BHUBANESWAR: Odisha government has planned to introduce a new process for preparation of Budget 2020-21 to enhance budget credibility. The process will follow international good practices and enable the Government to meet its service delivery commitments within an affordable resource envelope over the next five years.
As part of the new process, the budget calendar would be advanced and Finance department, in coordination with Planning and Convergence (P&C) department, will do macro-fiscal forecasting.
There will be a unified budget circular for administrative and programme expenditure. The circular would be accompanied with departmental ceilings, which will help guide expenditure estimates of all administrative departments.
While the ceiling will be communicated on broad category of expenditure with flexibility to departments to prioritise the expenditure, each administrative department will receive an allocation letter including their departmental ceiling dis-aggregated by administrative expenditure, programme expenditure (both the State and Central schemes) and disaster response funds.
Finance Secretary Ashok K Meena said the new budget-making process is being introduced as part of the Public Finance Management (PFM) reforms.
“The advance indication of ceiling would provide predictability to the departments, which will be given two to three months time to have thorough scrutiny and prioritisation of the budget proposals within the ceiling communicated,” he said.
The decision was taken after a big gap between ‘budget proposal’ and ‘budget allocation’ and between ‘budget allocation’ and ‘actual expenditure’ was observed. The current practice does not provide for a hard ceiling and there is limited prioritisation of expenditure proposals by departments.
The Finance department, in consultation with the P&C department, will bring out a ‘Fiscal Strategy Paper’ in December indicating the assumptions for revenue and expenditure projections and the outlook for the State economy and finances.
While previously established norms and practices would be adopted for preparation of estimates by departments within the ceilings communicated, departments have been asked to provide expenditure estimates by December 15.
The pre-budget consultation has been scheduled between December 16 and 31 and submission of revised estimates after the consultation has been fixed for February 3 next year. While the approval of annual budget 2020-21 by the Council of Ministers will be done between February 7 and 10, the budget will be presented in the Assembly in the third week of February.
Spending priorities for 2020-21 include piped drinking water, critical infrastructure (railways, roads, marketing linked infrastructure), education for learning outcomes, health assurance, skills development, livelihoods, women empowerment and agriculture, including irrigation.
Fiscal health
Below par performance of Union taxes so far and recent rate reduction in rate of corporation tax by Union Government will likely mean a decrease in Odisha’s share of Union taxes for 2019-20. There is an uncertainty in share in Central taxes for 2020-21 in the absence of the recommendations of 15th Finance Commission. Though the SGST collections have increased moderately by about 11 per cent compared to the previous year, other tax items as well as mining revenue collections have been moderate.
The loss on account of the GST will be compensated by the Centre for 2020-21, but it will not be available after June 2022. The State’s own revenues are expected to register moderate growth in 2020-21 primarily due to moderate to high growth expectations for the State economy.