He said that the indirect benefits from the forest wealth of Himachal were about Rs 99,000 crore and the revenue foregone for being unable to remove forest as per working plan was over Rs 22, 900 crore for six year period.
He requested the Commission that the State must be compensated for the intangible benefits accruing to the nation and the loss of revenue to the State on the restrictions imposed on removal of forests.
Chief Minister disclosed to the Commission that over 95 per cent of the total 23000 MW exploitable hydro power capacity available in the State had been allocated and the upfront premium received in this respect. He said that per unit sale rate of power has come down from Rs 7 to about Rs 2-3 per unit.
This has dampened the interest of the independent power producers who have been allotted power projects; besides they are unable to attain financial closure, he added. He urged the Commission to recommend to the Government of India to permit Himachal Pradesh to levy generation tax on hydro power produced within the State.
He further mentioned that bill for taxation on generation of power within State has been passed by the State Legislative Assembly and was waiting Presidential assent. He clarified that article 288(2) of the Constitution enables the State to impose this tax.
Virbhadra Singh said that being a hilly State with difficult geo-graphical and topographical conditions, cost of construction and maintenance of capital assets like roads, health and educational institution, irrigation and water supply schemes were much higher in Himachal Pradesh. He advanced irrefutable arguments for necessity to provide assets to cater to the needs of people living in dispersed areas in harsh and hostile climatic conditions.
He further explained that unlike other states where repairs of these capital assets require maintenance only once after monsoon season, in Himachal Pradesh maintenance of capital assets has to be carried out twice every year, once after the rainy season and subsequently after the snowfall. Therefore, he advocated for significant enhancement in maintenance grants for the capital assets.
Chief Minister said that about 87 per cent of the farmers in the State were small and marginal Farmers, per unit yields was much less than the national averages; and net return from activities in Agriculture and allied sectors due to high cost of production, labour, transportation and remoteness of the markets were very little.
He said that withdrawal of industrial package by Central Government even before the expiry date under pressure from the neighbouring States have significantly reduced the tax and non-tax base. He said the conventional taxes have reached a saturation level.
Virbhadra Singh said that Salary, Pension and Interest payments were major components of revenue expenditure in the State; and that reduction in these committed liabilities was possible only over a long term. He said that the impact of likely pay revision from January, 2016 has been reckoned in our projections for the forecast period.
He brought to the notice of Commission that whereas 13th Finance Commission has only assumed 6 per cent annual growth in dearness allowance, the average DA hike during the last three years of award period of 13th Finance Commission have been over 15 per cent per annum.
Chief Minister said that the cap fixed by the 13th Finance Commission that the salary expenditure should not exceed 35 per cent of the revenue expenditure, net of pension and interest payment, was far away from reality. He said that such cap cannot reduce committed salary burden. Therefore, he urged the Commission to remove such conditionalities.
He forcefully argued the Commission that the devolution be based on actual assessment of expenditure requirements. He requested that committed liabilities on salary, pension, interest and other committed liabilities should be accepted on the basis of calculation and may not be arrived at on normative basis.
Singh said that investments in social sector have brought rich dividends and were reflected in well recognized indicators in Health and Education fields. He elaborated higher service delivery responsibilities of the State compared to the Central Government and suggested vertical devolution to be raised to 40 per cent.
He also mentioned that horizontal devolution must be higher for hill States due to their low tax base and inherent cost disabilities.
Virbhadra Singh said that the debt liabilities of the State were 39.18 per cent of GSDP and were almost double of all states average of 20.55 per cent. He requested the Commission to consider the State’s debt stress and bail the State out of its financial situation through an appropriate intervention.
He brought to the notice of the Commission that states with post tax devolution deficit, get grant in the shape of revenue deficit grant and are therefore were left with zero surpluses for investing in capital expenditure. He urged that the Commission should therefore provide liberal State Specific Grants to Special Category States having revenue deficit.
Chief Minister urged the Commission to double the State Disaster Response Fund and said that it should be made 100 per cent centrally funded for Special Category States.
Expressing hope that the Commission would make realistic assessment of revenue potential and expenditure needs of the State, the CM said that under assessment made by 13th Finance Commission would be suitably compensated and that reward for conservation would be recognized and devolutions would be as per the request of the State.
Chairman 14th Finance Commission Padam Vibhushan Dr Y. Venugopal Reddy, while appreciating the developmental needs of the State Government said that the State Government has made marked progress in various developmental indicators despite difficult topographical and geo-graphical conditions.
He assured the State of all possible help to tide over the financial health of the State. He said that better coordination was vital for sustained development of the State. He also appreciated the comprehensive and inclusive data provided by the State Government to pledge its case before the Commission.
He suggested the State to come out with specific strategies to meet out the emerging challenges due to high debt liabilities. He said that the State should judiciously utilize its resources and save more for the committed liabilities.