. The Department is also supported by Water User Associations. The Stakeholder analysis is presented in
Table 13 outlining the responsibilities of the department as well as its revenue stream for the State Government.
Table 14: Stakeholder Analysis - Water Resources
Stakeholder Responsibility Relevant Revenue Stream for the state
Department of
Water Resources The overall administrative body acting as the
custodian of Water Resources
Revenue from Irrigation
Revenue from Municipal Corporations and
Municipalities for water supply
Revenue from Industries for water supply
5.1.2 Revenue composition and trends As presented in Figure 8, the major source of revenue from water is industries, comprising two-third of the revenue. The other major source of revenue is from farmers comprising a quarter of the revenue. Given below are the revenue trends for Irrigation as a whole (aggregate of major, medium and minor irrigation).
Figure 8: Revenue and composition of revenue from water resources, MP
Industries66%
Nagar Nigam
0%
Nagar Palika
1%Nagar
Panchayat0%
Gram Panchayat
0%
PHED0%
Farmers27%
Others6%
2003-04 2004-05 2005-06 2006-07 2007-08
Revenues 45.02 45.23 37.32 38.75 50.82
0
10
20
30
40
50
60
Rs.
cro
re
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5.1.3 Revenue Collection Mechanism The major source of income for the department is user charges. The user charges and collection mechanism are
different for agriculture and industry, as detailed below:
5.1.3.1 For Agriculture
The process of collection of user charges from farmers has the following features:
• At the beginning of each crop cycle, the department signs an agreement with the farmers in the area
• The department has an estimate of the landholding pattern through coordination with revenue department
at the time of project construction.
• The department has field level workers or „Amins’ who visit and collect the user charges from the farmers.
The rates applicable are „per watering‟ as shown in Table 15.
• The department also provides on demand irrigation facility.
Table 15: User charges for Agriculture
S.No Crops/ Lands/ Sources
Rate per Hectare (in Rs.)
Previous (enforced from
1st Nov., 02)
Existing (enforced from 1st Nov 05)
9
1 Rice (Paddy) 215 85 each watering
Other Kharif Crops 130 50 each watering
2 Wheat Palewa 105 125 each watering
Wheat (for each watering) 65 75 for each extra watering
Other Rabi Crops 265 75 for each watering
3 Jute - -
4 Sugarcane 800 960
5 Others
i. Vegetables 525 630
ii. Paddy (Rabi) 525 155 each watering
iii. Fodder Crops 400 480
iv. Cotton Ordinary 185 70 each watering
v. Cotton Hybrid 400 -
Source: Water Resources Department, Government of Madhya Pradesh.
5.1.3.2 For Industrial and Other Usages
The Department enters into an agreement with the industrial users on the rates and usage of water resources. The
rates applicable as per agreement are given in Table 16:
Table 16: User Charges for Industries
S.No Classification Proposed tariffs for industrial purposes (Rates per KL) with effect from
1 Nov 08 1 Nov 09 1 Nov 10 1 Nov 11 1 Nov 12
A In official
sources
(Canal, tube
well, reservoir)
Private Sector
2.2 2.4 2.6 2.8 3
9 Please note that these rates are currently under the process of revision
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S.No Classification Proposed tariffs for industrial purposes (Rates per KL) with effect from
1 Nov 08 1 Nov 09 1 Nov 10 1 Nov 11 1 Nov 12
Industries or
State and
Central
Government
Undertakings
Etc.
B Natural/ Self constructed source from river, lake or other natural bodies
B (i) Those
industries
whose
sources were
constructed
from their own
expenditure
0.16 0.17 0.18 0.19 0.2
B (ii) Those
industries who
are directly
extracting
water from the
source
0.53 0.56 0.59 0.62 0.65
Source: Water Resource Department, Government of Madhya Pradesh
5.2 Good Practice Benchmarking
Figure 9 presents the recovery rates,
defined as the ratio of non tax
revenues to the revenue
expenditure.
As can be seen from the figure,
Orissa, Gujarat and Maharashtra
have higher recovery rates in
comparison to other states.
Government of Orissa has made it
compulsory for all the farmers to be
part of the “Paani Panchayat” to be
eligible for the maintenance grant.
This ensures that almost all the
farmers are part of the reform
program resulting in improved
recovery levels.
The states of Maharashtra and Andhra Pradesh have allowed the WUAs to levy charges and maintain irrigation
systems. In Maharashtra, WUAs are allowed:
• To determine, regulate, and enforce distribution of entitlement for various categories of use, as well as
distribution of entitlement within each category of use;
Figure 9: Recovery Rates in Irrigation, Various States
0.0000.1000.2000.3000.4000.5000.6000.7000.800
1993-94
2000-01
2007-08
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• To determine and regulate seasonal or annual water entitlements during scarcity;
• To establish a water tariff system for various categories of water use for the purpose of stable and self-
sustainable management of service delivery.
Gujarat has made provision for 15% rise every year for water charges for irrigation. In addition the state recovers more
than 70% irrigation revenue. In North Gujarat, Saurashtra and Kutch this recovery is 100% and farmers of this area pay
in advance the irrigation charges.
The rate of recovery from users for non agricultural purpose (except drinking water) is also around 80 to 90% and Rs.
200 crore are recovered every year from water supplied for non agricultural purpose.
Administration of irrigation projects in the entire state are given to water users association on “Andhra pattern” by
conducting election. The most important fact is that the water rates are fixed by such associations themselves, which in
general is higher than Government‟s rate. They are allowed to retain 50% revenue with them and use the same for
maintenance of the irrigation network.
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5.3 Issues and Recommendations
Area Issues Identified Possible Reforms
& Way Forward
Estimate of annual Increase in NTR
(Rs. crore)
Recovery
Mechanism The WRD has more than Rs. 450 crore of arrears outstanding. (See
table below and 9.3.1)
The two industries with the largest arrears are NTPC (National
Thermal Power Corporation), Singrauli (Rs. 210 crore) and
M.P.S.E.B (Madhya Pradesh State Electricity Board), Betul (Rs. 165
crore)
Significant arrears also accrue from Nagar Palikas and municipal
corporations.
Chief Engineer Balance as on
1/4/2008 From Arrear
Current Demand (2008-09)
Total Arrears
Chambal & Betwa Basin 1855.03 1064.43 2919.46
Ganga Basin 16522.79 8122.64 24645.44
Yamuna Basin 4856.43 478.42 5334.85
Narmada & Tapti Basin 1874.78 687.78 2562.56
Operations and Maintenance 3749.17 1075.66 4824.83
Rajghat Canal Project 788.03 356.17 1144.20
Dhasan & Ken Basin 1400.68 108.13 1508.81
Wainganga Basin 1138.61 608.70 1747.31
Ayacut Bansagar Basin 0 1570 1570
Electrical & Mechanical 0 105 105
Engineer In Chief 0 45 45
Bureau of Design of Hydel and Irrigation
0 5 5
Project Implementation coordination unit
0 0 0
Total 32185.52 14226.9 46412.4
All figures are in Rs. lakh
Presently, the focus of the department is on implementation of the
major medium and minor projects. The collection of revenues is
currently a secondary activity and the collection efficiency is low
WUAs to be made responsible for full cost
recovery from irrigation projects and possible up-
gradation of irrigation systems.
If the collection
efficiency from
farmers improves
15% the department
can get about Rs. 7
crore per year
(moderate scenario).
See section 9.3.2 for
three alternative
scenarios.
Have a fixed timeline for signing agreement with industries
For renewal of agreements clear time-bound procedures should be in place outlining escalation mechanisms up to Engineer-in
3 % improvement in
recovery rate from
industries will result
in an increase in
revenues of about
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Area Issues Identified Possible Reforms
& Way Forward
Estimate of annual Increase in NTR
(Rs. crore)
(Recovery of fees as a ratio of current demand) - See section 9.3.1
for details.
Service delivery issues - At present WRD is the revenue collecting
authority for even minor irrigation projects, while the WUAs are
responsible for the Operation and Maintenance (O&M). This suggests
that there is absence of a link between the payment of service
charges and the prospect of improvement in services provided by the
system in response to the user requirements. It is perceived that
minor irrigation schemes handed over to WUAs may become
unviable due to limited capacity.
Large number of litigations
Weak monitoring mechanism
Non finalization of agreements with industries (~25 % of agreements
pending finalisation). As can be seen from the table below, out of the
52 industries, the agreements are yet to be finalised in 14 industries:
Category #
Not applicable 16
Agreement Done 22
Agreement Not Done 14
Chief‟s office
After a period of 6-12 months, the recovery of revenue from industries may be delegated to district magistrate
Rs. 4 crore
(moderate scenario)
See section 9.3.2 for
three alternative
scenarios.
Reforms in
WUAs WUAs have not been handed any specific task based responsibility
Many of them have not been able to achieve end results as desired.
It is recommended that the WUAs are
specifically assigned the task of regular
maintenance for irrigation projects.
Devolution of grants to WUAs to be
contingent on participation of all farmers and
signing an agreement with the department
for payment of water charges.
Elections on a rotation basis for key officials
of WUAs to be ensured to avoid rent
seeking.
If the collection
efficiency from
farmers improves
15% the department
can get about Rs. 7
crore per year
(moderate scenario)
apart from possible
savings due to lower
regular maintenance
costs.
See section 9.3.2 for
three alternative
scenarios
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Area Issues Identified Possible Reforms
& Way Forward
Estimate of annual Increase in NTR
(Rs. crore)
Revision of
Rates
Presently, the proposal for revision of rates is pending with
government for close to a year.
There should be a time bound revision of
rates.
Instead of changing rates once in three
years with values for each year increasing
arbitrarily, indexation of rates (e.g. to
inflation) is preferable.
Rates could be made progressive as against
a flat rate. Thus, each WUA may be given a
measured amount of water and a target for
collection efficiency can be set for each
WUA.
See section 9.3.3 on pricing of water
resources. The note provides an estimate of
the increase in rates required to cover at
least maintenance expenditures of the
department
~ Rs. 3 – 5 crore
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6 Education
The education sector assumes central importance in the Human Development of any state. As per the present policy of
the state government, primary education is to be provided free of cost and similar policy is on the anvil in the upper
primary or middle schools. Thus, for this sector, our focus on generation of Non-Tax Revenue from the education
sector has been on Secondary, Higher and Technical Education.
6.1 As-Is Analysis
6.1.1 Stakeholder Analysis The following are the major stakeholders in Education from the Government of Madhya Pradesh.
Table 17: Stakeholder Analysis - Education
# Stakeholder Primary Responsibility Relevant Revenue Stream for
the state Government
1. Department of School
Education (SED)
Education from pre- primary to Higher secondary school.
(in Non- Tribal areas only)
No significant source of revenue
Board of Secondary
Education, M.P
Regulation of secondary education in the state Examination fees, recognition
fees, other fees are kept with the
Board itself
2. Department of Higher
Education
Collegiate education (excluding medical, veterinary,
engineering and agriculture colleges) and post graduate
education in arts, commerce and science faculties along
with policies thereof.
Fees from universities and higher
education
3. Directorate of
Technical Education
Implement technical education policies of GoMP and
Central Government, act as coordinating agency
between Government, industry and institutions and to
advice and assist the Government in the all-round
development of technical education.
Tuitions and other fees from
technical education colleges
6.1.2 Revenue Trends Revenue collections in education sector in MP are between 5-20% of Revenues collected in other major states.
10
Figure 10: Revenue Collection Trend – Education
10
Maharashtra, Kerala, Karnataka, Gujarat, Andhra Pradesh and Tamil Nadu.
2004-5 2005-06 2006-07 2007-08
NTR Education (Rs. crore) 13.17 11.85 10.93 13.72
0
2
4
6
8
10
12
14
16
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As is evident from Table 18 the revenue from technical education has gone down significantly in recent years. The
reason for this is explained in Section 6.1.5.
Table 18: Details of Revenue from Education (Rs. Thousand)
Classification/Year 2004-5 2005-06 2006-07 2007-08
Total (General +Technical) 1,31,732 1,18,573 1,09,338 1,37,256
General Education 41,357 95,605 94,021 1,35,611
Elementary Education 222
Secondary Education 20,504
University and Higher Education 22,347 33,554
General 22,067 68,895 47,561 18,139
Other Receipts 27,125 24,888 85,348
Deduct-Refunds -1,214 -415 -775 -1,652
Technical Education 90,375 22,968 15,317 1,645
Tuitions and other fees 91,120 22,968 15,317 1,645
Deduct-Refunds -745
Source: Finance & Accounts of Madhya Pradesh (2004-05 to 2007-08)
6.1.3 School Education • Madhya Pradesh does not collect significant revenues from Secondary education that accrues to the state
government. The only source of revenue for the School Education department is type writing exam fees.
This yielded revenues of Rs. 7 lakh last year.
• The Board of Secondary Education, Madhya Pradesh collects revenues that it uses for its own operations.
The major revenue sources are the examination fees (levied on a per student basis) and recognition fees
that schools have to pay to the board. The recognition is renewed every year for which there is a separate
charge. Other fees include enrolment, mark sheet and tuition fees.
• The Board earns about Rs. 70 -75 crore of revenue each year, which they deposit with a nationalised bank.
They meet their expenditures of about Rs. 55 – 60 crore through this source.
Table 19: Fees and charges levied by the Board of Secondary Education, M.P
S.No. Exam and other fee details
Amount (Rupee)
Regular Swadhiyai Correspondence
High School
Higher Secondary
Commercial
S. School/ H.Sec/
Commercial
D.Ad.
A Fees paid by organisation
1 Exam application fee 30 30 30 150
2 Examination Fee 250 250 500 300
3 Mark sheet Fee 40 40 40 40
4 Registration Fee 80 80 80 80
5 Lab fee- Per Subject 30 30 30 0
6 All Examination fee
One Subject 105 105 105 0
two Subject 125 125 125 0
More than two subjects 285 285 285 0
7 Tuition Fee (Correspondence- D.Ad first/ second year)
0 751
8 D.Ad second chance
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S.No. Exam and other fee details
Amount (Rupee)
Regular Swadhiyai Correspondence
High School
Higher Secondary
Commercial
S. School/ H.Sec/
Commercial
D.Ad.
One Subject 0 0 0 70
two Subject 0 0 0 90
More than two subjects 0 0 0 500
9 Affiliation fee - new fee 10000 12500 15000
Renewal 2000 2200 2500
10 Other legal fees (Subject/ Medium/Faculty/ central- modification)each
100 100 100 100
11 Educational research fee
12 Acceptance fees 200 200 200 200
B. Fees paid by Students
13 Copy document - Emergency Marksheet/ certificates
70 70 70 70
Immigration/visa/ enrollment 50 50 50 50
14 Re-checking fees per subject 100 100 100 100
15 Digest fee per subject 60 60 60 60
16 Complementary subject (Including all subject
50 50 50
17 D.Ad regular, second chance correspondence
0 0 0 250
18 Record verification fees 100 100 100 100
19 Other Fees 0 0 0 0
Source: Board of Secondary Education, Government of Madhya Pradesh
6.1.4 Higher Education • Opening up a new private college of higher education yields revenues to the department. Each new private
college has to pay the government Rs. 2 lakh rupees (recently revised upwards from 1 lakh). Before 2005,
no charge was levied for opening up private institutes.
• Private colleges are also charged Rs. 20,000 for opening up each new department (Adding subjects). This
fee was also revised upwards from Rs. 12,000 last year.
• As per the guidelines these charges can only be revised once every three years. Scope for an increment in
fees is therefore very limited in the next two years.
• Revenues from higher education were about Rs. 4.88 crore last year. Due to the revisions in rates, the
department expects this figure to increase to Rs. 5.5 crore.
6.1.5 Technical Education • As part of the TEQIP (Technical Education Quality Improvement Project- World Bank) Corpus fund, Staff
Development fund, Depreciation fund and Maintenance fund were created in each institution and steps
were taken to make available resources in these funds.
• More autonomy for universities and colleges in technical education has meant that the entire revenue
sources of the technical education colleges or universities are used for their own development. The
unutilised funds are accumulated in a corpus fund.
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• The Directorate of Technical Education therefore collects no revenues. In fact, it distributes (Plan and Non
Plan) development grants to institutions.
• Fee structures for different universities and individual colleges are decided by the Admission and Fee
Regulatory Committee (AFRC).
Table 20: Number of Technical Education Institutions by Subject
Syllabus Autonomous Government Aided Self Financed Private Total Students Capacity
BE/ Architecture 4 4 6 148 162 52200
Diploma (Engg) 42 2 44 11225
MBA 2 2 10 125 139 9350
MCA 2 3 7 79 91 5610
B Pharma 0 1 3 89 93 7980
Hotel Management 0 0 0 4 4 230
Source: Directorate of Technical Education, Government of Madhya Pradesh
6.2 Good Practice Benchmarking
As can be seen from Figure
11, Madhya Pradesh has been
far below the 13-state11
average in terms of revenue
generation. Its recovery rates
are the lowest among the 13
states under consideration in
2007-08, even though
recovery rates are typically
very low in this sector in
general.
The success stories are Tamil
Nadu and Haryana. Apart
from having very high
recovery rates Tamil Nadu
also earns large revenues
from education. In 2007-08,
Tamil Nadu earned more than Rs. 100 crore from elementary education and secondary education each, and more than
Rs. 50 crore from technical education. As noted earlier the total revenue from general and technical education in MP
was around Rs. 14 crore.
Tamil Nadu – Case Study, Secondary Education
The State of Tamil Nadu collects revenues from secondary education under the following major heads:
Management Contribution: This is a onetime payment and the school management pays the management contribution
in the Government Account on the basis of number of students as follows:
• Up to 500: Rs. 10,000
11
See figure above for the thirteen states under study.
M.PW.
BENGAL
RAJASTHAN
U.PMAHARASHT
RAA.P
KARNATAKA
ORISSA
GUJARAT
PUNJAB
KERALA
TAMIL NADU
HARYANA
1993-94 0.43% 0.28% 0.32% 1.33% 0.94% 2.17% 1.46% 1.44% 1.38% 0.88% 2.02% 1.50% 2.77%
2000-01 0.51% 0.40% 0.77% 2.97% 0.35% 3.27% 1.19% 1.17% 1.09% 0.58% 1.83% 1.28% 1.72%
2007-08 0.38% 0.39% 0.51% 0.72% 0.75% 0.99% 1.16% 1.61% 1.62% 1.97% 2.38% 2.72% 4.39%
0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%
Figure 11: Recovery Rates in Education, Various States
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• 501-750: Rs. 20,000
• 551- 1000: Rs. 40,000
• 1001-1500: Rs. 60,000
• 1501-2000: Rs. 80,000
• Above 2000: Rs. 1,00,000
Inspection fees: It is an annual payment by the schools. An amount of Rs. 2500 is collected for Matriculation schools
and Rs. 5000 for higher secondary schools
Application fees: It is paid every three years for opening, permission, recognition and renewal of recognition. An
amount of Rs. 10,000 is paid for upgradation and renewal and Rs. 1000 for opening additional classes.
Apart from these three heads the Government also collects a one time endowment fees of Rs.10,000 which stays in
the school account
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6.3 Issues and Recommendations
Area Issues Identified Recommendations Estimate of annual Increase
in NTR
(Rs. crore)
Revenue collection by Secondary Education Board, M.P
Most states receive significant revenues from secondary education primarily because the departments are responsible for collecting the revenues. In Madhya Pradesh, the department earns nominal revenues as revenue is collected by the Board of Secondary Education for its own operations.
The Secondary Education Board earns a surplus of about Rs. 15 crore each year from the various fees and charges it levies on both students and private institutes.
It is recommended that the state government levy a share of 20% of the examination fee and about 40% of the renewal fee for affiliation. There are several other process specific charges which should remain fully with the Board.
Rs. 4.3 crore See section 9.4.1
Ceiling on Corpus Funds with additional money collected to be deposited in State Treasuries
Almost all the universities have a growing corpus amount. This has led to a lot of agencies in the education sector with idle money e.g.
RGPV (Rajiv Gandhi Proudyogiki Vishwavidyalaya) - Corpus of more than Rs 200 crore
Vyapam – Corpus of more than Rs 25 crore
More than Rs 5 crore (in a separate account) for providing NOC (No Objection Certificate) to private bodies
It is recommended that depending on the function of an institution, a ceiling on its corpus may be defined and amount above the ceiling can be utilised by the state government for other capital intensive projects
While the government will not receive a significant amount of revenues from this measure, such a step will incentivise the concerned agencies to better utilize the corpus and will place less demand on the state government for additional resources.
Using physical infrastructure for alternate uses
No initiatives undertaken for alternate uses of school infrastructure
After the teaching hours are over or at the end of the week when classes are not held institutions could lease out their grounds/ auditorium/ classroom facilities for fees. This is currently happening on a very small scale in the state and is therefore not yet a significant revenue source.
The existing infrastructure in government schools such as classrooms can also be utilized effectively by lending them out after school hours to private coaching institutes for
Approximately Rs. 45 lakh. Details in Sec 9.4.2
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Area Issues Identified Recommendations Estimate of annual Increase
in NTR
(Rs. crore)
engineering/ MBA entrances and so on. Schools can earn significant revenues from this source.
A regulation of these charges for the entire state may also be a step in the right direction.
Sponsorship/ adoption of schools
Such initiatives have started in Madhya Pradesh (www.fundaschool.org) under the Rajiv Gandhi Shiksha Mission
For more details see section 9.4.3
Schools or school buildings, libraries etc. can be sponsored by individuals (or their nominees) or corporates.
Possible features of such a scheme (rates, certification etc.) are given under section 9.4.3
The revenue enhancement directly attributable to this measure is not estimated
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7 Water Supply and Sanitation
Government of Madhya Pradesh has recently made great strides in providing water supply and especially piped water
supply even to remote habitations. The percentage of rural habitations with less than 10 lpcd (litres per capita per day)
of water supply has drastically come down from 15.8% in 2003 to 0.1% in 2009. Also the percentage of habitations with
40 lpcd of water supply has increased from 59% to 97% over the period 2003 to 2009. Thus the state has made
considerable progress in terms of meeting the national norms for rural water supply.
7.1 As-Is Analysis
7.1.1 Stakeholder Analysis The following table provides the stakeholder analysis for water supply and sanitation in the state. The PHED, ULBs and
PRIs are the relevant stakeholders in this sector. Their primary responsibilities and revenue streams are also detailed
in Table 21.
Table 21: Stakeholder Analysis- Water Supply and Sanitation Sector
# Stakeholder Primary Responsibility Relevant Revenue
Stream for the state
Government
1 Department of Public
Health and Engineering
(PHED)
Construction of the water supply system is undertaken by
the centralized body -PHED and after the construction, the
assets are handed over to the Local Bodies.
PHED also provides technical assistance to Panchayati Raj
Institutions (PRIs) on need basis for O&M of the system
PHED is also responsible for operation and maintenance of
sewage treatment plants.
Service fee from
Contractors.
2 Urban Local Bodies (ULBs) Responsible for provision of water supply and sanitation in
Urban Areas
User charges collected and
retained by the local body
3 Panchayati Raj Institutions Responsible for provision of water supply and sanitation in
Rural Areas
User charges collected and
retained by PRIs.
While the revenue from this sector goes to the third tier of the government, we have focussed on three large municipal
corporations as enhanced revenue generation by such ULBs can in turn lead to less demand for grants from the state
exchequer.
7.1.2 Trend and Composition of Revenue
The PHED is the state level authority for levying and receiving user charges from the sector. As the table below
suggests, the receipts from user charges is minimal and decreasing as the authority to levy such charges has been
devolved to local bodies
As Table 22 suggests, there has been minimal trend growth in receipts as the receipts are mostly other receipts and
service fee from contractors for implementation.
Table 22: Trend and Composition of Revenue – Water Supply & Sanitation
Revenue Head 2005-06 2006-07 2007-08
Water Supply and Sanitation 55,886 51,345 59,106
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Revenue Head 2005-06 2006-07 2007-08
Water Supply 18,731 17,140 22,332
Receipts from Urban water supply schemes 432 241 338
Services and Service Fees 18,327 16,899 21,989
Sewerage and Sanitation 37,155 34,205 36,774
Receipts from Sewerage Schemes 998 879 1,691
Other Receipts 36,157 33,326 35,083
Source: Finance Accounts, GoMP. All figures are in Rupees thousand.
7.1.3 Service Delivery
7.1.3.1 Water Supply
Construction of the water supply system is undertaken by the centralized body- PHED and then after the construction,
these are handed over to the local authorities. In case of large municipal corporations, they may decide to implement
construction projects on their own.
None of the ULBs in Madhya Pradesh have bulk meters installed.
7.1.4 Operations and Maintenance
7.1.4.1 Water Supply
For water supply schemes, the operations and maintenance cost is borne and administered by the respective local
body. The source of funding is typically user charges or untied funds from various schemes for PRIs. In rural areas,
Gram Panchayats are thereafter responsible for the operation and maintenance of the water supply system. The PHED
provides technical assistance to the Gram Panchayats on need basis in the operation and maintenance of the system.
Since separate accounting for maintenance on water supply is not done at the state level, an overall assessment of
actual maintenance cost cannot be done. For our analysis we have therefore focused on the major municipal
corporations of Bhopal, Indore and Jabalpur.
Table 23 presents the data for three municipal corporations. It shows poor level of service delivery coupled with low
operating ratio. Operating ratio shows the ratio of recurring expenditure incurred to the revenues earned by the ULB.
An average of 3.23 for the operating ratio suggests that the revenue from water tariff may have to be increased more
than three times just to cover the operating costs of water supply schemes.
Table 23: Key Indicators (Water Supply) for Bhopal, Indore and Jabalpur12
Key Indicators Bhopal Indore Jabalpur
Water Coverage (%) 83.4 77.3 75.2
Water Availability (hours) 1.5 0.75 4
Consumption/Capita (l/c/d) 72 87 139
Production/Population (m3/d/c) 0.182 0.108 0.222
12
2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank
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Key Indicators Bhopal Indore Jabalpur
Connections Metered (%) 0 0.1 0
Operating Ratio 2.82 5.33 1.68
Staff/1,000 Connections (ratio) 20.7 18.7 0.4
Source: 2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank
7.1.4.2 Sanitation
PHED is responsible for maintaining the sewage treatment plants. Table 24 shows the Non Plan Revenue Expenditure
(NPRE) on sewerage services by GoMP.
Table 24: NPRE on Sewerage in MP
Year 2005-06 2006-07 2007-08
NPRE on Sewerage Services 9.69 11.7 11.8
Source: Finance & Accounts, GoMP. All figures in Rs. crore
7.1.5 Revenue Collection Mechanism In the urban areas, as per the devolution policy of the state government, water supply collection mechanism is at the
ULB level. Table 25 and Table 26 shows the water charges imposed by Bhopal and Indore. Jabalpur has a flat rate per
connection.
Table 25: Water Supply Charges, Bhopal Municipal Corporation
Size Domestic Commercial* Industrial
1/2" 60 500 600
3/4" 400 1,000 1,000
1” 600 1,500 1,500
Tariff for metered domestic connection is Rs 3.50/m3
Source: Bhopal Municipal Corporation Annual Report, 2009
Table 26: Water Supply Charges, Indore Municipal Corporation
Size Domestic Commercial Industrial
1/2" 150 300 600
3/4" 250 600 1,200
1” 500 1,400 2,400
1-1/2” 1,000 2,400 5,000
2” 2,000 5,000 10,000
3” 4,000 10,000 20,000
4” 8,000 20,000 35,000
6” 14,000 38,000 76,000
Bulk rates 11.00/m3 14.00/m3 24.00/m3
Tariff for metered connections – Rs. /m3 (Bulk rates)
Source: 2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank
There is no metering in Bhopal while metering has been initiated in Indore. A comparison across the three ULBs is
given in Table 27. Bhopal has the lowest rate applicable across the cities.
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Table 27: Average Tariff across ULBs (Bhopal, Indore and Jabalpur)
Indicator/ City Bhopal Indore Jabalpur
Average Tariff (Rs/m3) 0.6 2.79 1.5
New Connection Fee (Rs) 1,500 2,500 1,984
Staff/1,000 Connections (ratio) 20.7 18.7 0.4
In rural areas, water charges are levied by PRIs under the Nal Jal scheme. Typically, the PRIs charge Rs. 25-50 per
connection.
For sanitation, no separate charges are levied and a “Composite Charge” is levied by the ULBs comprising sanitation
and other charges. The composite charge is typically linked to the “Property Tax”. Property tax is usually based on the
area and probable commercial value. However, there is no fixed system to revise the property tax periodically.
Case Studies for Good Practices in Water Supply and Sanitation
Chennai Sewage Treatment
The Chennai Metropolitan Water Supply and Sewerage Board have made a significant advance in use of service
contracts for PPP in O&M of water supply and sewerage systems in the city. Out of the 119 city sewerage pumping
stations, 70 have been given to private contractors for operation and maintenance. The system is working very well
which has resulted in an increase in the contract period from one to three years. The Board has also given service
contracts for O&M of two sewage treatment plants for a period of three years.
Water Supply model (KUWASIP)
Government of Karnataka (GoK) is implementing a project called “Karnataka Urban Water Sector Improvement Project”
(KUWASIP) with assistance from the World Bank. This is a project for reforms in water and sanitation sector and
service improvements in water sector. For further details, including the tariffs for this project see Section 9.5.3.
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7.2 Issues and Recommendations13
Area Issues Identified Recommendations Estimate of annual
Increase in NTR
(Rs. crore)
Increase in Water Tariff
ULBs in Madhya Pradesh have very low recovery rate compared
to other similar districts across the country. The water tariff
charged is much below average.
High operating ratio (Recurring expenditure/ revenue from water
tariff)
Poor service delivery and lack of resources to improve the same
Section 9.5.1 shows comparative status of cities across India in
terms water supply. Section 9.5.3 shows the rate structure for a
PPP water supply model in North Karnataka.
Municipal Corporations need to recover at least their operation
and maintenance cost from revenues.
The revenue collected will be much needed by the ULBs in
improving their service delivery and productivity which is
significantly below the national average as can be seen in
sections 9.5.1 and 9.5.2
It is also recommended that this rate be indexed to inflation so
that the rate gets revised automatically on an annual basis
Explore Retail Price Index(RPI)-X method of indexation of water
tariff
The steps behind such a methodology are as follows:
Arriving at relevant set of indices and the appropriate weights for
these indices, i.e., to arrive at the RPI formula
Specifying different levels of standards and their bearing on the
end-user tariffs
Arriving at suitable values for the X-factor, that symbolizes the
efficiency gains based on increased productivity, technological
changes, quality standards, enhancements to the security of
supply and changes in economies of scale or scope, enhanced
service levels etc.
Rs. 5 crore
Metering of Water Supply
The concept of metering for water supply has not been
introduced in any of the ULBs. Indore Municipal Corporation has
installed some meters especially for bulk consumers. However,
Water, is going to be a scarce commodity and water supply
should be metered on the principle of fairness and conservation.
(See Section 9.5.2)
Metering will allow the ULBs to levy progressive charges on
consumers.
Meters to be installed for industries and bulk users
Sewage While the user charges of sewage treatment are collected at the Sewage treatment plant maintenance activity be handed over to ~ Rs. 3 crore
13
The recommendations made in this report are already under different stages of implementation as mentioned by the concerned
departmental officials during the presentation on the report.
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Area Issues Identified Recommendations Estimate of annual
Increase in NTR
(Rs. crore)
treatment Maintenance
ULB level, the maintenance is done by PHED. This model
hinders many of the reforms that are taking place in sanitation
sector in Madhya Pradesh and across India.
the ULBs
This will allow the ULBs to adopt the PPP approach, induct a
private player and at the same time levy user charge for this
purpose based on the actual cost of O&M. Also, with the given
high number of staff in many ULBs such as Indore and Bhopal,
there may be cost savings in
of savings (30% of 11 crore). See section 7.1.4.2.
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8 Cooperatives
Cooperatives all over the world have become an effective and potential instrument of economic development. The
Cooperative Movement that Madhya Pradesh has witnessed over the decades has contributed to substantial growth in
diverse areas of economy. There is not a single major sphere of economic activity which has not been touched by
Cooperatives. Cooperatives are also envisaged as an instrument for implementing many important policies like
agricultural credit, urban credit, market intervention, price support for agricultural commodities through Cooperative
Wholesale stores, Public Distribution System (PDS) etc.
There are six Apex level (State wide) Cooperative institutions
• Madhya Pradesh Rajya Sahkari Bank
• Madhya Pradesh Rajya Sahkari Krishi aur Grameen Vikas Bank
• Madhya Pradesh Rajya Sahkari Awaas Sangh
• Madhya Pradesh Rajya Sahkari Vipanan Sangh
• Madhya Pradesh Rajya Sahkari Upabhokta Sangh
• Priyadarshini Swa-Suwidha Kendra
These institutions are functioning with their area of operation extending over the entire state.
The District Central Cooperative Banks, District Cooperative Unions, Cooperative Printing Presses, Cooperative whole
sale stores are functioning with area of operation of the respective district. Urban Cooperative Banks are functioning
with area of operation confined to respective urban areas. The area of operation of Co-operative Marketing societies
are the respective districts/ blocks. Primary Cooperative Agriculture and Rural Development Banks are functioning with
area of operation at block /district level. The Primary Agricultural Cooperative Banks and Primary Cooperative stores
are functioning at Primary level covering villages. Primary Cooperative stores are functioning in Villages and its urban
centres covering the area of operation specified in their byelaws.
8.1 As-Is Analysis
8.1.1 Stakeholder Analysis Department of cooperation is the agency responsible and its main activities are as a regulatory and supervisory body of
institutions related to development.
The main obligations of the department are the registration, inspection, supervision, audit and liquidation of cooperative
societies. The department also guides the societies on various technical and financial matters.
The Department of Cooperation through almost 39,139 (2008-09) cooperative societies undertakes various activities
relating to procuring manure, seeds and other inputs for farmers, urban credit systems, PDS (Public Distribution
System) and obtaining essential consumer goods and so on. The societies involved in these activities range from urban
consumer cooperatives, housing cooperatives, fish/dairy forest produce, weaving, mineral works, etc.
Short term and long term credit are provided for farmers through M.P State Cooperative Bank along with 38 district
central cooperative banks and 4,530 primary agricultural credit cooperative societies.
Development work in housing, processing units and farm based industries is undertaken by cooperative societies. 28
lakh credit cards have been provided to the farmer community.
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In the M.P Cooperatives Act of 1960, 33% participation of women in primary cooperative societies is mandatory. Latest
data indicates that while in a few cases this norm is easily met, in most cases the percentage falls well short of the
required measure. Of the total 39,139 registered cooperative societies only 6,898 are women cooperative societies,
that is, only 17.6%. Efforts are underway to improve women‟s participation in the cooperatives.
To solve the housing problem more than 3,000 housing cooperatives exist in the state.
Table 28: Stakeholder Analysis- Cooperatives Sector
Stakeholder Responsibility Source of Revenue for the State
Department of Cooperation
Registration, inspection, supervision, audit and liquidation of cooperative societies.
Audit and other fees
Cooperative Societies
Instrument for implementing many important policies like agricultural credit, urban credit, market intervention, price support for agricultural commodities through Cooperative wholesale stores, PDS etc.
No significant revenue
8.1.2 Sources and Composition of Revenue
As is evident from Figure 12 the trend is that of
increasing revenue and the growth in NTR from
cooperatives in recent years has been quite rapid.
The single largest component of revenues from
cooperatives is the audit fees that the department
collects (see Table 29). Though even this
component has shown high growth in recent years,
the department expects this component to go down
as now the cooperative societies have the option of
allowing a chartered accountant to audit them
instead of the department.
Table 29: Composition of Revenue - Cooperatives
Category 2005-06 2006-07 2007-08
Co-operation 142,316 185,399 292,850
Audit Fees 120,542 152,965 252,509
Services and Service Fees
Other Receipts 21,784 32,438 40,341
Deduct-Refunds - 10 - 4
Source: Finance & Accounts, Government of Madhya Pradesh. All figures are in Rs. thousand.
8.1.3 Sources of Revenue – Audit Fees and Other Minor Sources As of now the department has only one source of revenue. According to the M.P Cooperatives Act every society was to
get audited atleast once in every year by the person authorised by the Registrar and pay the prescribed audit fee
providing for some exemptions which are listed below:
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Revenue 14.45 15.61 17.92 14.23 18.54 29.29
0.005.00
10.0015.0020.0025.0030.0035.00
Ru
pe
es
cro
re
Figure 12: Revenue Collection Trend- Cooperatives
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• A Central Society or an Apex Society or an Urban Co-operative Bank may get the accounts audited by a
Chartered Accountant approved by the Registrar
• A Co-operative Bank may get the accounts audited by a Chartered Accountant approved by the National
Bank, and the audit fees shall be paid by the Bank as may be determined by them
• Primary Agriculture Credit Co-operative Societies, too shall have option to get the accounts audited by the
Chartered Accountant or the Registrar
The department has a separate audit wing in each district through which it conducts the audits. Every year all the
societies in the districts are therefore divided among the auditors. The audit wing audits, levies and recovers the
charges from the cooperative societies.
One other source (very nominal) through which the department earns revenue is through the receipt of a fee by the
registrar in order to conduct an inquiry into the specific matters raised in an application relating to the constitution
working and financial condition of the society. Thus, when societies want an inquiry conducted they have to pay a fee.
According to the Act, the fee has to be sufficient to meet the costs of inquiry. No formal fee structure is laid down in the
Act. A similar provision for fees is there in case the registrar is called upon to assist in dispute resolution.
8.1.4 Procedure for Conducting Audit The person authorized by the Registrar to audit the accounts of a society has to submit an audit note to the Registrar
on the accounts examined by him and on the balance sheet and profit and loss accounts.
Every society the accounts of which are audited has to pay a charge for the audit to the state government for each year
in accordance with the scale laid down in the schedule depending on the class of society to which it belongs.
8.1.5 Levy of Audit Fees The basis for levy of audit fees applied depends on the class (and the type) of societies. The base is either the total
sales or the total turnover. For example, the basis for charging audit fees for Consumer (Electricity) Societies, Farming,
Housing, Marketing, Multipurpose and general societies is the total turnover.
Depending on the size of the annual business of a particular cooperative society, it has to pay a different fee depending
on the slab it falls under. Each slab has a certain average (Mid-value). If the annual turnover/sales fall below this
average the rate per lakh for that slab is applicable as audit fees, while if the turnover/sales are above that average
value, the maximum fee for that slab is paid.
As is evident from the table below the rate per lakh also decreases as the annual business value increases.
Table 30: Calculation Chart for Value of Audit fees
S.No Annual Business
Average Business
Rates for 0-100 lakh S.No Rates for 1 - 100 crore
Rate/lakh Min. Max. Rate/lakh Min. Max.
1 0-1 0.5 150 - 75 20 125 - -
2 1-2 1.5 150 150 225 21 125 12,500 18,750
3 2-3 2.5 150 300 375 22 100 20,000 25,000
4 3-4 3.5 150 450 525 23 100 30,000 35,000
5 4-5 4.5 150 600 675 24 100 40,000 45,000
6 5-6 5.5 150 750 825 25 100 50,000 55,000
7 6-7 6.5 150 900 975 26 100 60,000 65,,000
8 7-8 7.5 150 1,050 1,125 27 100 70,000 75,000
9 8-9 8.5 150 1,200 1,275 28 100 80,000 85,000
10 9-10 9.5 150 1,350 1,425 29 100 90,000 95,000
11 10-20 15 150 1,500 2,250 30 100 1,00,000 1,50,000
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S.No Annual Business
Average Business
Rates for 0-100 lakh S.No Rates for 1 - 100 crore
Rate/lakh Min. Max. Rate/lakh Min. Max.
12 20-30 25 125 2,500 3,125 31 75 1,50,000 1,87,500
13 30-40 35 125 3,750 4,,375 32 75 2,25,000 2,62,500
14 40-50 45 125 5,000 5,625 33 75 3,00,000 3,37,500
15 50-60 55 125 6,250 6,875 34 75 3,75,000 4,12,500
16 60-70 65 125 7,500 8,125 35 75 4,50,000 4,87,500
17 70-80 75 125 8,750 9,375 36 75 5,25,000 5,62,500
18 80-90 85 125 10,000 10,625 37 75 6,00,000 6,37,500
19 90-100 95 125 11,250 11,875 38 75 6,75,000 7,12,500
Source: The Madhya Pradesh Co-operative Societies Rules, 1962
Processing units, local, regional, divisional and district level branches or sales centre‟s are treated as separate
branches and are subject to a separate fee structure.
The Vaidyanathan Committee Recommendations
The Government of India (GoI) appointed a Task Force under the Chairmanship of Prof. A. Vaidyanathan in 2004 to
analyse the problems faced by the CCS (Cooperative Credit Structure) institutions and to suggest an implementable
action plan for their revival. The finalized Report of Task Force was submitted to the GoI in February 2005.
Government of India had accepted the recommendation of task force. The report submitted by the task force was also
thoroughly examined by the Government of M.P. in the context of benefits of ST CCS (Short- Term Cooperative Credit
Structure) of M.P. and after examining the report, the GoMP had accepted the recommendations of the task force and
executed an MoU (Memorandum of Understanding) with GoI and NABARD (National Bank for Agricultural and Rural
Development) in November 2006.
The Revival Package also focuses on introducing legal and institutional reforms, which will enable the cooperatives to
function as autonomous member centric and member driven institutions. These reforms will enable wider access to
financial resources and investment opportunities, remove geographical restrictions in operations as well as mandated
affiliations to federal structures, and provide administrative autonomy to co-operatives at all levels. The terms for the
revival of PACS (Primary Agricultural Credit Societies) in the MoU included a condition that the PACS and other
cooperative societies could get their accounts audited by Chartered Accountants as a further move to improve their
autonomy.
8.2 Good Practice Benchmarking
Figure 13 reveals that Maharashtra is a success
story. The revenues from audit are almost
comparable in size across states. Most of the
differences come from other revenue sources.
While in some states this other categories is a
significant share of the total (50% or greater), in
Madhya Pradesh, this component is barely 13% of
the total revenue from Cooperatives.
Another success story is that of Andhra Pradesh
where Rs. 34 crore (out of the Rs. 39 crore) is
from “Others” and about Rs. 5 crore are revenues
from audit fees. For further details on sources of
Maharashtra (06/7)
A.P Kerala Karnat
aka M.P
Rajasthan
T.N
Revenues 64.45 39.1 36.5 33.14 29.28 27 17.01
010203040506070
Ru
pe
es
cro
res
Figure 13: Revenue from Cooperatives, Various states (2007-8)
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revenue in other states see section 9.6.1. As is evident from Figure 14 Madhya Pradesh is fairly well placed when it
comes to recovery rates.
8.3 Issues and Recommendations
No major source of revenue augmentation has been identified within the cooperative sector. If we look at the
current rates specified for an audit conducted by the department, we find that these rates are comparable to the
market rates.
The table to determine audit fees, as given in the M.P Cooperative Societies Rules, should be simplified.
A functional review of the department is warranted owing to the societies now having an option to get audited
by qualified accountants.
Figure 14: Recovery Rates in Cooperatives, Various States
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
1993-94
2000-01
2007-08
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9 Appendices
9.1 Appendix I - Mining
9.1.1 Estimate of Revenue Increase from Auction Reforms
Table 31: Revenue Estimates – Auction Reforms
Revenue Estimates- Auction Reforms
Present Revenue from Royalty (In Rs. crore) 99.12
Reduction due to Inactive mines 10%
Net Revenue (90% of Present Royalty) 89.21
Increase in the Receipts due to actual physical assessment of mines capacity 20%
Total Estimated Revenue (In Rs. crore) 107.05
Net increase in Revenue (In Rs. crore) 7.93
9.1.2 Estimate of Revenue Increase from Inflation Indexing
The royalty rates for minor minerals should be indexed so as to increase by a nominal percent annually. Assuming an
increase of 3-4% of inflation, an annual increase of about Rs 3 crore is envisaged
Table 32: Revenue Estimates- Inflation Indexing
Revenue Estimates – Inflation Indexing
Revenue Generated (In Rs crore) 99.12
Increase in Revenue 3%
Increase due to inflation indexing (In Rs crore) 2.97
9.1.3 Estimates of Revenue Increase from SMC Reforms
Table 33: Revenue Estimates – SMC Reforms
Revenue Estimates – SMC Reforms
Present Royalty Rate for Sand (in Rs./ Metric Tonne) 95
State's Government Share (in Rs./ Metric Tonne) 66
One time Increase in Rates 10%
Revenue Generated (In Rs. crore) 27
Increase in Revenue (In Rs. crore) 2.7
State's Government Share14
(In Rs. crore) 2.02
14
Assuming the Governments share also increases on a pro rata basis
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9.1.4 Estimating Lost Revenues through the Consumption Method Sand is one of the more important minor mineral in Madhya Pradesh, in terms of production, production value and
especially in terms of revenue generated through royalties. It is because of this importance that an estimation of
collection efficiency in sand revenues becomes necessary. Sand extraction is susceptible to widespread leakage and
an attempt has been made to estimate the difference between potential revenue collections and the actual collection.
Methodology:
The actual revenues from sand in the state are based on the reported production figures. It has been attempted to
estimate the actual sand production from possible consumption of sand in the state. The lost revenues from estimated
actual production of sand (that goes unreported) is the difference in royalty that would have accrued from the potential
sand production and the actual reported figures.
Generally, the cement to sand ratio for various construction activities is in a standard proportion. These proportions
have been used to estimate the consumption of sand from the cement consumption figures. The consumption of sand
in the state has been estimated by using cement consumption data for Madhya Pradesh from 2003-04 to 2007-08. Two
scenarios have been developed taking two values for the sand-cement mix ratio.
Since sand is available in abundance in many parts of Madhya Pradesh, the state is largely self-sufficient in this
respect, an assumption has been made that there is no import of sand in the state.
Results:
As expected, the estimated consumption figures of sand using the above method are significantly higher than the
official production figures. This is even more significant after realizing that it is much more likely that some of the sand
extracted or produced in M.P might actually be exported, whereas the possibility of importing sand for consumption
purposes is unlikely for the state. Thus our estimation of the difference between the official production figures and the
actual consumption may be actually still understating the gap. The details of the calculations and the gaps under the
two scenarios are presented below.
Scenario 1: Conservative Scenario
In the conservative scenario (see Table 34) we assume that for every 1 part of cement 3 units of sand or used, on
average in the whole state.
Table 34: Potential Loss of Revenue from Sand- Conservative Scenario
# Item 2004-05 2005-06 2006-07 2007-08
1 Cement Consumption (M.T) 6,287,000 6,368,000 6,509,000 7,483,000
2 Sand Consumption (M.T)15
18,861,000 19,104,000 19,527,000 22,449,000
3 Sand Production (M.T) 11,445,194 14,855,774 16,651,179 18,379,415
4 Production as a proportion of Consumption (%)
60.68
77.76
85.27
81.87
5 Actual Sand royalties (Rs. Crore) 25.92 24.36 50.21 55.80
6 Potential Sand Royalties (Rs. Crore)16
42.72 31.33 58.89 68.15
7 Potential loss in revenue (Rs. crore) 16.80 6.96 8.67 12.35
15
Assumption cement and sand are used in a 1:3 ratio 16
Calculated as: [Row #6 = (Row #5/Row #4)*100]
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In the conservative scenario, the realized sand royalties are about 60-85% of the potential. In the year 2007-08 the
potential revenue loss was around Rs. 12 crore.
Scenario 2: Aggressive Scenario
The aggressive scenario assumes that cement and sand are used in a ratio of1:4 (state-wide). The potential loss of
revenues as per the moderate scenario is presented in Table 35:
Table 35: Potential Loss of Revenue from Sand - Aggressive Scenario
# Item 2004-05 2005-06 2006-07 2007-08
1 Cement Consumption
(M.T)17
6,287,000 6,368,000 6,509,000 7,483,000
2 Sand Consumption (M.T)18
25,148,000 25,472,000 26,036,000 29,932,000
3 Sand Production (M.T) 11,445,194 14,855,774 16,651,179 18,379,415
4 Production as a proportion
of Consumption (%)
45.51
58.32
63.95
61.40
5 Actual Sand royalties (Rs.
crore)
25.92 24.36 50.21 55.80
6 Potential Sand Royalties
(Rs. crore)19
56.97 41.77 78.52 90.87
7 Potential loss in
Revenue(Rs. crore)
31.04 17.41 28.30 35.07
As is evident from the table, actual sand royalties have been around 45-65% of the potential in the years under
consideration. The estimated potential revenue loss is as high as Rs. 35 crore in 2007-08. It can also be observed that
the potential loss figures are higher in the years where the reported extraction is higher i.e. when demand goes up
significantly, the level of non-reported extraction also increases significantly.
17
Source Data: www.indiastat.com 18
Assumption cement and sand are used in a 1:4 ratio 19
Calculated as: [Row #6 = (Row #5/Row #4)*100]
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9.2 Appendix II – Forest
9.2.1 Note on Forest Certification
Forest certification is a mechanism for forest monitoring, tracing and labelling timber, wood and pulp products and non-
timber forest products where the quality of management from environmental, social and economic perspectives is
judged against a series of agreed standards. It is a process that leads to the issuing of a certificate by an independent
party, which verifies that an area of forest is managed to a defined standard.
Forest certification refers to two separate processes viz., forest management unit certification (FMU) and chain of
custody certification (COC). Forest management certification is a process which verifies that an area of forest
/plantations from where the wood, fibre and other non-timber forest products is extracted is managed to a defined
standard. COC certification is a process of tracking forest products from the certified forest to the point of sale to
ensure that product originated from a certified forest.
For buyers of forest products, the responsible sourcing is their adoption of policies and practices that reward suppliers
using wood, fibre and other non wood forest products from well-managed forests or from recycled products and
discouraging suppliers using it from unknown, illegal or otherwise controversial sources.
For Example, IKEA, the world‟s largest furniture retailer has a long-term goal to source all wood in the IKEA range from
forests certified as responsibly managed. IKEA works actively with WWF and IKEA suppliers must provide
documentation to show where the wood comes from. IKEA conducts select audits and IKEA forestry specialists trace
the wood from the supplier back to the forest in order to check that IKEA requirements are met.
9.2.2 Estimate of Revenue Increase from e – auction and Forest Certification To arrive at rough estimates of the increase in revenues from e-auctions and forest certification we have made the
following assumptions:
1. The Department estimates for increase in revenues through e-auction were about 1-2%%. For this exercise we
have assumed that a 1.5 % increase in revenues can be expected from such a measure in Timber and
Bamboo, while the revenues from minor forest produce will remain largely unaffected.
2. A 4% increase in royalty revenues is assumed based on consultations with the forest department. As before, it
is assumed that only timber and bamboo plantations would undergo the certification process.
Table 36: Revenue Estimates: e-auction and Forest Certification
Revenue Source 2007-08 (in Rs ‘000)
Estimated increase from e-Auction
Estimated increase from Certification
Percentage In Thousands Base (20% of Rev.)
Percentage In Thousands
State Trading in Tendu Patta
2,463 0.00 0 0 0.00 0
State Trading in minor forest produce
135 0.00 0 0 0.00 0
State Trading in Timber
4,822,956 1.5 72,344 9,64,591 0.04 38,583
State Trading in Bamboo
3,62,329 1.5 5,435 72,465 0.04 2,898
State Trading in Khair
3,905 0.00 0 0 0.00 0
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Revenue Source 2007-08 (in Rs ‘000)
Estimated increase from e-Auction
Estimated increase from Certification
Percentage In Thousands Base (20% of Rev.)
Percentage In Thousands
Total Increase (in Rs. crore) 7.77 4.15
9.2.3 Estimated Increase in Revenue from Development of Ecotourism
To arrive at rough estimates of increase in revenues from development of ecotourism we have assumed that 5 such
sites can be developed with each experiencing a footfall of about 2000 tourists. We also assume that the governments‟
revenue per tourist is 20% of the per capita expenditure by tourists.
Table 37: Revenue Estimate – Development of Ecotourism
Revenue Estimates – Ecotourism Development
Increase in footfalls of tourists per site 2000
Number of destinations developed 5
Per capita expenditure by tourists (in Rs.) 1000
Government‟s revenue per tourist (in Rs.) 200
Margin 20%
Total Expenditure by tourists 2000*5*1000= 1 crore
Estimated total Revenue [Govt. Share – in Rs. lakh] 20
9.2.4 Case Studies - Carbon Trading
9.2.4.1 Introduction
The CDM defined in Article 12 of the Kyoto Protocol (KP) allows industrialized countries (Annex 1 Parties) to acquire
Certified Emission Reductions (CERs) from project activities implemented in developing countries (non-Annex 1
Parties). The CERs generated by such project activities can be used by Annex 1 Parties to help meet their emissions
reduction targets under the Kyoto Protocol. CDM project activities are also to assist developing countries in achieving
sustainable development and in contributing to the ultimate objective of the UNFCCC.
Forestry activities, limited to afforestation and reforestation (AR), are eligible for the CDM. They may include
afforestation or reforestation of degraded lands, conversion of agricultural land to agro-forestry systems, and
commercial plantations, among others. AR-CDM project activities are subject to the specific modalities and procedures
of the CDM. They have the potential of improving livelihoods and the environment in impoverished rural areas of
developing countries by leveraging investments in the forestry sector that would not occur in absence of the possibility
of selling CERs.
There is wide agreement on the fact that carbon may well become the commodity with the largest trade and there can
be little doubt that it is a market that is growing very rapidly and will do so in the future as well. Since these carbon
credits can also be traded on exchanges (like the Chicago Climate Exchange/ European Climate Exchange) just like
commodities, the state can also consider entering into talks with such exchanges to sell the credits that it has gained
through its various initiatives and projects.
There are 1,593 CDM projects registered around the world and the majority involve the energy sector (59.7 per cent)
followed by waste handling and disposal (17.5 per cent) and agriculture (5.41 per cent), while the forestry sector has
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only 0.15 per cent. Forestry has a huge potential to grow and experts estimate that it has the capacity to absorb 12 –
15% of global emissions from fossil fuels.
9.2.4.2 CDM Initiatives in India
China is the world leader in CDM supply with a 73% market share of transacted volume in 2007. Brazil and India, at 6%
market share each, transacted the highest volumes after China.
At present there are only two forestry projects registered in India under the CDM, one in Haryana and the other for ITC,
Bhadrachalam.
Studies20
have shown that currently Forestry has not been tapped into in a major way in India for carbon credits. Thus,
Madhya Pradesh has the opportunity to be one of the leading states in this initiative in India.
So far, India concentrated mainly on
renewable energy (biomass, wind power,
etc.) / waste heat recovery projects which
generate much less CERs
Case Study I – Initiatives by
Uttarakhand
Uttarakhand has been making efforts to
obtain validation from the UNFCCC for
carbon credits needed for carbon trading at
the international level for zero carbon
emissions and protecting environment. The
state hopes to get its carbon credit
validation on forests in the near future as
the inquiry process on the claims have
started.
The state government has already set up a
CDMC to coordinate work for earning
carbon credits from international bodies.
Case Study II – Haryana Community
Forestry Project (HCFP)21
The HCPF includes India‟s first Small Scale Afforestation Clean Development Mechanism Project. The CDM project is
part of the larger Haryana Community Forestry Project, co-funded by the European Commission. The CDM project was
implemented by Haryana Forest Department, under which nearly 370 hectares of sand-dune affected lands, belonging
to 227 farmers from eight villages, were selected. The project will help to stabilize shifting sand-dunes and wind-blown
sandy soil, substantially reducing dust storms and subsequent loss of soil. The project land at present is usually left
fallow. It supports little vegetation or natural regeneration as rain falls only once every three to four years.
In addition to the ecological benefits, the project will benefit poor farmers by creating over 11,500 carbon credits
annually for a period of 20 years. It has been estimated that the net revenue per hectare per year with these carbon
credits will be Rs. 6350 as compared to Rs. 1196 per hectare per year without.
20
“Clean Development Mechanism (CDM) And Carbon Trading In India” - Jitendra Kumar Singh 21
http://cdm.unfccc.int/UserManagement/FileStorage/DJISYMVG9RKHTCPU53X4BZA0NW8O2L
Figure 15: Sector-Wise Break-Up: Investment done in host country approved
CDM projects
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9.2.4.3 Investment Requirement Estimation
9.2.4.3.1 Per Hectare Costs and Initial Equity Investments
One particular estimate of costs per hectare concludes that the average investment requirement would be between Rs.
50,000 to 100,000 per hectare with additional investment on soil moisture conservation. If we assume about 12 CDM
projects each with an average size of 5000 hectares, the total costs are estimated to be around Rs. 450 crore,
assuming the per hectare cost at Rs. 75,000 per Ha. Such projects will also require equity investments of about rupees
100 crore.
9.2.4.3.2 Transaction Costs:22
When registering a project under the CDM, the project developer needs to cover the costs accruing during the steps of
the CDM project cycle, i.e. the transaction costs. The costs for project preparation, validation and registration accrue
up-front, long before any revenues from carbon credit vending can be expected. Projects need to be sufficiently large in
order to justify the transaction costs. On other hand, there are simplified modalities and procedures for small-scale
projects that do not exceed 8,000 CERs per year and these face lower transaction costs. For the regular large-scale
projects, the most important sources of transaction costs are the following:
• Project preparation (usually by a consultancy company): The costs depend on the complexity, the scale of
the project, and on the required technologies and expertise. It also depends on the extent to which local
and international consultants are involved. Costs for project preparation may range at USD (United States
Dollars) 60,000-180,000.
• Validation (by a Designated Operation Entity-DOE): estimated at USD 15,000-25,000.
• Registration fee (by Executive Board - EB): For the first 15,000 CERs projects are charged US$0.10/CER,
for anything above 15,000 they are charged US$0.20/CER. So, a project expecting an average of 50,000
CERs per annum would pay an upfront registration fee of 15,000 x $0.10 + 35,000 x $0.20 = $8,500.
• Monitoring costs: depending on project size and sample size needed, as well as on monitoring methods
and intensity.
• On-going verification (by DOE): depending on the size and the complexity of the project USD 15-25,000 per
audit.
• Issuance fee (by the EB): In accordance to the on-time registration fee scheme, every time a project
requests issuance it has to pay an administrative share of proceeds. The issuance fee is as above US$
0.10/CER for the first 15,000 CERs, it is US$ 0.20/CER for anything above 15,000 CERs. Any upfront
registration fee already paid is deducted from the amount due at the first issuance.
• Adaptation levy (by the EB): Upon issuance, the EB retains 2% of the CERs generated to support
adaptation in countries that will be most affected by climate change.
• Taxes (by the host country): Some countries claim a share of a project‟s CERs in exchange for issuing a
Letter of Approval that is prerequisite to registration.
9.2.4.4 Procedure for Participation in CDM forestry projects23
9.2.4.4.1 Prerequisites
22
Guidebook to Markets and Commercialization of Forestry CDM projects by Till Neeff and Sabine Henders 23
This section provides only a brief description. For a more detailed description see the original source – “Guidebook to
Markets and Commercialization of Forestry CDM projects” by Till Neeff and Sabine Henders (February 2007)
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In the first commitment period of the Kyoto Protocol (2008-2012), the scope of activities eligible for the CDM is limited
to afforestation and reforestation projects. Projects must demonstrate that the land within the project boundary was not
covered by forests in 1990, and that the sites are not covered by forest at project start. Countries may choose threshold
values defining a Kyoto forest from the following ranges:
• Minimum crown cover: 10-30%
• Minimum height at maturity of vegetation: 2-5 m
• Minimum area: 0.05-1 ha
9.2.4.4.2 Project Cycle in Forestry CDM
The project cycle is given in Figure 16 and the explanation of the activities involved is given below. The blue boxes
represent mandatory activities while the grey ones show the common activities that are not necessarily mandatory.
Figure 16: Project cycle of a Forestry CDM Project
Step 1- Initial Documentation
The project cycle usually initiates with the elaboration of a preliminary Project Idea Note (PIN) that summarizes a first
concept and project structure. Some host country authorities use this to issue a Letter of Endorsement (LoE) or letter of
no objection for this project concept, issuing a first confirmation to continue with the project development based on the
outlined design. From some potential credit buyers, it is possible to obtain a Letter of Intention (LoI) to purchase credits
based on the PIN.
Step 2- Project Design
The project design phase is the process of defining the concept of the project, estimating the GHG mitigation potential
of the project, undertaking the feasibility analysis, identifying the various project partners and developing a working
plan. Projects consolidate their design often only after elaboration and preliminary endorsement of a PIN. The project
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design will be fixed and consolidated in the Project Design Document (PDD), which needs to be submitted to the CDM
authorities in a specified format
Step 3 – Methodology Approval
For the definition of baseline and monitoring schemes, projects can either use approved methodologies or submit new
methodologies for approval. If projects decide to submit a new baseline and monitoring methodology, the project can
only be validated based on an approved methodology. Registration of projects is therefore delayed until the
methodology has been approved by the EB.
Step 4- Emission Reduction Purchase Agreements (ERPAs)
In any phase of the project cycle, there is the option of establishing ERPAs between interested credit buyers and
project developers. In contrast to the LoI, the ERPA constitutes a legally binding contract. Even though the ERPA can
be signed at any stage of the project cycle, projects that depend on the CER revenues as seed capital for attracting
more capital will need to sign an ERPA with a buyer at an earlier stage than those that can secure sufficient
implementation capital and reach financial closure in other ways.
Step 5 - Host Country Approval
Host-country approval is an essential requirement of the CDM, it is necessary that the DOE has a Letter of Approval
(LoA) from the host country‟s DNA (Designated National Authority) before it can finish the validation of the project. The
process of host country approval can vary from country to country, due to different internal procedures and agencies
responsible for dealing with climate change issues. In general, however, it is expected that government agencies would
like to analyze the project proposal prior to releasing a LoA, the final letter needed from the host government.
Step 6 - Project Validation
The next steps in the CDM project cycle are to seek validation of the project by an accredited (with the CDM EB),
independent certification body. The PDD and any supporting information are sent to a Designated Operational Entity
(DOE) who conducts the validation of the project.
Step 7 - Registration
After successful validation, the validation report is also made publicly available and then together with the PDD they are
submitted to the CDM Executive Board in order to register the project. The registration process should be completed
after a maximum of 8 weeks, unless one of the involved Parties or at least three members of the EB request a review.
In that manner, registration of projects that come under review can be delayed by 4-5 months.
Step 8 - Monitoring
Once the registered project enters the implementation phase, real project achievements can be calculated based on
periodical monitoring. This activity can be conducted by staff directly employed by the project, or subcontracted to
external agencies specialized in forestry and carbon inventory. The monitoring needs to be carried out according to the
project‟s Monitoring Plan.
Step 9 - Verification and Certification
CDM projects will need to be independently verified by a DOE before any CERs (tCER or lCER) can be issued. To put
it simple, the verification is an audit of the monitoring and project implementation. For large-scale projects, this DOE
has to be different from the DOE that validated the project. The project verification will need to demonstrate the
following:
• The project has followed the implementation plan described in the validated PDD.
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• The carbon claims of the project are based on the monitoring results and the calculation procedures used
for producing these claims (using the approved baseline and monitoring methodologies).
• The data and the procedures used for data collection follow acceptable quality standards.
• The sustainable development indicators proposed in the PDD have been monitored and meet the project‟s
targets (i.e. environmental and socio-economic impacts should be positive).
• Verification of a LULUCF CDM project can only be done every five years.
The successful output concludes in the certification of the project. This process is strictly related to verification and
consists basically only of issuing a statement indicating that the project has successfully generated a given amount
of carbon credits in accordance with the rules and regulations of the Kyoto Protocol.
Step 10 - Issuance of Credits
Based on the successful verification and certification the Executive Board will then issue the corresponding amount of
credits. The EB then has 15 days to issue the CERs (although a review of the project activities can be requested in
some cases).
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9.3 Appendix III – Water Resources
9.3.1 Collection Efficiency of the WRD (in %) for 2008-09
Table 38: Chief Engineer-wise Collection Efficiency (in %) for 2008-09
Name of Chief Engineer
Balance as on 1/4/2008 From
Arrear
Current Demand Year
2008-09
Total Target 2008-09
Total Up to March 2008 (Arr + Curr)
% Recoveries Up to March
2008
CE_CB 1855.03 1064.43 2919.46 1459.6 754.66 51.70%
CE_GB 16522.792 8122.645 24645.44 2694.79 1598.578 59.32%
CE_YB 4856.43 478.42 5334.85 406.65 153.92 37.85%
CE_NT 1874.778 687.748 2562.526 631.5 544.06 86.15%
CE_OM 3749.17 1075.66 4824.83 2061.15 993.47 48.20%
CE_RAJ 788.03 356.17 1144.2 557.03 121.723 21.85%
CE_DK 1400.68 108.13 1508.81 444.68 58.81 13.23%
CE_WB 1138.611 608.7 1747.311 595.9 391.51 65.70%
CE_BAN 0 1570 1570 1525 39.41 2.58%
CE_EM 0 105 105 102.4 45 0.00%
CE_ENC 0 45 45 41.5 48.498 0.00%
CE_BODHI 0 5 5 5.8 12.28 0.00%
CE_PICU 0 0 0 0 0.214 0.00%
Total 32185.521 14226.903 46412.42 10526 4762.133 45%
Source: Water Resources Department
Table 39: Source-wise Collection Efficiency (in %) for 2008-09
Source Current Demand Recovery Amount Collection Efficiency (CE) in
%
Industries 7,760.84 2378.16 30.64
Municipal corporation 279.44 1.8 0.64
Nagar Palika 145.36 22.13 15.22
Nagar Panchayat 7.41 2.52 33.99
Gram Panchayat 0.54 0.12 22.22
PHE (D) - 4.16 -
For Farmers 3,091.10 974.84 31.54
Other Recovery 193.68 221.24 114.23
Total 114,78.37 36,04.98 31.41
All figures are in Rs. lakh
9.3.2 Estimates of Increase in Revenues from Recommendations (WRD) – Three Scenarios
Table 40: Scenarios for Estimates of Increase in Revenue
Scenarios Scenario 1 Scenario 2 Scenario 3
Recommendation 1/2 New CE Additional Revenue New CE
Additional Revenue New CE
Additional Revenue
Industries 0.33 1.82 0.36 4.15 1 53.82
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Scenarios Scenario 1 Scenario 2 Scenario 3
Recommendation 1/2 New CE Additional Revenue New CE
Additional Revenue New CE
Additional Revenue
Municipal corporation
1 2.77
Nagar Palika
1 1.23
Nagar Panchayat
1 .048
Gram Panchayat
1 0.0042
For Farmers 0.4 2.61 0.55 7.25 0.6 8.79
Recommendation 3 3
4
5
Total 7.445 15.41 71.68
See Table 39 for current demand and recovery amounts. All figures are in Rs. crore.
The additional revenue calculated here is only based on the new (higher) collection efficiency out of the current
demand for the year 2008-09. In the first scenario, the collection efficiency from industries increases only by about
2.4% while that from farmers is expected to increase by 8.5%. This second scenario (moderate) is when the
assumption is made that CE from industries increases by 5.4 %, and that from farmers increases by 23.5%. The third
scenario is the „ideal‟ scenario in the sense that industries and tier-III government bodies are expected to pay the entire
amount of current demand raised in a particular year (2008-09) while collection efficiency from farmers is expected to
increase to 60%. As can be seen from examples like Gujarat, such a scenario may not be entirely unrealistic.
9.3.3 Note on Pricing of Water Resources
Irrigation water consumes the bulk of renewable fresh water resources. Water demand is increasing with rising living
standards and population growth and prospects for water diversion (extraction) are limited in some regions and
nonexistent in others. The only course of water policy left open is to increase efficiency of water use. This requires
taking account of the full cost of water and this must also be reflected in the pricing of water supply.
The Madhya Pradesh Government has tried to achieve the twin aim of conservation of water and recovery of costs
through the mechanism of modified “volumetric pricing”. This is an optimal-pricing approach that charges based on the
volume of water used by the farmer. Unlike area-based pricing24
, this approach also encourages farmers to better
control their water use. However, as can see from the analysis below, the pricing mechanism is not adequate to
recover the cost of maintenance.
Trend Projections of Revenue Receipts Based on Past Data:
Table 41 gives the data for Irrigation revenue receipts for the WRD from 2003-04 to 2007-08
Table 41: Revenue Receipts Trend – WRD (2003-04 to 2007-08)
Irrigation Source 2003-04 2004-05 2005-06 2006-07 2007-08
Major 37.80 37.92 29.56 11.22 17.24
Medium - - - 18.60 20.18
Minor 7.22 7.31 7.76 8.93 13.40
Total 45.02 45.23 37.32 38.75 50.82
Source: Finance accounts, M.P. All figures are in Rs. crore. Before 2006-7, revenues from major and medium Irrigation were clubbed under one head.
24
This approach uses the average cost pricing principle to levy a fixed charge based on the area that is supposed to be
irrigated
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Based on the CAGR calculated from the above data, revenue receipts are projected for the next five years:
Table 42: Projection of Revenue Receipts – WRD (2009-10 to 2013-4)
Estimation 2009-10 2010-11 2011-12 2012-13 2013-14
Revenue Receipts 51.27 51.72 52.18 52.64 53.11
All figures are in Rs. crore
Trend projections of Maintenance Expenditure:
Table 43 gives the amount spent on maintenance expenditure since 2003-04.
Table 43: Past Expenditure Data of the WRD (2003-04 to 2007-08)
Actual 2003-04 2004-05 2005-06 2006-07 2007-08 RE
Maintenance Expenditure 52.87 58.01 73.81 73.2 77.23
Source: MTEF (Medium Term Expenditure Framework). All figures are in Rs. crore
The trend projections of maintenance expenditure have been estimated as per the MTEF, WRD 2009. The
maintenance norms have been adopted from the recommendations of twelfth finance commission and may have to be
revised upwards in the thirteenth finance commission report.
Table 44: Trend Projections of Maintenance Expenditures of the WRD (2009-10 to 2013-14)
Estimation (2009-10-2013-14) 2009-10 2010-11 2011-12 2012-13 2013-14
Trend Maintenance Expenditure 92.59 98.98 105.37 111.76 118.15
Additional Maintenance Expenditure 38.82 42.19 46.23 49.54 53.09
Total 131.41 141.17 151.60 161.30 171.24
Base Data: MTEF, WRD (2009). All figures are in Rs. crore
Ratio of maintenance expenditure to revenue receipts
As was evident from the above tables, there has been a clear past trend for the maintenance expenditures to exceed
the revenue receipts. Our projections for 2009-10 to 2013-14 can give us an idea if this trend will continue in the future
as well as the magnitude of the difference between the two. The rationale behind this exercise is to determine the
extent to which tariffs need to be revised upwards in order to eliminate this gap in the future. The table below presents
the ratio (in percentage terms) of the estimated expenditures to the estimated receipts.
Table 45: Ratio of Maintenance Expenditure to Revenue Receipts - WRD
Item 2009-10 2010-11 2011-12 2012-13 2013-14
Maintenance Expenditure 131.41 141.17 151.60 161.30 171.24
Receipts 51.27 51.72 52.18 52.64 53.11
Maintenance Expenditure as % of receipts 256% 273% 291% 306% 322%
Conclusions:
As can be seen, from Table 45, the receipts need to be improved by 190 % on average over the next five years just to
keep up with the projected maintenance expenditure requirements.
So, at the present recovery levels, rates have to be revised by about 200 % to just recover the projected maintenance
cost.
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Present rates in M.P are provided in section 5.1.3. The rates in M.P are 25% of rates for Gujarat where the water rate
for industrial users is Rs. 10/cu.m. Additionally, in Gujarat this rate automatically increases by 10% each financial year.
Government of Uttar Pradesh also charges Rs. 10/cu.m for industrial units.
Thus, we see that a fairly strong case can be made for increase in rates for water resources in MP. It is to be noted that
a rate hike is not enough and for a successful system additional elements such as an appropriate mix of technology,
management, policy, and institutional arrangements are also required. These will help in:
• Facilitating transparent and efficient service delivery
• Increasing farmer‟s willingness to pay and to use limited water resources more efficiently.
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9.4 Appendix IV - Education
9.4.1 Estimates of Revenue Increase from Sharing Revenues of the Secondary Education Board
Table 46: Revenue Estimates from Sharing Revenues Secondary Education Board (SEB), MP
Exam and other fee details Sec.
Education State Govt. Share
(Rs.) Applicability
Total Revenue (Rupees)
Fees paid by organization
Exam application fee 30
Examination Fee 250 50 No. of Students 3,85,73,950
Affiliation fee - new fee 12,500 1,250 No. of Schools 1,56,25,000 (One
time rise)
Renewal 2,200 1,000 No. of Schools 41,79,000
Total (Rs. crore) 4.27
Number of Students 7,71,479
Number of Schools 4,179
9.4.2 Revenue Estimates from Alternative Utilisation of the Schools/Institutions Infrastructure
Madhya Pradesh had about 3155 schools (both higher secondary and secondary) that were run by the school
education department. For an estimate of the revenue potential of this recommendation, our focus will be only on the
districts that have the major cities or towns in them, as this initiative is only possible in such locations.
The SED schools column is the sum of secondary and higher secondary schools in the district. Our assumption is that
only 15% schools of the selected districts will be located in urban/semi-urban areas and have the requisite
infrastructure to carry out such activities. The total revenues (per annum) are calculated on the basis that each school
earns 40,000 rupees each year from this source. The revenue sharing can be such that a part of the share goes to the
maintenance of such infrastructure while the remainder goes to the department. In this example, SED‟s share is
assumed as 90% of total revenue generated, while 10% share is allocated for maintenance.
Table 47: Estimate of Revenue from Alternative Utilization of School Infrastructure
District SED Schools 15% of Schools Total Revenues (Rs.) SED's Share
Gwalior 68 10 4,00,000 3,60,000
Ujjain 80 12 4,80,000 4,32,000
Indore 103 15 6,00,000 5,40,000
Bhopal 66 10 4,00,000 3,,60,000
Sagar 113 17 6,80,000 6,12,000
Jabalpur 99 15 6,00,000 5,40,000
Chhindwara 174 26 10,40,000 9,36,000
Rewa 124 19 7,60,000 6,84,000
Total 827 124 49,60,000 44,64,000
All figures are in Rupees.
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9.4.3 Note on School Sponsorship Scheme Under the Rajiv Gandhi Shiksha Mission, the Madhya Pradesh government has launched a website, whereby non-
resident Indians and corporates can sponsor schools or pay for the education of a child. The website,
www.fundaschool.org, will soon have links to all the primary schools in Madhya Pradesh started under the DPEP
(District Primary Education Program) scheme and the sponsors can keep tabs on the performance of the school or the
children they have sponsored.
The idea came from several other such sites on the internet, where American schools offer schools for sponsorship to
alumni and corporate. The site will have the list of all the schools under the scheme and photographs of the children
and the school will be sent to the sponsors.
Proposed Features of the Scheme:
• School building as whole or specific buildings of the school can be named after a person of sponsor‟s
choice
• The sponsor to sign on a character certification declaring that the person is one of sound moral character
(see Table 48 for a sample format of certification below)
• The sponsored amount should be tax deductible (under section 80-G of the income tax act)
Table 48: Sample Format of Certification
Sr. No.
Particulars
1. Name :
2. Present address in full, with police station and district.
:
3. Home/ Permanent address in full with police station and district
:
4. Father‟s name:
5. Applicant „s Nationality :
6.a. Have the person whose name is to be used ever been arrested? Yes No
b. Have the person whose name is to be used ever been prosecuted? Yes No
c. Have the person whose name is to be used ever been kept under detention?
Yes No
d. Have the person whose name is to be used ever been fined by a court of law?
Yes No
e. Have the person whose name is to be used ever been convicted by a court of law?
Yes No.
f. Is any case pending against the person whose name is to be used in any court of law?
Yes No
I certify that the following information is correct and complete to the best of my knowledge and belief.
Counter signature of School Principal
Date________________ Signatory with stamp Place________________
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Estimated Amount:
The contributors would be free to choose and support any interventions with the concurrence of the state government
or local body. Possible sponsorships and estimated costs are given in Table 49. These values were determined in
2007 and may need to be revised soon. Foreign nationals can pay the amounts in dollars as specified in the table.
Table 49: Rate for Sponsorship of Schools
#
Area of Contribution
Primary School (I to V)
Upper Primary School (VI to VIII)
Elementary. School (I to VIII)
Rs. US $ Rs. US $ Rs. US $
1. School Building 10,00,000 20,000 10,00,000 20,000 18,00,000 36,000
2. Campus Development 50,000 1,000 1,00,000 2,000 1,25,000 2,500
3. Furniture & Equipment 1,00,000 2,000 1,00,000 2,000 1,25,000 2,500
4. Library Cum Computer Room 2,00,000 4,000 2,00,000 4,000 3,00,000 6,000
5. Pre School Activity Room 50,000 1,000 - - 50,000 1,000
6. Science/ EVS Laboratory 50,000 1,000 50,000 1,000 1,00,000 2,000
7. Two Additional Rooms 5,00,000 10,000 5,00,000 10,000 5,00,000 10,000
8. Mid-Day Meal Cooking Facility 50,000 1,000 - - 50,000 1,000
Source: www.fundaschool.org
Expanding the Program:
Though the website is accessible, it still seems to be under construction and adopting particular schools in a district of
choice is not possible online as a result of this. The fund a district option is also unavailable online. Apart from resolving
these accessibility issues there are also significant opportunities for the dissemination of information on these schemes
through marketing and promotion of the campaign. The following steps may be considered to popularize the scheme or
at minimum to make it more visible to a larger audience:
• Through organizing talks or seminars on the scheme to explain how it works and the potential benefits of
the scheme. A mention of such an initiative in the speech of senior elected representatives (such as the
Chief Minister) can also help in popularizing it.
• Advertising the scheme (especially the link to the website) more prominently on billboards etc. in both towns
and the larger cities of the state, in order to target the larger sponsors/corporate sponsors etc
• Using local radio stations/ newspapers to make the scheme more visible
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9.5 Appendix V – Water Supply and Sanitation
9.5.1 Comparative Indicators across Cities
Table 50: Water Supply Indicators- Various Cities
City Water Coverage
(%)
Water Availability
(hours)
Consumption/Capita
(l/c/d)
Staff/1,000 Connections
(ratio)
Average Tariff
(Rs./m3)
New Connection
Fee (Rs.)
Ahmadabad 74.5 2 171 2.2 1.39 100
Amritsar 75.7 11 86 4.8 9.34 950
Bangalore 92.9 4.5 74 5.2 20.55 1740
Bhopal 83.4 1.5 72 20.7 0.6 1,500
Chandigarh 100 12 147 8.6 5.04 530
Chennai 89.3 5 87 13.3 10.87 1,930
Coimbatore 76.1 3 109 4 3.66 3,000
Indore 77.3 0.75 87 18.7 2.79 2,500
Jabalpur 75.2 4 139 0.4 1.5 1,984
Jamshedpur 74.4 6 203 5.6 4.51 300
Kolkata 79 8.3 130 14.7 1.13 1,000
Nagpur 91.5 5 100 3.2 6.6 1,675
Nasik 92.6 3.5 93 3.4 4.32 1,250
Rajkot 98.1 0.3 101 1.1 5.07 1,850
Surat 77.4 2.5 nd 1.7 1.66 345
Varanasi 77.7 7 147 5.9 3.17 2,375
Vijayawada 70.5 3 158 5.7 2.18 5,500
Visakhapatnam 49.2 1 124 5.4 8.55 2,000
Average 81.2 4.3 123.3 7.4 4.91 1,584
Source: 2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank
9.5.2 Comparative Indicators across cities- water coverage and connections metered
Table 51: Water Coverage and Connections Metered - Various Cities
City Water Coverage (%) Connections Metered (%)
Ahmadabad 74.5 3
Amritsar 75.7 4
Bangalore 92.9 95.5
Bhopal 83.4 0
Chandigarh 100 79
Chennai 89.3 3.5
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City Water Coverage (%) Connections Metered (%)
Coimbatore 76.1 100
Indore 77.3 0.1
Jabalpur 75.2 0
Jamshedpur 74.4 0.9
Kolkata 79 0.1
Nagpur 91.5 40
Nashik 92.6 80
Rajkot 98.1 0.4
Surat 77.4 1.9
Varanasi 77.7 0
Vijayawada 70.5 6
Visakhapatnam 49.2 1.3
Average 81.2 24.5
Source: 2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank
9.5.3 Note on KUWASIP Water Supply Model Government of Karnataka (GoK) is implementing a project called “Karnataka Urban Water Sector Improvement Project”
(KUWASIP) with assistance from the World Bank. This is a project for reforms in water and sanitation sector and
service improvements in water sector.
Key Features of the Scheme
• At the core of the project is a performance based contract with a private sector firm for rehabilitation,
operation and management of water service in small areas in Belgaum, Gulbarga and Hubli‐ Dharwad
(called Demonstration Zones).
• The role of private sector is limited to demonstration of improved service - Assets remain with ULBs and the
staff would continue on ULB rolls though working under PSP. There is no investment risk to PSP (private-
sector player) and though the PSP would develop a computerized billing and collection software system, it
has no role in tariff fixation & bill collection.
• Another key aspect of the project is that the contract is fee based.
Key Benefits
A) Better Service Delivery:
• Before implementation, periodicity of supply in Demo Zones was 2‐3 hours for 3 days a week in Belgaum,
1‐2 hours for 2 days a week Gulbarga and 2‐6 hours / 3 to 5 days per week in Hubli‐Dharwad. It is now
24X7 with minimum 6 meters pressure
• Water supply has become more reliable and there has been an improvement in water quality
• Customers are saving money as they no longer rely on pumping of water from pumps. This is one of the
reasons for improved customer satisfaction
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• Improved data management of both the customer database and asset database
B) Encouraging Improvements and Innovations in Technology: • Use of smaller diameter distribution pipes has led to significant savings in capital investment
• Pressure control valves means that manual interventions are avoided
• Electro fusion & butt welding pipe joining techniques minimizes water losses etc
C) Pro Poor Approach:
• 0‐8 KL fixed as life line supply for urban poor and the revenues from this are recovered at a subsidized rate
of Rs.6/ KL
• Pro‐poor policy has encouraged slum dwellers to opt for individual house service connections and public
stand posts have been eliminated in demo zones
Status of the Scheme Being Implemented
The primary objective of the first phase has been to demonstrate feasibility of continuous pressured (24x7) water
supply in small areas of the project ULBs (“Demonstration Zones”), and a utility environment with sound commercial
system including monthly bills based on volumetric tariffs, and backed by sound O&M practice.
Five Demonstration Zones (viz., two Demonstration Zones in Belgaum and one each in Gulbarga, Hubli and Dharwad
cities) were selected and services of a Private Operator were engaged for “Rehabilitation, Operation and Management
of Water Provision” in the selected Demonstration Zones in Belgaum, Gulbarga and Hubli-Dharwad Municipal
Corporations. Implementation of works in the Demonstration Zones has been completed. Continuous pressured (24x7)
water supply has been operationalised in all the five Demonstration Zones and the Operation & Management period
has commenced from April 2008. The Demonstration Zones consist of about 25,000 house service connections and
cover a population of about 2 lakh.
Based on the success of continuous pressured (24x7) water supply in the Demonstration Zones with Private Sector
Participation, it is proposed to extend 24x7 Water Supply to cover the entire Corporation areas of Belgaum, Gulbarga,
and Hubli-Dharwad on PPP basis
The state government has approved a one-time settlement plan for pending water bills of the residents of Hubli-
Dharwad. As per the order, the Government has approved the one-time settlement plan for pending bills from
November 1, 2008 to June 30, 2009, which were in excess of Rs. 200 per month.
Tariffs for the 24/7 Schemes
The State Government has also approved a revised tariff for the demonstration zones in Hubli, Dharwad and Belgaum
where the 24 x 7 water supply scheme has been implemented (See table below).
Table 52: KUWASIP - New Revised Water Tariffs for Hubli-Dharwad and Belgaum w.e.f November 1, 2009
Hubli-Dharwad
Domestic Non-Domestic Commercial & Industrial
Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl)
0-8 6
8-25 8 0-25 16 0-25 32
25-40 12 25-40 24 25-40 48
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>40 20 >40 40 >40 80
Monthly Minimum Charges - Rs. 48 Monthly Minimum Charges - Rs. 128 Monthly Minimum Charges - Rs. 256
Belgaum
Domestic Non-Domestic Commercial & Industrial
Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl)
0-8 6
8-25 10 0-25 20 0-25 40
25-40 15 25-40 30 25-40 60
>40 20 >40 40 >40 80
Monthly Minimum Charges - Rs. 48 Monthly Minimum Charges - Rs. 160 Monthly Minimum Charges - Rs. 320
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9.6 Appendix VI - Cooperatives
9.6.1 Case Study – Sources of Revenue for the Cooperative Department
The cooperatives department of states like Andhra Pradesh, Kerala, Maharashtra and Rajasthan earn most of their
revenues not from audit, but from „other sources‟, as per the finance accounts classification.
For the state of Maharashtra, the major receipts of the Department are audit fee, supervision charges, license fee for
issuing license to money lenders and inspection/license fee for renewal of license, etc. The supervision charges are
collected in respect of the agricultural produce purchased from the market regulated at market area.
The cooperative department of Kerala earned Rs.36.5 crore in 2007-08 of which Rs.33.5 crore was categorized in the
finance accounts as other receipts and about Rs.3 crore as audit fees. Major receipts from the Co-operative
Department are audit fee, arbitration fee, liquidation charges, fee for appeal or revision, interest/penal interest on loan,
penal interest for delay on retirement of share capital, dividend on share capital and guarantee fee, etc. Table 53
shows the revenue break-up for Kerala‟s Cooperative Department from 1997-98 to 2001-02.
Table 53: Revenue Break-up for Kerala Cooperative Department from 1997-8 to 2001-2 (Rs. crore)
Sl.
No.
Category of receipts Years
1997-98 1998-99 1999-00 2000-01 2001-02
1 Audit fees 1.06 1.20 1.46 2.27 2.12
2 Cost of Audit 7.92 9.69 14.47 13.10 10.86
3 Arbitration fees 3.34 4.20 5.20 5.53 5.24
4 Interest from Co-operative Societies 7.22 3.91 3.97 2.46 2.42
5 Liquidation charges appeal fees and other receipts 0.88 0.67 1.05 1.43 1.33
6 Grants from NCDC (National Cooperative
Development Cooperation)
1.02 3.31 1.31 1.13 1.57
Total 21.44 22.98 27.46 25.92 23.54
The other major revenue sources are interest from cooperative societies and arbitration fees. Together they made
about Rs. 7 -10 crore from 1997 to 2001. Today this component would be significantly larger.
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