Odisha to have a larger FY20-21 Budget, despite lesser Central funds


BHUBANESHWAR: Naveen Patnaik’s government is likely to place before the state assembly a budget close to Rs 1.5 lakh crore for the financial year 2020-21, a 14-15 per cent increase despite the reduced funds from the Centre.

The 2019-20 budget of Rs 1.39 lakh crore was a 15 per cent increase from the previous year. With room to borrow from the years of fiscal prudence, the state government believes its economy is at a stage where it needs to spend more to accelerate growth.

The state’s borrowings should cross Rs 92, 000 crore (for FY 2020) which puts its debt to GSDP ratio for the year at 17 percent, still way below the 25 per cent cut off recommended by the 14th Finance Commission. Odisha, on account of its fiscal discipline, is the only state allowed to run a fiscal deficit of 3.5 per cent, a threshold that is anyway expected to be increased by Fifteenth Finance Commisison when it submits its recommendations for 2021-2026 in October.


From its back of the envelope calculations, Odisha expects less from the divisible pool of Central taxes, already reduced by a percentage point from 42 to 41 per cent on account of Jammu and Kashmir no longer being a state. For that, because GST is yet to stabilise and an overall slowdown, the 15th FC has tabled recommendations for one year up to March 2021.

Under the earlier regime, Odisha got 4.641 per cent, under the revised formula Odisha gets 4.629 per cent. During the last financial year, the state was to receive around Rs 37,000 crore from the divisible pool of Central taxes, it expects significantly less this year.

The state government is looking keenly at the ongoing auctions of iron ore mines to bridge this gap in the future. A rough calculation based on reserves and presuming current prices hold, pegs the additional annual income from auctions at around Rs 7,800 crores. Senior officials in the Finance Department, speaking on condition of anonymity, said they would rather wait for what promises to be a windfall than count their chicken’s before they have hatched. A clearer picture is expected once operations of these mines resume, under new lessees, post April.

Odisha’s GSDP has increased and it has been running a revenue surplus government, it doesn’t qualify for any revenue deficit grant that 14 other states will get. If it is getting here, it is on account of its “good performance” say officials. The state though will pay for being less urban. Funds for local bodies, are divided for the coming year in a ratio of 67.5 per cent to rural panchayats and 32 per cent to urban local bodies (up from last time’s 25 per cent). Fifty per cent of which goes to cities with a million plus population, which even Bhubaneswar does not qualify for.

The Cabinet on February 7 approved the action taken report of the State’s Finance Commission. “Odisha is one of the few states to set up its state finance commission in time, get its report in time and align the duration it Central Finance Commission. To align ourselves with the next Finance Commission’s recommendation (that will now stretch to 2026), we have decided to stretch the state commission’s report for one more year and allotted money accordingly.

More funds are expected to be allotted to roads, education and health, the latter could see a significant increase. While Odisha’s much-hyped, more generous, prepoll agrarian scheme may have now been merged with the Centre’s ‘PM-Kisan Yojana’, the state will have to provide for the difference and for beneficiaries that get left out from the central scheme, like landless farmers. Significant funds are also expected to be allocated for its new pet projects, a redevelopment of the Puri town, the redevelopment of the Srirama Chandra Bhanja Medical College in Cuttack and other infrastructural projects promised for the millennium town.

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