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Bhubaneswar: In the much-awaited Union Budget 2021 tabled in the Parliament by Union Finance Minister Nirmala Sitharaman today, the black swan event’s (Corona pandemic) larger shadow on the finances of Odisha have been clearly discernible.
While the State saw a whopping shortfall of over Rs 10,840 crore in the net tax and duty proceeds in the FY 2020-21 (financial year ending on March 31, 2021), the devolution of central taxes and duties to Odisha in the coming financial year 2021-22 will also be Rs 3,048.99 crore lesser than the tax devolved to the State in 2019-20.
However, the budgeted net devolution of the central taxes and duties totalling at Rs 30,136.68 crore to Odisha in the financial year 2021-22 will be 18 per cent higher than the net central taxes and duties inflow to the State in the pandemic year.
As per the Union Budget document presented today, Odisha had received Rs 25458.95 crore in the current financial year that will end in March 2021 (FY 2-20-21).
In contrast, the Budget 2020-21 had pegged the total central taxes and duties transfer to Odisha at a whopping Rs 36,299.74 crore.
HOW BIG IS THE IMPACT?
Since the devolution of central taxes and duties were done in accordance with the recommendations of the 15th Finance Commission (FC), the details available with the FC reveals that Odisha is entitled to receive a transfer of Rs 1.912 lakh crore during the award period of 2021-26.
And the transfer to Odisha will be done as per the State’s share of 4.528 per cent in the divisible pool of central taxes and duties (41 per cent of central taxes and duties come under the divisible pool).
Moreover, the distribution mandated by the 15th FC is based on the financial resources needed by the State to carry out its development programmes.
A detailed look shows that during the awarded period of 2021-26, Odisha, on average, would receive an amount of Rs 38, 259 crore per year – which means for the development programmes of the State, the 15th FC has awarded Rs 76,518.8 crore to Odisha for the fiscal years of 2020-22.
Since the transfers are guided by buoyancy in tax revenues of the Centre, Odisha could see the devolution of over Rs 25,516 crore, which points to a shortfall of Rs 12,742 crore.
WHY ARE CENTRAL TRANSFERS VITAL?
As per the 15th FC data, Odisha could end up in revenue deficit if the State’s own tax and non-tax revenues are alone taken into account. However, post the horizontal distribution of central taxes, Odisha records a revenue surplus.
“There will be pressure on the State Finance Minister to fund State’s development programmes following the shortfall. But Odisha will not record revenue deficit. The gap in 15th FC estimates and actuals may lead to higher market borrowings by the State, and that could lead to a rise in total debt stock of the State,” explained former XIMB Prof Niraj Kumar.
It needs mentioning here that the cumulative debt stock in Odisha will cross the Rs1 lakh crore mark by the end of Match this year. As a proportion to GSDP, the debt stock is currently at around 16 per cent.
