Kashmir Life (KL): You are busy in next budget. But there is an impression that a lot of promises you made in earlier budgets haven’t been kept.
Dr Haseeb Drabu (HD): I don’t think that is correct. Most of the announcements are reform measures which are a part of system building and results will eventually accrue to all the people. System building doesn’t happen overnight. The role of finance is not that of, talking in hockey parlance that of right winger or centre forward. We are mid field players and we have to build the system for others to function.
I had announced a huge reform for changing the entire banking relations of the government. Over the year, we have discovered that every day huge monies are lying in bank account for years. Some accounts have Rs 200 crore not utilized for years. So we are building a system brick by brick, so an irreversible change has been set into motion which has already yielded results.
As of today, I have no GP fund liabilities; no liability of contractors that have authorised liabilities. In fact, I am clearing liabilities of past 10 years. I have cleared power liabilities of Rs 7500 crores without anybody making any hue and cry about cash crunch. It is also a fact that we couldn’t do much developmental work so pressure on the treasury was less. But we have cleared huge amounts of past liabilities and by March 31, we will have a clean slate.
You must also see that the last two budgets were presented in extremely different situations. For the first budget I got 20 days. Post that, there was a huge period when after the demise of Mufti Sahib, the government was not in place. When the government was formed, I presented the budget in seven days. So we haven’t got a stretch of period to carry out the reforms that we have initiated.
KL: You once said yow will change things in 18 months?
HD: Yes. During initial days, I had sought 18 months to work out the entire state finances. I am happy to say that situation has improved a lot. The position of treasuries now is much better than what it was earlier. One good indicator is that for the first time this entire year, I have not taken recourse to overdraft. This is a huge thing. I have made enormous savings by doing debt restructuring where I have saved Rs 200-300 crore of interest. In totality, I believe I have saved Rs 600 crore of interest. But these things are not visible to the public and hence a certain ill-informed view is taken about that reforms have not taken place.
Some of the reforms originate in finance and get executed in other departments. It takes a lot of time to build consensus on those reforms as there are different interests, different stakeholders, and even battles of turf. All these are very difficult things to follow, and to execute. So reforms may originate in finance, but they are executed across the system and it takes a certain amount of time to build consensus. So, these are the reasons which I think, are responsible or this perception. But that doesn’t mean we have failed. We are working towards the goals we have set and it takes time.
For instance, the reform of public enterprises, we are now building boards and making professional management decisions. These reforms are to be done by tourism, industry and other departments. We are nudging on that, and we realise these are major changes that will eventually have an impact on the way corporations function.
KL: For state finances, power is a grey area. But what was the magic wand you used in clearing such a huge quantum of liabilities that it didn’t disturb the overall public finance setup?
HD: Two things happened. Once, if you remember, I announced in budget that I will do a power bond. Government of India came with a similar scheme called the Uday (Ujwal Discom Assurance Yojana) Bond. We had liabilities of about Rs 10,000 crore and our entitlement to Uday bonds was Rs 3500 crore. So we took recourse to that Rs 3500 crore that reduced our dead burden.
Of course we have asked the Government of India to give us permission to raise Rs 4000 crore more to take care of the remaining liabilities in power. We are in the process of negotiating with them and we shall get it. If we don’t, even then I intend to cut some expenditure and pay off because there are not only liabilities, there is interest and then penal interests. Once we made bulk payments, we sorted discount from the power companies. I think we saved about Rs 400 crore there also.
Then we made some savings on interests, in fact, some windfall savings also. I issued an order that any account inoperative for two years, having cash balances, the cash balances should be transferred to the treasury. This one faced a lot of resistance from a lot of departments, because they feel it is their money. They do not know that treasury money is not different from the money they are keeping in their accounts. We can utilise the money better.
We discovered that in R&B department, we had Rs 280 crore lying in different accounts, unspent for last two years. No transactions had happened. We can use this money better. Why should I borrow at 18% when I can use my own money lying in bank vaults? Whenever R&B requires, we will give it back. So, it is about management of cash balances and finances that had helped us.
I changed the whole budget classification from plan on plan to revenue capital so a lot of double payments, being made earlier, have stopped. It is better financial control. I am not saying it is adequate but it is still better.
So, it has been a lot of small initiatives very meticulously done and I would give you the example that finance department works like a goldsmith – on small things, intricate. Ours is invisible work, but very important for others to work more effectively. I think it is a broad recognition today that system link has happened in finance and we are able to help other departments execute their work properly.
KL: But your reforms in power sector will not fetch consumer better power supply because you have massive transmission and distribution losses.
HD: Exactly. For the last 30-40 years, we have just got caught in this newspaper headline kind of power policy of generation and generation, not even realising that whatever is generated must be evacuated. There are not many transmission lines. We can’t get more power into the valley even if we purchase more. Today, funds are not a constraint. Same is the case with distribution lines. Now, major reform is happening through that Deen Dayal Upadhyaya Gram Jyoti Yojana. It will transform the power transmission. At our level, we have also done some reforms. I have given Rs 1 crore to each MLA for poles and wires so that the network also improves. So, I would imagine, had this turmoil not been there, we would have done much better. We have also now started getting into power trading. I think we have to give more autonomy to JKSPDC to be able to initiate reforms. Once that happens, you will see a much better power scenario.
KL: What would the focus of your next budget?
HD: I will look at consolidating whatever we have. I presented the last budget in June. Instead of initiating new things, we will consolidate whatever has happened in the last two budgets. By January 2018, we will be able to register the gains the last two budgets have given us. So, this will be a budget for consolidating the reforms, for delivering on each initiative that we have taken and executing them through departments, so that there is difference made on the ground.
KL: If I am correct, you were seriously thinking of initiating some measures for social security that will trigger some change?
HD: It will be difficult to say whether it will be in budget or not. But I have been working on this idea that there is multiplicity of social welfare schemes done by departments which is not delivering on ground. I want to try an experiment: can we create a universal basic income system, where everybody has a certain amount of income that comes from the state in terms of direct benefit transfer rather than this multiplicity of schemes, implemented by all departments. All these at the end of the day are transfer payments and many of them come from central government. I have discussions with central government also that if they allow me the same amount of money not in multiple schemes, but in a single corpus then I may be able to design a system which in the olden times used to be called the universal basic income or a social dividend.
Everybody, for instance, gets Rs 5000 – 6000, a month to be able to live. In our case, the biggest advantage we have as a state and as an economy is that we have only 1.25 crore people of which around 25 lakh live below poverty line.
So, if in first stage, I were to propose that we do a universal basic income of Rs 5000 – 6000 for every BPL family, it doesn’t add up to that kind of money. In fact, it may benefit from putting this much of money together and then distributing it. There will be no leakages. So, once the idea is put into the system, it takes root and germinates and some time it may take a form.
KL: So does that mean these schemes have not improved lives or stagnated the situations?
HD: No. These schemes are designed at the central level. In case of J&K, the nutritional calorific schemes don’t really work very well because we have a different diet pattern. If we put them together in one basket, we will be able to do much better. By and large, they have worked. It also depends on the society and culture. Look at the Anganwadis. There are so many of them. Are we delivering what we should: good nutritional food? Not really from what I hear and what my experience is. Some societies in the north east and down south are doing very well, because there is a certain culture for that sort of community kitchens and feeding. We don’t seem to have that. We are a far more insular kind of a society. So we will need to redesign some of these. I am saying let’s not redesign these. Let’s leave it to individuals. We will do our monetary transfer. There is no leakage. And you will benefit because once a basic income is secured, then he can top it with his own income and come above the poverty line. Our biggest strength is that we are a small economy with a very small number of BPL people and that I think works very well when you are doing policy interventions and designing schemes to alleviate poverty.
KL: What is the status of Rs 80,000 crore package that Prime Minister announced?
HD: TAMIER is for infrastructure. I think some money related to relief and rehabilitation has already come. Flow has been good. We have not been able to utilise it. Bulk of it will improve connectivity, access to markets and spaces, power, urban development, sewage, so basic infrastructure will improve. But the way we are going, it will take 10 years. We need an enhanced speed for that. We have not been able to do anything for the last five months. So, while money is available, we need to improve our absorptive capacities so that we can absorb that kind of money and build infrastructure.
KL: In last five months, nothing much happened in most of Kashmir. Where are the allocated funds going and how are you managing them?
HD: They will not go anywhere. They will be used. Right now, we are using them for other liabilities. In some case, like relief and all that, we have already used the liabilities of the past, but otherwise they remain with us because no work has been done. There is no chance of diversion from one sector to another, from one region to another. That will not happen. Every single penny is earmarked for a project. That project is rooted in a particular place, and it will not be possible for anybody to divert this money to something else.
KL: You have been championing the cause of daily-wagers. Is there any possibility of these lives getting some dignity as part of your budget?
HD: I had done a broad scheme that got approved in the cabinet also that we should try and workout a road map for them. Unfortunately we are in difficult times, and also in a system that has lost its values. In good faith, the Chief Minister was very keen that one should do this and figure out a road map for their recognition. When I asked departments for estimates on basis of Adhar based biometrics so that one knows what is the extent of liability that I am going to take on my head, the numbers varied. Initially number started with 10,000 goes to 15000 and then 20000. There was a lot of dishonesty and corruption was happening which has really disheartened me. I believe in a certain faith in policy making and one has observed that these estimates have not been done in a fair and transparent manner. So I have to go back to the drawing board and see how well we can utilise it because if the liability number is Rs 61000 crore, and I get manpower number of 30000 from one department, from one region, then imagine where this will reach. I think there is a lot of need for civil society support in these cases. People have genuinely worked years, should ensure that others are not done like this. If we have a reasonable estimate, I am very confident we can go ahead well with this.
KL: Everybody is puzzled why J&K don’t have long lines outside banks and ATMs in wake of demonetisation. What are the reasons and how better can we explain this phenomenon?
HD: Well, one very obvious reason is that you are living in the most uncertain economy in the world where the transactional demand for the money is very high. The cash to GDP ratio is very high because people are not sure if shops will open or not. Similarly, on the physical, commodity side, people, because of uncertainty, stock goods. So not only do you stock food, you stock other things also. So when demonetisation happened, a lot of relief was from the fact that there was no distress. People are used to Bandhs when they have no access to currency. Shopian had no access to currency for two months in the 2008 and 2009. So we are used to this spell. We have adapted to it by high currency demand. Regular national average is 12% of cash to GDP ratio. In J&K, it is 23-24%. So that is the reason.
Second is that J&K Bank is more of a commodity bank. It has relations across the spectrum. Unlike, other commercial banks, it also has community relationships. So people are sure that they will be taken care of.
Third, in some ways, J&K is an under-banked area. So we didn’t have the same transactional thing.
KL: But then J&K is considered to be one of the highly corrupt states. If it is the case, then where has the money gone?
HD: Corruption is relative. When you have a Rs 40000 crore budget, assume 10% corruption is there. For a state like Bihar, which has a Rs 10 lakh crore budget, 10% means a lot. For J&K, it means very little. So in that sense, you may be higher but magnitudes are very low. Counterfeit, we have not been able to get more than Rs 1 lakh in counterfeiters.