Baba Ghulam Shah Badshah University, Rajouri

185131 (J&K)
Announces Admission for Academics Session 2008-09
 Epilogue
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Zafar Choudhary

Consulting Editor
D. Suba Chandran
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Associate Editor
Haseeb A Drabu
THE MONEY MOVEMENT THE MONEY MOVEMENT 6
Irm Amin Baig THE MONEY MOVEMENT THE MONEY MOVEMENT
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Special Reports
Executive Director THE MONEY MOVEMENT THE MONEYZafar
MOVEMENT2008-09 (Projections)
Choudhary 11
Mohammad Yasmeen THE MONEY MOVEMENT THE MONEY MOVEMENT
2002-03

Dr Ashok Bhan 13
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subscription.epilogue@gmail.com Sans Innovation ?

Edited, Printed and Published by ‘Figures Fuged,

Zafar Choudhary for CMRD 25 Report
Statistics Faked’
Publications and Communications Situation in J&K and
‘We Have Brought Turn Contours of Future Strategy 43
Published from ‘Ibadat’, Madrasa 27
Lane, Bhatindi Top, Jammu, J&K Around In Economy’

Printed at 34 ‘J&K Is Headed For Columns

Dee Dee Reprographix, Jammu A Severe Debt Trap’
Tareekh 45
Disputes, if any, subject to jurisdiction Jest Ponder 47
of courts and competitive tribunals in
Jammu only.
Review
Movie 49
Price : Rs 40
Epilogue
From the Consulting Editor 50

Epilogue Ø
1×
January 2008

Letters
Mail your letters to editor.epilogue@gmail.com
Army Chief appreciates Epilogue
The Chief of the Army Staff has gone
through the Epilogue magazine and has
conveyed his appreciations to you for
bringing out such quality magazine.
BRIG SK CHATTERJI
Deputy Director General,
Public Information, DGoMI
Keep the mission alive
I got an opportunity to have a look at
Epilogue magazine and found it up to the
mark, I hope you will keep up your
mission and come forward for the rescue
of he people, who are reeling under the
cruel feet of the present government.
ASLAM KHAN
Via email
Resume column on travel
Your regular column on travel has been
missing for last three months. Named as
Travelogue, the regular column served as
a good source of information on the
destinations in Jammu and Kashmir. We
are told that every place in your state is
worth visiting. Could you please think of
resuming the column with some
additional information on mode of
transport and stay options.
NAZIR KA
Kochi, Kerala
Invaluable source on J&K
Epilogue Magazine is excellent. It is indeed an invaluable source of information on our state –Jammu and Kashmir
M A I L B O X
LETTERS TO THE EDITOR
Sincere effort
I have been reading
Epilogue magazine
regularly. I appreciate the sincerity
of efforts that go into making of this
magazine.
Sachin Pilot
MP, Lok Sabha
Expand area of coverage to entire J&K
We are greatly appreciative of your
magazine which has provided an
alternative to mainstream coverage of
events in Jammu and Kashmir. We,
however, feel that to garner greater
readership, your articles should cover all
regions of Jammu and Kashmir including
the Pakistan occupied Kashmir, Gilgit
and Balochistan and also the adjoining
Pakistan. This would meet aspirations of
region specific readers and also provide
an over-arching compendium to
interested analysts.
BRIG ABHIJIT GUHA
BGS (IW) Northern Command
(Now GoC, Third Division, Leh)
Chairman and Managing Director, ITDC
Epilogue Ø
2×
January 2008
Add monthly chronology
I have been reading Epilogue very
keenly ever since it was launched
January last. In a short span of time, the
magazine has established itself as a
reputed and credible source of
information which has been missing in
the mainstream media. I would
appreciate if you consider a couple of
suggestion –one that it is a monthly
journal and therefore it should carry a
chronology of the main events of the
preceding month and second the
magazine should have a regular section
on economy of Jammu and Kashmir.
ANU GUPTA
University of Jammu
Why rural reports missing
I saw a letter to editor in your magazine
some three months back which
suggested doing some more work on
rural reporting. Your editorial stuff is
yet to include reports from the margins.
Please consider doing this lest the
magazine is seen addressed an elite
audience.
AATIF SHEIKH
Kishtwar
Pervez Dewan, IAS
 P R O L O G U E
FROM THE EDITOR

An Elegy To Transparency
Zafar Choudhary

January was literally a month of to be some alliance. This has National

political upheaval in Jammu and
Kashmir. An expansion of state cabinet
was followed by the last budget session
of the state legislature. State is headed
for general elections later this year. The
government had obviously wanted to
showcase its achievements of past five
years to consolidate the public mood in
its favour. The opposition which
appeared at a weak footing, despite
strong in numbers, also came up with a
renewed strategy to take on the
government. In fact, the opposition
National Conference had little to
actually behave as a strong opposition
all these years when the ruling alliance
partners –the Congress and the Peoples
Democratic Party –continued to be
drawn into murky battles within. With
the alliance partners washing their
linen in the public, the National
Conference probably was waiting to
cash in the opportunity to see fall of the
coalition government and then enter
into a possible alliance with the
Congress to regain the lost power. This
apparently was the reason that the
National Conference for over two years
behaved more or less like a friendly ally
of the Congress. However, in first week
of December last year, the Congress and
the Peoples Democratic Party decided
to bury their differences and resolved
to strengthen their ties and work
towards a renewed alliance for
forthcoming elections. It is unwise to
predict as what political situation
emerges later this year but as of now
none of the major political parties –the
Congress, the PDP or the National
Conference –are in any position to form
the government at their own. There has
Conference exasperated and requiring
it to built an aggressive posture against
the government. There was hardly any
day when the opposition allowed
smooth proceedings of the assembly
which met for its last budget session
January 7 onwards. The Finance
Minister was not allowed to make a
reply to the discussion on budget as
opposition demanded his resignation
for his alleged involvement in the
irregularities in Forest department.
Discussions on the budgetary
allocations of more than 25
departments were not allowed to be
held and the assembly had to be
adjourned sine die ten days ahead of its
schedule. It will be misplaced to
conclude here that what National
Conference did was just for the sake of
it. There was a definite cause of action.
There were allegations of corruption
against many functionaries of the
government including Ministers.
Eradication of corruption, it may be
mentioned here, has remained one
single top most agenda of the coalition
government ever since it took over in
November 2002. Ironically, the end of
the day the allegation are against
government itself. The most
unfortunate part of the story, however,
remains that instead of coming clear on
the allegations, the government has
chosen to level counter allegations
against the National Conference for
what they did before 2002. Probes may
bring the truth to fore in due course of
time but in the meanwhile the message
going to the public reads, we are
corrupt but lesser than National
Conference.
Epilogue
because there is more to know
EPILOGUE aims at providing a
platform where a meaningful exchange
of ideas, opinion and thoughts can take
place among the people and about the
people of Jammu & Kashmir. The
attempt is to research, investigate,
communicate and disseminate
information, ideas and alternatives for
the resolution of common problems
facing the state and society of Jammu &
Kashmir and in the context of their
significance to South Asia as a whole.
We welcome contributions from
academics, journalists, researches,
economists and strategic thinkers. We
would also like to encourage first-time
writers with the only requirements being
a concern for and the desire to
understand the prevailing issues and
themes of life in Jammu & Kashmir
Contributions may be investigate,
descriptive, analytical or theorectical.
They may be in the form of original
articles or in the form of a comment on
current events. All contributions have to
be neatly types in double space and may
be sent to the address given alongside or
e-mailed to the editor.
While the editor accepts responsibility
for the selection of the material
published, individual authors are
responsible for the facts, figures and
viess ithe tier articles.

Epilogue Ø
3×
January 2008
 HEAR AND HEAR

WHO SAID WHAT

At 24 p
laces, K s l i fe u n der
report s
ays the
undal Cm’ ner,
wrongs at . G ard
of Fore
st Offic thre ra t or in
approva ers had
e op e
.... still
l of Min
ister... telephon n with
maintai
the gov
ernmen collusio s
militant
ns that t
no dire there is
ct invol
vement
any min of
ister Various
TV News Channel

Ali Mohammad Sagar

National Conference

“We cannot lower our guard, whether on the borders or in the interior'”
Lt. General (Retd) S K Sinha (During his speech on 59th Republic Day)

“Every single person in the State is under debt of Rs 10655”

Dr Mehboob Beg, NC leader, reacting to the State Budgt

“Gun is not solution - be it in the hands of the troops or the militants”

Mufti Mohammad Sayeed, People's Democratic Party (PDP) patron and former Chief Minister of J&K, during a meeting in Samba

“I was forced to pay Rs 40,000 to a Special Assistant of a Cabinet Minister to get

my sister's genuine work done in the Civil Secretariat”
Shoaib Lone, MLA during his speech at the Legislative Assembly

“We are at a crucial stage of the freedom movement.

We swim together, or we sink together”
Shabir Shah on his return to the Hurriyat Conference led by the Mirwaiz

“Pakistan cannot arrest me. I live on my own soil”

Syed Salahuddin leader of the United Jehad Council

Epilogue Ø
4×
January 2008

January 1:
Chief Minister Ghulam Nabi Azad expands
his Council of Ministers by inducting four
more Ministers –all from Congress. Mula
Ram and Abdul Ghani Vakil are inducted
as Cabinet Ministers while Ghulam
Mohammad Saroori and Chowdhary Gharu
Ram are inducted as Ministers of State.
January 2 :
Union Minister of State for Commerce Jai
Ram Ramesh says that A. V. Thomas,
world's largest wallet making company
has desired to set up at leather wallet
making unit in Kashmir
January 7:
State Legislative Assembly meets for its
advanced budget session which began at
a noisy note amidst boycott of joint
sitting by the opposition National
Conference and protests in the Central
Hall by Panthers Party.
January 10:
Mangat Ram Sharma, Minister for Health
and Medical Education announced in the
Legislative Assembly that the coalition
partners are committed to the
Delimitation Commission, which is a part
of the Common Minimum Programme and
they would introduce the bill in this
session itself.
January 11 :
Jammu-Srinagar National Highway was
reopened for the traffic after being
closed for three days due to landslide at
Panthyal
January 12:
Security forces gunned down three
militants of Lashkar-e-Toiba (LeT) in
Doda district
January 14 :
Shabir Shah, chief of the Democratic
Freedom Party (DFP) returned to the All
Parties Hurriyat Conference (APHC) led
by Mirwaiz Umar Farooq.
C H R O N O L O G Y
J&K JANUARY 2008
January 15:
Minister for School Education and
President of state unit of Congress
Peerzada Mohammad Sayeed is sacked
following allegations from a legislator
that he paid Rs 40,000 to Minister's
personal staff for getting a work done
from his department.
Sacked: Peerzada Sayeed
January 16:
Finance Minister Tariq Hameed Karra
presented annual Rs 18443 Crore budget
for the financial year 2008-09
January 17:
As many as 66 passengers of Karvan-e-
Aman bus crossed sides at Kaman, the
last Indian military post on the Line of
Control (LoC) in Uri sector in north Kashmir.
January 17:
Deputy CM Muzaffar Hussain Baig says
that he State Government has proposed
to establish a residential and technical
University in the State to offer Islamic,
scientific , technical and other education
as also utilization of finances of Jamiyat-
e-Ahalihadees, Salfiya Muslim Education
Trust and Wakf Tanzeem Trust
January 18:
Taj Mohiudin, while answering a question
Epilogue Ø
5×
January 2008
in the State Legislative Assembly said,
during 2007, 148 persons lost lives in 476
militancy incidents.
January 18:
The Legislative Assembly passed a bill to
set up Shri Shiv Khori Shrine Board
(SSKSB). According to the Bill, 20 per cent
of the shrine funds is likely to be spent for
development of Reasi and areas
surrounding it.
January 21:
At Mandigam village near Handwara in
Kupwara district, three militants of
Lashkar-e-Toiba have been killed at the
residence of two activists of the ruling
People's Democratic Party (PDP).
January 25:
Security forces gunned down Bashir
Ahmed alias Sabba Hajia, of Harkat-ul-
Jehad Islami (HUJI) outfit, in Kishtwar,
He was believed to be behind the serial
blasts in Uttar Pradesh in 2007.
January 26:
Justice Adarsh Sen Anand, former Chief
Justice of India and former chairman of
National Human Rights Commission, Mian
Bashir Ahmed, veteran Gujjar spiritual
and political leader, Prof Amitabh Matto,
Vice Chancellor of the Jammu University
and Mohammad Yousuf Taing, MLC and
former Secretary Culture Academy were
given Padma awards. Justice A S Anand
has been awarded Padma Vibhushan,
Mian Bashir Ahmed Padma Bhushan while
Prof Mattoo and Mr Taing have been
awarded Padma Shri.
January 30:
The Speaker of State Legislative
Assembly Tara Chand adjourns the
session sine die, ten days ahead of the
schedule, following unprecedented
protests from the Opposition National
Conference seeking resignation of two
Ministers for their alleged role in the
Forest scams.

J&K is a Rich State
Run by a Poor Government
Interview with Dr Haseeb A Drabu
Dr HASEEB A DRABU, the Chairman of Jammu and Kashmir Bank and Economic Advisor to the State Government, is a
perceptive economist and a meticulous planner. In a freewheeling discussion with ZAFAR CHOUDHARY,
Editor-in-Chief Epilogue Magazine, he shares his ideas on J&K’s economic scenario and
explains growth story of his bank.
You joined Jammu and Kashmir
government as economic advisor in
January 2003. Can you please recall
your assessment of state's economic
position at that point of time? We heard
from the present government that
there was a fiscal crisis in 2003.
However, in June same year, the
government presented a Zero Deficit
budget. How do you explain this
journey?
My first experience was quite
disappointing at the state of affairs. On
January 4, 2003, the Finance Minister
Muzaffar Hussain Baig called me to his
office chambers in civil secretariat for a
meeting. When I went in, the Minister
had with him Finance Secretary and
Planning Secretary. The issue being
discussed was debt servicing of Baglihar
hydro-electric project. The state was
heading for a default on January 6. On
Baglihar project, it was a complete off
budget borrowing. This set me off with
thinking that there is something wrong
with the whole fiscal mechanism. The
deeper we looked, the messier the
situation emerged. There was a
complete adhocism in the system. The
approach of the predecessors, as I
gathered from my initial look at the
system, was completely adhoc and
unprofessional. I could gather that there
was no application of mind. It was an
entirely loosely knit system where
estimates would crop from the bottom
while there should have been a
formulation of estimates from the top. It
was more like a fiction. The budget
D I A L O G U E
HASEEB A DRABU
numbers had to sanctity and lacked
credibility.
Can you imagine that in the preceding
five years (before 2003) there was no
discussion on the plan? There was total
lack of information. The Finance Minister
would give a figure of Rs 5000 Crores and
revised estimates would suggest Rs 2000
Crores. It was a fiction. I wonder how
things used to move without having an
advance meeting with the Planning
Commission.
The system was in disarray. Therefore I
suggested the Finance Minister (Muzaffar
Hussain Baig) that instead of presenting
budget we should look out for a Vote on
Account for three months till we arrive at
a complete understanding of the system
and fix the problem areas. It made no
sense to present a budget with a budget
deficit of Rs 1,600 crore or a fiscal deficit
of over Rs 2,000 crore. The Finance
Minister got the point; we both met the
Chief Minister over the issue. As
expected, the Chief Minister asked that
why to postpone the budget and seek
Vote on Account.
I quickly gave him the outline of the
problem as I saw it. The plan size hadn't
been finalised and that meant we would
have a fictitious number in the budget.
And once the plan size was assumed in
the budget without resources in sight, it
was bound to be financed by higher
borrowings from institutions and that
Epilogue Ø
6×
January 2008
would vitiate fiscal balance. There were
large information gaps that needed to be
plugged in before a complete fiscal
position could be worked out. The
government, for instance, had no
estimates of the off-budget borrowing
and guarantees given by it. Therefore,
we could have faced a default. There
might have been borrowings that weren't
provided for in the budget. My proposal
was agreed to and we started working on
new scheme of things.
After five years of Zero Deficit budget,
now we hear that the brain behind this
innovation was yours. Please share
with us the inside account of this
budgetary balance and innovative term
which was hitherto unknown to Jammu
and Kashmir.
See the problem is very simple to
understand. There are three types of
deficits. Fiscal deficit reflects
borrowing. Revenue deficit means short
on revenue and what exactly budget
deficit means is your total expenditure
minus total receipts. This shortfall is
called the budget deficit which can be
mopped up only by printing notes and
nothing else. States can not have budget
deficits because they do not print notes.
If you can not print notes and your budget
still shows deficits this means that the
part of the budget corresponding to the
deficit is unfunded. This reflects
mismanagement. Therefore, the budget
should have zero deficits.

It is been five years that you have been
advising Jammu and Kashmir
government on economy. How much,
do you think, the state has benefited
from your advices. Can you please
enlist the major reforms?
My influence is peripheral and limited. I
generally sit outside the system. But I can
claim credit for few things. One, that we
brought professionalism in the system
and ensured a complete transparency.
The level of information shared with the
public is larger than what was there
e a r l i e r. T h e P r i m e M i n i s t e r ' s
Reconstruction Plan is another area
where I feel that I played definite role.
The separation of power budget from the
main budget is another area where my
inputs brought discipline in the system.
How do look at the debt burden
problem of Jammu and Kashmir. Is it
fiscal or macro-economic? It is growing
by ever year. Your assessment of the
problem please.
Well, debt burden is a problem of slower
growth. If you grow fast, the burden will
come down. There is a wrong impression
that Jammu and Kashmir has a huge debt
burden. Your debt has to be seen in
relation to SDP of the state. Compared to
other states in the country our position is
far better.
How do you look at the overall
economic scenario of Jammu and
Kashmir? Jammu and Kashmir is a
resource rich state but still it is seen as
poor in outlook. What are your
suggestions for making this state
economically vibrant?
Jammu and Kashmir is a rich state run by
a poor government. The natural
resources of the state are rich but
finances of government are poor. There
are obvious gaps in the system. People
D I A L O G U E
HASEEB A DRABU
are not paying for what they get. Take
the power budget out and there are no
taxes on anything else. For example
agriculture and horticulture sectors are
not taxed and industry is enjoying a slew
of exemptions. Sooner or later these gaps
will have to be filled up to support
finances of the government.
Suggestions…
See, there are some important areas
which need rethink. For example
planning has to be totally based on more
understanding of the whole structure.
The Finance Minister needs to have some
more flexibility. Unfortunately, in an era
of centralized financial management,
the State Finance Ministers will soon be
reduced to the 12th man in the cricket
team. Therefore, the Finance Minister
should get some more flexibility. A re-
look at the plan methodology is essential.
We should plan in a different manner –say
to have sub plans etc. The government
should also focus at putting in place a
strong institutional capacity for
implementing the economic policy. The
economic policy too needs to be re-
structured to have a special emphasis on
social infrastructure. Another most
important thing –the government should
look at corporatising a large part of its
operations. In this direction a beginning
c a n b e m a d e w i t h t h e Po w e r
Development Corporation and I am sure
this will yield tremendous results.
The Jammu and Kashmir Bank has been
growing with enormous pace. Please
explain the growth story of your bank.
The growth story of Jammu and Kashmir
Bank goes back to history when this bank
came up in 1938. The major phase of
growth, however, was in 1970s when the
Bank moved out in the state and
elsewhere in the country. The second
phase of growth was in the 1990s. The
civil strife had pushed most of the banks
Epilogue Ø
7×
January 2008
to wall and many of them closed down
their branches. The Jammu and Kashmir
Bank stayed back and served the people.
There was a huge business growth.
The third phase was the phase of
consolidation and it coincided with my
arrival at the helm of affairs. See, the
story of 1990s was quite simple –we
benefited by exit of other banks and got
business in huge volumes. The latest
phase involved a strategy of
consolidation and improvement in
quality of service. The strategy was not
of only lending but also investing in
government schemes at low interest
rates. My coming in at this position was
marked by three things:
* Interest revision
* Rise in interest rates and
* People going back to other
banks
Looking at the prevailing scenario, we
did a quick change in strategy. Instead of
lending endlessly we tried to
consolidate. Our growth in 10 years had
been quite explosive so we gave a pause
and worked out improvements in the
internal system. We were provided for 40
per cent NPAs which we revised to 75 per
c e n t . We b r o u g h t a c o m p l e t e
transparency in the system. You may note
that first time in the history of any bank,
our balance sheets for two consecutive
years had no qualification alters. This
speaks of transparency in the system.
At what position do you rank your bank
in terms of public trust and growth in
the country?
Jammu and Kashmir Bank has been rated
as one among the 150 most valuable
companied in India. Our public trust is
enormous and growth stupendous.
What is your Bank's role in micro-
enterprise in Jammu and Kashmir. Can

we expect you taking some lessons
from the Grameen Bank of Bangladesh
which earned Dr Muhammad Younis
Nobel Prize.
See, what Grameen Bank did has always
been a part of our operations. What all
we have in Jammu and Kashmir is small
and tiny enterprises and financing them
is a part of our portfolio. However, we
can not exclusively devote ourselves to
this sector alone and we need to look at
the big enterprises as well.
Right or wrong, but there is a general
perception that the growth story of
Jammu and Kashmir Bank is directly linked
with poverty of Jammu and Kashmir
government. Some people feel that the
government is your biggest borrower and
the interests you earn thereupon
make your bank rich. Comment…
(Laughs) This reflects a total lack of
information and understanding. Our total
lendings are of more than Rs 23,000
crores while what all Jammu and Kashmir
government owes is something around Rs
2000 crores. Therefore, it is only eight
per cent of the total interest which we
get from the government. 92 per cent of
our interest earnings are from outside
the government. So where is the question
of linking bank's growth to the poverty of
government?
What would the J&K Bank look like two
years later?
Regional in origin
National in profile
International in quality of operations
Can you please share with us something
about the making of Dr Haseeb Drabu
–the economist? People don't know
much about you.
Well there is not much about me which
people should be keen to know but my
becoming an economist was a matter of
D I A L O G U E
HASEEB A DRABU
sheer accident. And then coming to
Jammu and Kashmir was rather a bigger
accident and not a decision by careful
design.
Going back to my school days, I was poor
at sciences. In my higher secondary
examination, I failed in Chemistry. This
made me to change the choice of my
subjects. I shifted to Amar Singh College
in Srinagar and took up Arts stream –with
Economics as one of the subjects.
Meanwhile, I developed keen interest in
Economics. I continued with Economics
at University of Kashmir and topped in my
MA degree. Then I shifted to Mumbai and
joined the Center for Development
Studies, then headed by Mr KN Raj. The
environment there changes my way of
life. Meanwhile, I got a job in the
Planning Commission during VP Singh's
regime where I became of member of a
high powered group and wrote a paper on
employment. I was taken as a member of
Economic Advisory Committee to the
Prime Minister, headed by Mr Bimal
Jalan. Later, I met Mr C Rangarajan, who
was then Deputy Governor of the Reserve
Bank of India and I was made a member of
the Finance Commission. When
Rangarajan retired from the RBI as
Governor, he recommended me to Mr KC
Pant for a role in the Planning
Commission.
Sometimes later, I realized that I was sick
and tired of the government jobs and
then I moved to the newspaper (Business
Standard)
Some experiences from Business
Standard…?
Well, that was the stint I enjoyed most in
my life. I was sitting at a powerful
position and my writings wielded a lot of
impact. The Corporate world sometimes
appeared worried. My regular column in
the Business Standard would often come
under discussions in Parliament. That
was most satisfying experience.
Epilogue Ø
8×
January 2008
As we know that you were brought into
Jammu and Kashmir government as
Economic Advisor by then Chief
Minister Mufti Mohammad Sayeed.
Some people say that somewhere in
early 1990s you were speaking at a
Seminar in Delhi where you
disapproved of land reforms policy of
Sheikh Mohammad Abdullah and Mufti
spotted you there as the right person
suited to his ideology.
I don't know any such thing but let me say
that I have deep appreciations for Sheikh
Mohammad Abdullah's economic policies.
Mufti might have heard me at some
seminar but let me tell you that my first
entry to Jammu and Kashmir was in 1996.
In fact, Dr Farooq Abdullah's Chief
Secretary Ashok Jaitly knew about me
and I was made a member of Madhav
Godbole Committee on Economic
Reforms. My association with Jammu and
Kashmir government dates back to 1996.
In 2002-03 two persons had suggested me
to work with Jammu and Kashmir
government –KC Pant and Dr Manmohan
Singh. In fact, I had settled down in
Mumbai when Dr Manmohan Singh called
me in Delhi and asked to go to Kashmir.
What role do you aspire to take up after
your term with the state government
and the Jammu and Kashmir Bank is
over. Can it be a role with World Bank,
IMF or Planning Commission?
I have already worked with the
organizations you have named. Honestly
speaking I want to retire after my present
assignment. I am saying this from the
core of my heart.
Can we see you performing a larger role
in Jammu and Kashmir politics?
No, I am happy with what I am doing.
Even otherwise I believe one can perform
better being outside the politics.
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 S P E C I A L R E P O RT S
TRANSPARENCY

Tackling Corruption :
Trends Reversed?
Zafar Choudhary

All pervasive if this does not describe
the menace of corruption in Jammu and
Kashmir, the recent fuss does say so. On
a daily average each sitting of Jammu
and Kashmir legislative assembly costs
the state exchequer rupees one crore,
claims Deputy Chief Minister Muzaffer
Hussain Beig. By a modest estimate Rs.
20 Crore must have been lost till the
speaker Tara Chand adjourned the
House sine die on January 30, ten days
ahead of schedule amidst a
pandemonium and ruckus in the house.
Unprecedented indeed, demands on
grants of all departments worth Rs.
1911336.19 lakhs sand many bills were
passed without any discussion. Reason :
the main opposition National
Conference continuously stalled
proceedings of the House demanding
resignation of two ministers on
corruption charges even though one
senior cabinet minister had been sacked
earlier this month after a legislator
stunned the house with revelations that
he had to pays Rs. 40,000 to the
M i n i s t e r s ' ( Pe e r z a d a M o h a m m a d
Sayeed) driver to get a work in
secretariat done.
It is natural for the opposition to take on
the government in a bid to convince the
electorate that the choices should be
reconsidered. To that extent, the
National Conference played it well. But
the coalition government, which had
listed corruption as it top agenda, will
eventually become so weak in defence
was least expected. The government
did have a number of things to list in
defence, but in the dominant din the
ruling regime was caught on the wrong
foot.
After compulsive resignation or sacking
of Education Minister Peerzada
Mohammad Sayeed, the government
suffered a severe blow to its public
image. The opposition National
Conference got the necessary impetus
to push the government to wall.
Pressure was mounted and chief
Minister was literally compelled by NC
Legislators, Particularly Abdul Rahim
Rahter and Ali Mohammad Sagar to
table the (BR) Kundal Report on
irregularities in Forest Department.
Agreeing to table the report in the
House, the Chief Minster sought to
assure the members in the Legislative
Assembly that no minister has been
indicted by the probe panel.
This clarification came from the Chief
Minister at a time when opposition had
yet not cast any aspersion on role of
Minister(s) even though the media
reports had earlier indicated this.

This was the last budged session of the

present legislature and one had
expected some landmark legislations
and debates in the assembly as later
this year the state heads for fresh
assembly elections. 'Corruption' was
perhaps the one big word and one big
issue which dominated the proceedings
since January 7, when the legislature
met.

Politics takes a different turn during the

election year there is nothing new in it. NC MLA’s protesting against corruption in legislative assembly

Epilogue Ø
11 ×
January 2008
 S P E C I A L R E P O RT S
TRANSPARENCY

Interestingly, while the government all

along goes on defending the ministers,
even a cursory glance at the Kundal
Committee report would reveal that the
Forest Minister (Qazi Mohammd Afzal
and his predecessor Tariq Hameed
Karra, though not identified by name)
have been nailed 24 times for approvals
to the wrongs for which the officers had
been indicted and severe strictures
passed against them. It makes one to
doubt on whether head of the probe
panel compiled his report sparingly or
the government is turning blind to all
those paragraphs (in the report) which
conclude that the scams had approval
of the Ministers. The Ministers,
however, continue to stick to the chair
and government refuses to read those
lines.
The Paradox :
Remember the first session of the
present assembly and first promise the
government made. It was in November
2002 that Mufti Mohammed Sayeed took
over a Chief Minister and declared war
against corruption. Recalls the senior
Peoples Democratic Party leader and
Deputy Chief Minister Muzaffar Hussain
Baig, “I asked Mufti saheb that I want to
do something big for common good,
please suggest me what it should be...
he asked me to work on a legislation for
setting up of State Accountability
Commission (SAC).” With powers and
status of the High Court, the
Accountability Commission was
supposed to be the highest anti-
corruption ombudsman empowered to
probe complaints and try public men
including the Chief Minister and
Ministers. This underlines the priority
which the present government has been
claiming from the day one. The
Commission was set up after an
inordinate delay, however, a year later
its chairman resigned after going public
with the allegations that the
government was interfering in
Defensive : Azad in assembly
Commission's affairs. It has been lying
headless for close to two years now. The
SAC did receive an overwhelming public
response against corruption. More then
1700 application have so far have been
received and many decisions delivered
against senior Ministers, top
bureaucrats and other functionaries in
cases of corruption and misuse of
official authority. Ironically there are
some missing links. All such decisions
have been stayed by the High Court.
Besides SAC, the State vigilance
organization was re-energised to weed
out corruption from public life. Radha
Vinod Raju, a police officer of high
integrity, was brought in by Mufti
regime to wield the tough baton of war
against corruption.
During Mufti's tenure as Chief Minister
(Nov 2002 to Nov 2005) some 60 officers
were terminated from the services as
government, claimed established cases
of corruption against them. The most
high profile case of Mufti's regime
against corruption was the one which
involved a top IAS officer Ajit Kumar. In
fact this reiterated before public the
government's seriousness of an
unsparing was against corruption.
When Ghulam Nabi Azad took over as
Chief Minister in 2005, he renewed and
The most high profile case of
Mufti regime against corruption
was the one which involved a top
IAS officer Ajit Kumar.
In August 2006 Azad sacked 15
officials for established case of
corruptions against then. Most of
them were small fishes. The high
profile name in Azad lists was of
Sayeed Asghar, then director
rural development, Kashmir
The crusade against corruption
was renewed with more vigour
and resolve when Azad took over
as CM in Nov 2005.
Interestingly, among its first few
cabinet decisions, the Azad led
government reinstated Ajit
Kumar suspend by Mufti
government on corruption
charges. Not only this, Kumar
was given an honourable
posting, though he is yet to come
clear from the courts. And no
wonder that Syed Asghar
Hussain, sacked by Azad
government in 2006 is now the
state secretary of Mufti's Peoples
Democratic Party. The message
here is loud and clear. Slogans
are for public consumption.

Epilogue Ø
12 ×
January 2008

refreshed the war against corruption.
Azad often described corruption as more
serious challenge before Jammu and
Kashmir than militancy. Like Mufti (who
convened a special session of assembly
to pass legislation on SAC) Azad too
convened a special session in December
2005 to get amendments in the anti-
corruption law passed in assembly to
make it the most stringent in the
country.
On August 15, 2006 the Azad led
government announced termination of
the services of 15 government officers for
established cases of corruption against
them. The high profile name in the list
was that of Syed Asghar Hussain, Director
Rural Development, Kashmir. Infact,
Asghar and the then Minister for Rural
Development Peerzada Mohammad
Sayeed both were indicted by the SAC for
their involvement in the Rural
Electrification scam. Asghar was sacked
but Peerzada was spared on the grounds
that allegations were yet to be proved.
The SAC chairman had said that “the
Minister is neck deep in corruption”.
However he managed to stay on till
January 2008 when a legislator made
allegations against him.
Interestingly, among its first few cabinet
decisions, the Azad led government
reinstated Ajit Kumar suspend by Mufti
government on corruption charges. Not
only this, Kumar was given an honourable
posting, though he is yet to come clear
from the courts. And no wonder that Syed
Asghar Hussain, sacked by Azad
government in 2006 is now the state
secretary of Mufti's Peoples Democratic
Party. The message here is loud and clear.
Slogans are for public consumption.
Again going back to the first session of
present assembly one recollects the
scathing attack of coalition government
against National Conference for
'institutionalizing' corruption. And now as
last session is adjourned sine die, one
finds the coalition at loss of words when
talk of corruption is all pervasive.
S P E C I A L R E P O RT S
TRANSPARENCY
‘It is coercion at bottom,
Collusion at Top’
Interview with Dr Ashok Bhan, Commissioner SVO
Since past few years there has been a
tremendous hype that Jammu and
Kashmir is the second most corrupt
state in India. In this backdrop, the
state government has always
reiterated that weeding out corruption
is at the top of its agenda. In fact the
present Chief Minister Mr Ghulam Nabi
Azad declared in his first press
conference in November 2005
(immediately after taking over as CM)
that eradication of corruption makes
his priority number one. An all
pervasive and intensified war against
this deadly menace followed. Two
years down the line, where does
Jammu and Kashmir stand today in
terms of transparency in public life?
They (Transparency International) talked
about petty corruption. They visited
some ten or eleven departments and did
some sample testing as how much a
common man has to pay for the basic
services. Though I am not in full
agreement with the scheme of their
testing and choice of samples but they
did a great job in bringing this
(corruption) menace to focus. The
government was seized of the challenge
and an increased attention came in
against the corruption. The Transparency
International sparked a cause of action
for all –for the government and for the
public.
In our working methodology, we too have
tried to target the petty corruption. In
fact one has to understand the pyramid
corruption as a coercion at bottom
becomes a collusion at the top. Under
this regime of increased focus against
corruption we have tried to nip the
targets both ways –by public mobilization
Epilogue Ø
13 ×
January 2008
and by our own monitoring. And the level
of success has been reasonable. From
January 2005 to December 2007, as many
as 117 trap cases were registered.
Interestingly, from the trap cases one
can make a fair idea of where the
corruption takes place most. Out of
these trap cases, the highest (26) were
reported from the Revenue department,
22 from Police, 17 from Engineering
departments and 12 from Finance and
allied departments. Information about
many cases was generated through the
whistle blowers.
Unfortunately, we observed that the
level of information generated through
different sources was coming down.
Perhaps they were no more ready to
come forward with information fearing a
shabby treatment from the immediate
system for taking lid off the rot. This
matter was discussed at appropriate
levels. Now the government (also
through the speech of the Chief Minister)
has send a clear message that whistle
blowers deserve due honour. This is likely
to further encourage the genuine
information generation system.
Apart from the political rhetoric and
obvious blame game, there is also a
feeling that conflict situation also had a
lot to do with promotion of corruption.
Your analysis please…
Your analysis is true. In fact the conflict
situation weakens machinery of the
government in keeping a check on all its
arms. Conflict situation has definitely
influenced un upward trend in
corruption. Figures explain this well.
From 1990 to 1996, Jammu region
recorded 76 per cent of the total cases

registered. This implies that people were
not ready to come forward. And when the
popular government returned in 1996,
the scenario changes. From 1997 to 2007,
Kashmir region accounted for 65 per cent
of the total cases registered.
The corruption is often described by
many in a very technical term
–institutionalized. Do you think that
corruption has really been
institutionalized and, if yes, how
difficult it is to break down this
institutional mechanism?
Instead of calling institutionalized, I
would rather say that corruption here is
deep rooted. Take (for example) the case
of Social Welfare Department. We
unearthed some five to six cases
pertaining to old age or widow pensions
or other relief schemes. There was a
huge but silent scandal. The amount due
to the beneficiaries ranged from Rs 200
to Rs 500. They (the poor beneficiaries)
would be happy to get this amount but no
loud cries if this did not reach them. So,
some officials considered the second
option. They (officials) did not send
money to a large number of
beneficiaries. The amount was swindled.
Now you see (for example) SICOP or
Super Bazaars. They are supposed to
supply materials to the government
departments and run their affairs out of
the earnings on sales. But in connivance
with traders they overcharge the items.
The booty is shared between the buyer
(government departments), the supplier
(private traders) and officials of these
corporations/societies. Same is the case
with Cooperative Housing Society who
has the government as their counter-
guarantor. Same is also the case with idle
purchases in various departments,
particularly the Engineering
departments.
What is your opinion about political
corruption in Jammu and Kashmir?
There have been many allegations but
S P E C I A L R E P O RT S
TRANSPARENCY
no move of your organization has been
seen on this front.
See, corruption is widespread in country
and world and no part of society can be
said to be totally free of it and honest.
(However) a professional organization
like State Vigilance Organisation has to
base its investigations on available
evidence. (Moreover) investigations have
to convince the courts also. Therefore,
we would not like to be drawn into
hearsay or wild allegations. (But) all
cases with concrete evidence will be
looked into on merits (and) irrespective
of the status (of the persons involved).
Your proceedings are normally initiated
when there are specific complaints or
any case has been referred to you by
courts or government. Do you also
initiate suo motto proceedings based
on your in-house research?
We generate information at different
levels. There are very few people who
would approach me directly. But they
meet our officers and share information.
Another way is through written
complaints. However, the written
complaints have not proved very
productive. Proceedings are initiated
after we are convinced (to a certain)
level that prima facie there becomes a
case.
And what about anonymous
complaints…there may be chances of
witch-hunting and settling personal
scores among parties.
Yes, that is what I have tried to explain.
In fact, on getting such complaints we
ask our officers to first check reputation
of the person against whom a complaint
has come. If our test check reveals that
the person bears a good reputation then
some caution has to be exercised.
How many complaints of corruption do
Epilogue Ø
14 ×
January 2008
you receive at an annual average? And
what is disposal mechanism and
success rate –filing charge-sheets,
disposals etc.
On an annual average we receive
around 5,000 complaints. On perusal, it
comes out that 50 per cent are in
duplicate (means filed before many
agencies with a copy to us). Out of the
50 per cent considered by us, 35 per
cent are (normally) referred to the
Departmental Vigilance Officers (Heads
of departments, DCs etc), therefore,
we deal (directly) with 15 per cent of
cases –which means around 750
inquiries a year.
In fact we are particular about quality
(and not quantity). If we go after the
volumes, cases are not proved at the
end of the day. If we look at the
statistics of past few years, of the total
cases registered between 1990 and
1996, 64 per cent could not be proved;
between 1997 and 2002, 66 per cent
could not be proved. The trend
improved post 2002. 73 per cent of the
total cases registered between 2003
and 2005 were proved. As we compile
the figures of cases registered between
2005 and 2007, it will emerge that as
many as 90 per cent have been proved. I
am happy to inform you that out of 65
cases registered in 2005 there is only
one case which is still under
investigation –all others have been
filed. Out of 84 cases registered in 2006,
44 have been challaned. In 2001, 81
cases were registered and 44 are under
investigations.
Vigilance proceedings, as we see, take
too long to reach a conclusion. We
have often seen cases taking 15 to 25
years and in many such cases the
accused is acquitted –sometimes with
court observations that your probes
failed to establish a case. I hope you
understand in such long proceedings
the damage to the reputation of an

accused has already been done before
the courts confirm that a case could not
be made out. The accused also suffers a
humiliation and obvious harassment for
a long. Isn't there something wrong
with the system?
We are seized of the issue and are
concerned about this slow pace. (In fact)
this is a loss to us also. For last ten years
the average conviction rate has been
12.5 per cent. Because of delays people
loose interest in cases and they generally
forget (what had happened). Slow pace is
detrimental to the success in rate of
conviction. (Not surprising in this
scenario) that 400 cases are still pending
before courts. This may take another few
years to clear these cases and during this
time you get new cases also, thus,
pendency is carried on. You may know,
the Chief Minister has already announced
that there will be two more special anti-
corruption judges –one each at Jammu
and Srinagar. But at the level of
investigations we are trying to move fast.
Your reputation of an honest and
efficient officer has very few parallels
in Jammu and Kashmir. The fact that
you were chosen for this challenging
assignment speaks about your
credibility. But your people down the
line are also part of the same system
which is loudly condemned as corrupt.
In the interest of public trust, can you
please explain the system of in-house
checks in your organization?
(I must assure you) there is a definite
system of checks. But let me say that
whatever we have achieved today, the
credit for all this goes to our investigators
for the courage (they have demonstrated
in being above board). I would again say
that there may not be many people who
can approach me but you must
appreciate that our investigators are
locals (they come from the same
segment), in such scenario any one can
S P E C I A L R E P O RT S
TRANSPARENCY
be prone to pressures. But I am happy to
say that they have been able to work
against pressures (to bring home
credibility). Still, we have a system of
monitoring and in-house checks at
several levels. The moment we feel that
investigation is going in wrong direction,
the person (investigator) is immediately
changed and action is initiated. Not many
people know that the appointments in
Vigilance Organisation are clearly by a
high powered committee headed by the
Chief Secretary (DGP is also a member)
and many things are taken into account
while making selections. We also keep on
shifting people. Another thing (which I
would like to mention here) that we have
done away with the system of having
specialists for particular nature of cases.
This has been done to ward off the risk of
breeding vested interests.
There is a general perception gathering
ground that the people targeted by the
Vigilance Organisation are usually from
the middle and lower rungs of the
system, of course, barring a few
exceptions.
As I explained at the very outset that
corruption at the bottom is coercion and
when you walk the ladder upstairs it
turns into collusion. I also pointed out
earlier (in this interview) that the petty
corruption has to be targeted first. See,
(what happens) the collection takes
place at the bottom and then the booty
share goes up. Unfortunately, the
complainants at the top level are not
forthcoming, there is also problem of
obtaining credible evidences but in case
of bottom you have many complainants.
(Simplifying further) in fact, the bottom
is the collection terminal. But this not a
matter of policy for us, what all we need
is specific complaints and credible
evidences.
On the contrary, we have another
interesting scenario. At a time when
Epilogue Ø
15 ×
January 2008
corruption is being described as most
serious challenge before Jammu and
Kashmir, last year the awards of
honesty were conferred upon top
most officers, except one from the
middle rung. The outgoing Chief
Secretary, the Chief Secretary-in-
waiting, another top IAS officer, the
Principal Secretary of General
Administration and you shared the
honours. Does this selection give to
understand that honesty prevails only
at the top and the rot has
accumulation at the bottom only?
We I am not the right person to answer
this question. But I personally believe
that such awards of appreciation should
go to the people who have ten to 15
years of service to go. This can be a
motivation for the awardee and
inspiration for others.
Your amended law against corruption
has been much talked about. We are
told that even people in Europe have
evinced keen interest in applying this
model there. What difference has this
law brought in the crusade against
corruption?
The law you are talking about was
imminent in view of a scenario where
for the corrupt people the gains of
corruption far overweigh the losses (on
their prosecution, conviction or sacking
from the government service. In fact,
the United Nations too had proposed
this law (as an effective tool to curb
corruption) but we were prompt in
having it in place.
So far, we have taken over properties
worth Rs 3.5 Crores in 12 cases of
corruption. Now a new trend has come
up. The people (with dubious money)
are going in for Benami properties
instead of buying in their names or in
the names of family members. We are
scanning every such case minutely to
find out the linkages where they exist.

West Pakistan Refugees :
60 years on, still refugees with no homeland
Pawan Bali
Their three generations have lived in the state, but have never been a part of it. For six decades, they have tilled the land,
weaved a promise and waited anxiously. It has been over 60 years since the mayhem of 1947-when 5,764 families left the
insecure hamlets of the newly created West Pakistan and took refugee in Jammu and Kashmir. Since then the families have
lived as refugees, waiting to belong to the state where they once sought a home. Years later, they still have not got one.
In the January 2008 assembly session of
the Jammu and Kashmir government,
chief minister Ghulam Nabi Azad once
again mowed down their hopes. While
replying to the Governor's address, he
categorically stated that the issue of
West Pakistan refugees was a human
problem, more than a political one. In
many words, Azad also ruled out granting
Permanent Residents Certificate or state
subjects to these families. The minister
of state for revenue Aijaz Khan also said
state subjects for them was a difficult
decision. All this despite the common
minimum programme of the government
promised a solution in black and white.
The government's plea is that granting
Permanent Resident Certificates to West
Pa k i s t a n R e f u g e e s r e q u i r e s a
constitutional amendment to Article 370.
And for this constitutional amendment
they do not have the required two-third
majority. With another tenure coming to
an end this year, their demands will be in
deep freeze for yet some more time.
THE GENESIS OF THE PROBLEM:
During the Partition, 5,764 families
(47,215 people as per official records)
migrated from West Pakistan and settled
in parts of Jammu, Kathua and Rajouri.
No land was allotted to them, but these
families did occupy some government
land and evacuee property, which later
they were allowed to retain with certain
conditions. In all, over 46,466 kanals was
occupied by these families. But this was
the land they cultivated, but never
owned.
S P E C I A L R E P O RT S
REFUGEES
With Article 370 applicable in Jammu and
Kashmir, the West Pakistan refugees
were never considered a part of the
state. Unlike refugees from Pakistan
Occupied Kashmir, they were not granted
a Permanent Resident Certificate or what
in other terms is a state subject. Quoting
the Jammu and Kashmir constitution
(which was fully adopted ion January 26,
1957), the following Section 6 qualifies
the permanent resident as:
Every person who is deemed to be a
citizen of India under the provisions of
the Constitution of India shall be
Permanent Resident of the state if on
fourteenth day of May 1954
He was the state subject of Class I or
Class II
Having lawfully acquired immovable
property in the state, and he has been
ordinarily resident for not less than 10
years prior to the date (May 14, 1954).
Any person who, before the fourteenth
day of May 1954, was a state subject of
class I and class II and who having
migrated after the first day of March
1947 to the territory now included in
Pakistan returns to the state under a
permit of resettlement or for permanent
return issued by or under the authority of
any law made by the state legislature
shall on such return be a permanent
resident of the state.
Since the West Pakistan refugees were
not residing in the state territory, they
Epilogue Ø
16 ×
January 2008
did not qualify as permanent residents as
per these clauses. Also till May 1954,
they had not even completed 10 years of
stay in Jammu and Kashmir. The refugees
from Pakistan Occupied Kashmir,
however, were considered to be part of
the Kashmir territory, and recognised as
permanent residents.
NO PRC -THE STRUGGLE:
Lack of permanent resident certificate
translates into gross disadvantages and
disparities. This means that around 1.5
lakh of these West Pakistan Refugees
here cannot buy immovable property,
transfer land in their name, and under
the rule 17 of J&K Civil Services Act, they
are even barred from employment in the
state government services. Also, they
cannot vote in the state elections, and
are even disqualified from being
members of the village Panchayat under
Section 6 of Panchyati Raj Act , 1989.
They, however, have the right to vote in
Lok Sabha elections.
Men like 83-year-old Jaggu Ram, say
they voted once immediately after the
Partition when Justice Mehar Chand
Mahajan took over as the first Prime
Minister of the Jammu and Kashmir. But
after, the rules changed, Article 370
came into force and they lost their voting
rights. Ram says disillusioned by this
discriminatory attitude of Jammu and
Kashmir government, these families had
once even decided to leave the state and
settle down in Punjab. But it was then
chief minister Sheikh Abdullah who asked

them to stay back and promised a
settlement. But the settlement never
happened.
Between conversations, refugees like 70-
year-old Mohan Lal say that once forms
h a d b e e n d i stri b u te d th e n for
registration of West Pakistani refugees.
Sheikh Abdullah had come close to an
agreement, but their people were
divided then. An unorganised, leaderless
body of West Pakistan Refugees split,
took divergent views. Some even floated
rumours that the forms were for sending
them back to Pakistan. Selfish motives
played with the ignorant class, and the
matter was never resolved. This was the
closest they ever came to a settlement.
Since then, it has been protests and
marches. Cries that sometimes reach
the capital, and many times, do not cross
the borders of the state.
During Rajeev Gandhi's tenure as the
Prime Minister, these refugees had
staged protests at Delhi's Boat Club. Two
years back, they again organised dharnas
at Jantar Mantra. More promises, but
never results. An irony in the recent
times, since our present Prime Minister
Manmohan Singh is also from West
Pakistan.
GENERATIONS WASTED:
The past has not been pleasant, and the
future does not look bright either. The
families, majority of which belong to the
scheduled caste, had been mostly into
agriculture, tilling the patches of land
which they had retained. Some opted for
daily labour chores and a few lucky ones
got into central jobs like armed forces.
The problems have compounded now.
The young have no future to look forward
to. Without a state subject, there are no
government jobs, and getting into armed
forces is difficult. Young boys like Romesh
Kumar in Parnoia village near Jammu
have not studied beyond class 12. Higher
education and even professional degrees
again require state subjects. Getting a
S P E C I A L R E P O RT S
REFUGEES
driver's licence or even applying for a
bank is not an option. What do the young
do then? Set up shops, play card games,
indulge in idyllic conversations and
regrets. Some have meagerly paying
private jobs, some take tuitions, and the
rest hope that some day there is a
change.
The land holdings are also shrinking. The
families have divided from nearly 6,000
to 24,000 households now. Since they do
not own the land (most of which is
evacuees property), it cannot be
officially divided. New land cannot be
purchased, no new houses can be set up.
Cramped spaces and lost opportunities
have been passed on as family heirloom
to the generation next.
WADHWA COMMITTEE REPORT :
In 2007, after several debates and
protests, the government formed a
committee under the chairmanship of GD
Wadhwa, Financial Commissioner
Revenue, to look not the issue of those
displaced during 1965, 1971 from POK
and also, of the West Pakistan Refugees
The committee, which submitted its
report in November 2007, stated that the
West Pakistan refugees were citizens of
India, and their demand for state
citizenship was a political one, which
should be decided by the government
Barring this, the committee did make
some favourable recommendations for
the West Pakistan refugees:
Provision of separate funds for providing
basic civic amenities for the areas
inhabited by these refugees.
Since most of these displaced people
belonged to schedule caste category, the
government should issue grant them
reserve category certificate applicable
only for recruitment of posts under
Central Government or other state
governments and para military forces
Centrally sponsored schemes should be
Epilogue Ø
17 ×
January 2008
applicable to their areas.
On the analogy of Kashmiri migrants,
identity cards should be issued for
disbursing of any type of relief
Those living on Custodian land and
property should be allowed to repair
their houses as per norms
Deputy commissioners will be directed to
issue them domicile certificates after
fulfilling formalities
Special package should be formulated for
them and the matter should be taken up
with the Central government.
THE PATH AHEAD:
The road ahead does not seem easy
either. With a complete lack of a political
will to resolve this issue, a change in their
fate is a thin chance.
President West Pakistan Refugee
Committee Labha Ram Gandhi
threatens that if left with no choice the
families would uproot themselves once
again and settle somewhere else in the
country. The Courts are another option.
Labha Ram claims that there have been
times when relaxations have been made
while granting permanent resident
certificates, like for several Tibetan
refugees who settled down in Kashmir
during Sheikh Abdullahs tenure as chief
minister. Then why not this section of
refugees?
The Wadhwa Committee report did make
some favourable recommendations,
which need to be implemented
immediately. Regarding the issue of
granting state subjects, a right political
will is the key. Jammu and Kashmir goes
to polls once again in 2008. The issue of
West Pakistan Refugees will prop up in
various agendas, but will this issue ever
see resolutions. Some conflicts benefit
seats of power. And unfortunately, just
like this one, they benefit a few at the
cost of thousands.

Delimitation Farce For a
‘Khush-hal’ Kashmir
Anmol Sharma
The rationale for including Delimitation
Commission in the Common Minimum
Programme of the coalition government
was not only to end the disparity in the
number of the assembly seats but also to
end the political, social, and economic
hegemony of one region over another.
However, the truth is that it remained far
from its objective of equal regional
development and was from the very
beginning mere rhetorics and shambolic
with series of contradictory statements
by the Mufti-Duo, the then PCC Chief
Ghulam Nabi Azad, and belligerent NC
leaders like Abdul Rahim Rather.
The Delimitation Programme was more of
less like a football match played between
the heads of various political parties in
the parochial chowk of the Kashmir
centric politics, with Congress and PDP
carelessly fooling around in the futile
parleys and JKNPP leadership meanwhile
intermittently grabbing the agenda like
rugby aficionados. The supremacist Chief
Minister on 15th Jan' 2008 blew the final
whistle with the ego of being a
international demagogue in the Assembly
Hall of the Jammu Darbar.
The unapologetic body language of the
CM had no trace at all of regret for his
utter failure to fulfill the promises made
to the people in the manifesto and
numerous public meetings. Referring to a
local daily, 'Virtually kicking off the
campaign for the forthcoming Lok Sabha
elections… the setting up of Delimitation
Commission, Mr. Azad assured the
gathering that Congress will leave no
stone unturned to remove discrimination
with any region or sub-region of the
State' (DE, 11th Feb' 2004)
S P E C I A L R E P O RT S
DELIMITATION
daily, “For the third straight time, the
Azad disrespected and sacrificed Mangat People's Democratic Party (PDP), the
Ram Sharma for the sake of salvaging his main coalition partner in Congress led
own incompetence, by remarking Government, boycotted meeting of the
'Punditji to is tarah ki assurances dete political committee …. as Abdul Rahim
rahte hain' (KT, 16th Jan' 2008), and in Rather (Leader of Opposition in the
that way turning the senior most party Assembly) and Prof. Bhim Singh also
colleague into a cheap sitcom stooge. didn't turn up, the meeting held in
Srinagar under the chairmanship of
Health and Medical Education Minister
By this over simplistic explanation, Mr.
Mangat Ram Sharma, was virtually
Chief Minister has tried to trivialize the
reduced to a farce.” (DE, Draft bill on
complex and delicate character of Dogra-
delimitation circulated, 11th June' 2007)
Kashmiri geopolitics while ostensibly he
himself has so many times made
The last excuse he could mush out was
oxymoronic statements in the Press.
“…that the Government would need a
two-third majority (for delimitation) in
At one place he said, “the same
the State Assembly which was not there
(delimitation) is needed for the next
at the moment.” (DE, 5th Nov' 2007)
elections and if we did the same it will
destabilize the whole functioning of the
Not just him, but all the consecutive
Government…delimitation of
Chief Ministers are explicitly guilty of
constituencies at present juncture will
ignoring and snubbing the
lead to neglect of some areas." (DE, I will
constitutionally guaranteed
continue as PCC chief, 27th Jan' 2003).
fundamental rights of the people of
Jammu Province. At the risk of sounding
While addressing a press conference as
clichéd, it would nevertheless, be
Co-ordination Committee Chairman and
pertinent to point out that the provisions
PCC (I) President Mr. Azad declared
of both the Constitution as well as the
“...that all promises regarding
Representation of the People's Act were
implementation of Wazir Commission
never scrupulously adhered to, even
and setting up of Delimitation
during NC's regime.
Commission, can be fulfilled in just three
months of the Government.” (DE, 'What
The favoritism with one particular region
NC couldn't do in 6 years; we have done in
and the gross discrimination with Jammu
3 months', 15th Feb, 2003)
were self-evident when 75 members of
the Jammu & Kashmir Constituent
Then, he tried to place the carrot in front
Assembly, all of them belonging to the
of the donkey by floating a separate,
National Conference, embarked to
unrealistic, and impracticable idea of
delimit the assembly segments based
increasing the number of seats in each
upon the obsolete 1941 consensus. The
region by 25%, which he very well knew
bar was discriminatingly set at 60,000
before hand that JKNPP, NC, and PDP
voters for each assembly seat at Jammu
would never support. To quote a local
Epilogue Ø
18 ×
January 2008
 S P E C I A L R E P O RT S
DELIMITATION

while it was only 40,000 for Kashmir. This
legacy of the propounders of 'Khushal'
Kashmir has continued until today in the
fact that a mere 9,900 electorate exists
for the Gurez segment while the figure is
1.65 lakh for Jammu-West seat.
It would be very interesting however to
see the how Farooq and Co face the
Jammu electorate in the forth coming
assembly elections. Farooq and his party
are openly averse to any process of
delimiting the constituencies. (DE 1st
April' 2002). Abdul Rahim Rather gave the
lame excuse that delimiting would mean
more and more legislators and the
consequent burdening of the ex-chequer.
If anything really, came in the way of
setting up this Delimitation Commission,
it was the obdurate and intransigent
mentality of the representatives of
Kashmir. Their apprehension was that
delimiting constituencies would increase
the number of seats form Jammu and if
the demand of JKNPP to give eight
reservations to the people from POK
living in Jammu were also met, it would
polarize the power in the hands of non-
Kashmiris. That is the reason perhaps,
why Mehbooba termed the caucus
meetings discussing delimitation as
“mazaak” and a futile exercise, which
she naturally never attended.
The biggest tragedy with Jammu is that it
lacks politicians with oratory and
leadership qualities like in Prof. Nirmal
Singh or Mr. Ashok Khajuria. Bhim Singh
on the other hand is in the habit of
making such fantastical statements, like
the one he had made in Parade Ground,
“Mahabharata will start if delimitation
commission etc., is not constituted” (DE
29th May' 2003), that now nobody takes him
seriously enough. Harsh Dev Singh who is
sadly notorious for losing his temper in
public meetings and debates in the
Assembly Hall has also contradicted himself
many a times on the delimitation issue.
Sometimes he talks about setting up
Delimitation Commission, demanding
that is a constitutional requirement
under Section 47 of the J&K Constitution
and section 3 of Representation of
People's Act. At other times, he forgets
what RPA actually mandates, and brings
from nowhere his 'Sheikh Chilli' ideas of
the like, 50 seats each should be given to
both the regions.
To illustrate an example by
referring a local newspaper,
'Former Minister for
Education and senior
National Panthers Party
legislator from Ramnagar,
Harsh dev Singh has said
that his Party will move
bills regarding delimitation
of assembly seats with 50
seats each for Jammu and
Kashmir regions…' (DE,
27th July' 2006, Bills for
50:50 Assembly seats, 5 yr
LA term being moved:
Harsh)
To illustrate an example by referring a
local newspaper, 'Former Minister for
Education and senior National Panthers
Party legislator from Ramnagar, Harsh
dev Singh has said that his Party will move
bills regarding delimitation of assembly
seats with 50 seats each for Jammu and
Kashmir regions…' (DE, 27th July' 2006,
Bills for 50:50 Assembly seats, 5 yr LA
term being moved: Harsh)
Interestingly, the number had actually
Epilogue Ø
19 ×
January 2008
gone up to 52 by the time the bill had
reached the House. However, knowing
perfectly well, being a good student of
law, he is, that any increase in the
number of seats without the satisfying
the parameters mentioned in The RPA
and the Constitution would be illegal,
unconstitutional, and void abinitio. Still
he displayed the fixation of doing those
kinds of things for the reasons best known
to him and his leader.
The prose of the great poet Iqbal suits the
present predicament very well when he
said, “Bus ek he ullu kafi tha barbaad
gulistan kerne ko, har shaakh pe ullu
baitha hai, anjam-i-gulistan kya hoga.”
Therefore, the citizens must exercise
their votes sensibly this time so that they
do not elect persons who make fool of
themselves are not opportunists, and
take the people, who elect them, for a
ride.
In Jammu City
Get your copy of
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delivered
at your
doorstep
Call :
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 I N F O C U S
THE MONEY MOVEMENT

Budget 2008-09 :
Political Courage Sans Innovation ?
Dipankar Sengupta

State Budgets do not generally get the kind of publicity that Union budgets do. This is because given the centralization of
finances that still persists and the absolute figures involved the Union Budget not surprisingly puts state budgets in shade.
For example the Central Government's share of plan expenditure has consistently been over 55% while the share of all the
states hover around 40%. Additionally, as the Economic Advisor to the State Government, Haseeb Drabu pointed out, the
budgetary measures like income tax policies that give relief to the ordinary citizens lie with the Central Government. The
ability of States to do anything in this regard is limited. That is why the storm created by the State Budget despite its short
duration was surprising but not perhaps unjustified.

Backdrop Government) took the politically continued throughout the duration of

courageous step of postponing the this coalition government.
For one this is the last budget that is budget and going in for a “vote-on-
being presented by the Congress-PDP account” instead as the budget framed One aspect of this effort is the
coalition government as it completes its was under-prepared and in a mess. The introduction of “zero-deficit” budgets.
full tenure of six years. The budget numbers about to be presented were Another aspect of this effort can be seen
speech delivered by fictitious and lacked credibility. It was i n t h e
Mr. Tariq Ahmed rationalization of
TABLE 1: BUDGET AT A GLANCE
Qarra resonated with （in　Rs　crore） taxes and single-
this theme as he minded and even
Items 2002-03 2006-07 2007-08 2007-08 2008-09
described the narrow stress on tax
upward economic (Pre-actuals) (BE) (RE) (BE) collections. How
trajectory traversed (RE) has this strategy
by the State in the A Revenue Receipts 7524 11981 13555 13901 15316 fared? In absolute
last six years leaving B Revenue Expenditure 7442 10212 10763 11855 12089 numbers, the
others to infer that it Revenue Surplus (A-B) 82 1769 2792 2046 3227 State's own tax
was indeed this revenues have risen
C Capital Receipts 1771 2182 2712 3453 3127
government that was from 936 crores in
D Capital Expenditure 2391 3951 5504 5499 6354
responsible for the 2 0 0 2 - 3 to 2 2 9 9
economic upturn. He Capital A/C Deficit(C-D) -620 -2182 -2792 -2046 -3227 crores in 2007-8 and
went further. The E Total Expenditure 9833 14163 16267 17354 18443 are projected to
minister also F Total Receipts 9296 14163 16267 17354 18443 rise to 2666 crores
claimed the Budget Deficit (E-F) -537 0 0 0 0 in 2008-9. As a
restoration of proportion of State
Fiscal deficit -1881 -1509 -2011 -2737 -2330
financial governance Domestic Product
Primary deficit -722 -308 -760 -706 -730
and discipline which this means an
in turn enabled the increase from 6.2%
State government to spend increasing realized that not only would the plan size in 2002-3 to 10.2% in 2007-8 and is
amounts in capital formation. have to be brought down to more projected to rise to 10.6% in 2008-9.
realistic levels but also revenues would Since SDP itself has demonstrated
have to be raised by the politically moderate growth, tax collections have
This is a theme that has underlain almost
inconvenient but necessary method by been buoyant. Clearly, on this score, the
all budget making exercises since 2003.
getting people to pay for government coalition government cannot be faulted
That was the first time the newly elected
services. This process of putting the state for patting itself on its back. Similarly
PDP-Congress coalition (with some
government finances into something Plan Capital Expenditure (which now
prodding from the NDA-ruled Central
resembling fiscal discipline has been

Epilogue Ø
20 ×
January 2008

goes largely to building infrastructure
and increases the productive capacity) of
the economy rose from 1316 crore rupees
in 2001-2 to 4007 crore rupees in 2007-8.
Even when Central government largesse
is availed of is in the case of the Rs 3900
crore Power Grant spread over three
years it has been matched by the State
with a commitment to bring discipline to
this sector by undertaking reforms the
most visible and politically difficult
examples being the metering of
connections and the hiking of power
tariffs. It is to the credit of the
government that the independent
auditor has certified to the central
government that the state has achieved
the benchmarks mutually agreed upon by
the Centre and the State governments.
The nature of fiscal reforms whether
they are in the realm of generating
resources or changing the composition of
expenditure increasingly in favour of
capital formation (from 23% in 2003-4 to
32% of total expenditure in 2007-8) has
occurred in a milieu of increasing
transparency the most important
manifestation of which is the publication
of the annual Economic Survey of the
State a practice that has been prevalent
in other states. This document which is a
commentary on the State's economy
describes the context in which the
budget making exercise takes place so as
to make debate on the budget more
meaningful.
We are perhaps seeing the beginning an
era where the state of Jammu and
Kashmir is no longer being looked at as an
entity to be bribed or coaxed. It is indeed
being looked as a state that can and
should stand on its own two feet. Indeed,
when it was announced that the state
had led the nation in growth of VAT
collections, the observation that Jammu
and Kashmir had started from a very low
base (albeit correct) came in too quickly.
This possibly suggests that the state's
performance in any area will not be
I N F O C U S
THE MONEY MOVEMENT
indulged like that of a backward child
that has performed well but rather with
critical eyes. This is to be welcomed as
this is surely a step towards the
restoration of dignity and self-respect a
theme that Mr. Muzaffar Hussain Beig
brought up when he presented the
budget in 2005. Or so it would seem.
The first indicator of the magnitude of
the task that lies ahead was described by
Dr. Drabu himself when he pointed out
that salaries alone exceeded the State's
own revenues! The estimated salary bill
in 2008-9 is 4771 crore rupees which is
Memo Items:
Gross State Domestic Product 16980
Own Revenues/SDP ratio (%) 8.9
Tax Revenues / SDP ratio (%) 5.75
Fiscal Deficit / SDP ratio (%) 11.07
Salary+pension+int/rev rec (%) (A) 56
projection　
＊　 on　
an　
assumption　
of　１１．５　％　
growth．
double the 2002-3 figures of 2394 crore
rupees when the coalition assumed
power. Thus the increase in the salary bill
during the Congress-PDP rule is more
than the increase in tax revenues! The
second is the massive outflow on account
of power where expenditure on power
massively outstrips revenues although on
this count the state government can be
credited with bringing it down (by raising
revenues more than threefold from 268
crore rupees in 2001-2 to a projected 922
crore rupees in 2008-9).
But these problems place the Jammu and
Kashmir in the company of other state
few of which enjoy healthy financials and
not a state that has to be constantly
bribed into submission! This however is
not enough and as much is admitted by
the State's policy makers. They want the
budget to be much more; specifically
they want the budget to be an indicator
of the Government's long-term policies.
Epilogue Ø
21 ×
January 2008
In this context the government wants the
budget to be viewed as an employment
oriented budget; it would be fair
therefore to use this yardstick to judge
the government's effort this year.
Economic Policy and Budget Making
It is well known that the sector that
contributes the most to employment is
agriculture. The sector that has grown
most rapidly is the Arts and Crafts sector
employing 340,000 artisans. Other
sectors that have also grown are tourism
especially in the Jammu region while
29115.26 32172.24 32172.24 35872.05*
13.7 14.7 15.4 16.1
8.6 10.1 10.2 10.6
5.2 6.2 8.5 6.5
47.6 44.5 53.6 47.7
tourism in the Valley has exhibited some
signs of recovery. It is not necessary given
the Coalition's stated goal of
employment creation that the budget
allocates funds to sectors depending on
contribution to employment or even
growth. That would be simplistic and
even unnecessary. For example the
dynamism of the Arts and Crafts may not
need heavy financial assistance given
local entrepreneurship and effort. Thus
the quantum of funds spent in this case
will be less important than the quality of
intervention required.
On the other hand productivity in the
state's agricultural sector (which
accounts for 29.44% of the SDP and
supports 80% of the population) is below
national averages for many crops a
dismal state of affairs given the fact that
national productivity figures themselves
are low to begin with. Moreover the State
is food deficit and imports cereals, meat,
 I N F O C U S
THE MONEY MOVEMENT

eggs and milk from other states. When it the social services supplied by it are so low. At the same time corporate India (as
comes to investment or capital little. Social indicators like literacy rates well as industrialists of the state) face a
expenditure in the rural sector, the total are well below national standards. A massive shortage of skilled people. At
sums allocated under various heads in concerted plan to change the nature of this juncture which has seen increased
the budget presented are roughly around government employment (if not the size demand for skilled workers; Jammu and
584 crore rupees or little more than 12% for reasons of political expediency) Kashmir finds itself unable to take
of the proposed total capital advantage of this
outlay. What is embarrassing Figure 1. opportunity. On the other
is that for certain heads, Where does the rupee come from? Composition of Revenue Receipts hand the government has
particularly Rural Resources from the Centre Own resources announced the opening of
Development where the several new colleges with
plan outlay in 2007-8 was an eye on the coming
391 crore rupees the actual assembly polls. This comes
23% 34% 38%
expenditure was at a time when most
approximately 149 crore colleges in the state are
77% 66% 62%
rupees only! Similarly, running with the help of
against the plan outlay contractual lecturers hired
allocation of 238 crores 2002-03 2007-08 2008-09 on a temporary basis.
committed to irrigation and (Projections) Moreover, the employability
flood control in 2007-8, only of these graduates is low
133 crore rupees was spent. given the curricula. A far
This failure to spend the Figure 2. cleverer policy and one that
allocated budget for a Where does the rupee go to? Composition of Total Expenditure would also be politically
sector that needs it most Resources from the Centre Own resources acceptable would be to set
and employs the most up technical institutes or
number of people is polytechnics that would at
alarming and makes a 24% least equip students with
32% 34%
mockery of the claim that skills needed for the job
this budget is an market. Clearly, much of
76% 68% 66%
“employment budget.” This the capital outlay of 70
underutilization of the crore rupees on colleges
allocated amount is also is to 2002-03 2007-08 2008-09 could have augmented the
be expected, given the size (Projections) 26 crore rupee allocation
and topography of the state, made to technical
the centralization of its governance and towards educationists and health institutes. Here unfortunately, the
complete disempowerment of workers from the day the coalition budget falls, a victim to a lack of
Panchayati Raj Insitutions in the state assumed office would have delivered imagination and innovation on part of the
who could have otherwise been impressive dividends cumulatively over coalition.
entrusted to plan and execute some of five years. This is while it is impossible to
these investments given their proximity do anything about the government The areas that consume the greater
to the farming community. Thus, in this employment at any single point in time; shares of the capital outlay are Social
case a budget allocation made in a vital incremental changes can have significant Services (1283 crore rupees or 26.2 % of
sector comes undone because of cumulative effects even in the medium the proposed total capital outlay), power
governance and the centralized term. (1156 crore rupees or 23.6% of the
structure of the government. proposed total capital outlay) and
The implications for employment the transport (673 crore rupees or 13 % of the
The other area in which the budget is a stated government goal of “employment proposed total capital outlay). General
victim of government paralysis and lack generation” are serious. It is well known Economic Services have been allotted
of innovation is evidenced in the runaway that given the lack of institutions that 567 crores (11.6 % of the proposed total
salary bill. It is a paradox that the size of impart technical skills, the employability capital outlay). The sectors that directly
the state government is so large when of people who graduate from colleges is affect the productivity of the economy

Epilogue Ø
22 ×
January 2008

are the latter items. The bulk of the
outlay on power is to go to transmission
and distribution (812 crore rupees) with
generation getting a modest amount (285
crore rupees). The impact of investment
in power generation will come later when
apart from hard infrastructure the
financial health of this sector improves
with the reforms in place. Admittedly, in
this area deadlines have been met.
The bulk of the outlay on transport is
targeted at road construction
(approximately 600 crore rupees). Rural
connectivity gets approximately 100
crores by way of the Pradhan Mantri
Figure 3.
Where does the rupee go to? (In greater detail)
Maintenance
8% Others
10%
Salaries
Security 24%
4%
Power Pensions
10% 6%
Interest
10%
Capital
Expenditure
28%
2002-03
Gram Sadak Yojana. This investment is
vital as connectivity in this mountainous
state is still weak. Increasing
connectivity is a vital precursor to the
exploitation of the state's bio-resources
and mineral wealth, indeed all economic
activity.
The problem with investments in power
and transport is that while they are
capital intensive and vital, the benefits
will come only later and that too if the
corresponding reforms continue and
investors grow more confident. As things
stand today, where industry is
concerned, the State holds a unique
position where the proportion of
phantom or nonexistent units of the total
I N F O C U S
THE MONEY MOVEMENT
units registered, is the highest showing
that these bogus units were registered to
take advantage of the generous scheme
of subsidies that are in operation. A
better indication of investor intent is the
surge in the demand for land in the
designated industrial estates and the
government is responding to these
signals as evidenced in the allocations
made to the industrial estates.
The Budget in this Context
How is one to evaluate the budget?
Given the yardstick given by the
Security
3%
Others
9%
Salaries
Power 30%
10%
Capital Exp
34%
Interest
9%
2008-09
(Projections)
government itself, the shortcomings of
the budget become all too evident. This
per se is not the fault of the budget. The
budgets are after all periodic
expressions of the state's long term
economic policy. This in turn is
dependent on political management of
the necessary difficult decisions that
have to be taken to turn an economy such
as this troubled state's. The tragedy is
that while political courage has been
demonstrated, political innovation has
not. The former is evidenced in the
manner the state's tax revenues have
grown a feat not matched by many
states special category states or
otherwise. It is also evidenced in the
manner that power reforms have been
Epilogue Ø
23 ×
January 2008
implemented with all benchmarks being
met. Indeed these measures have
demonstrated (although few have
noticed) how false is the stereotypical
image of the state as one that has to be
continuously bribed into submission.
The lack of political innovation or vision
is demonstrated in the failure or refusal
to empower Panchayati Raj Institutions
of the state. It is also demonstrated in
the failure to lay the foundation of
changing the composition of government
employment to enable better delivery of
social services and creation of human
capital formation even if it did little for
fiscal discipline in the short or medium
term. It is this demonstration of political
courage sans political innovation that has
prevented a commendable turnaround in
government finances into being a
spectacular one.
GLOSSARY OF TERMS
Vote-on-Account
As opposed to a Budget (which is a
complete set of accounts, including both
Pensions
expenditure and receipts and which lays
5%
out both the manner in which the money
is to be spent and how it is to be raised), a
vote-on-account which is resorted to
mainly by care-taker governments deals
with only with the expenditure side is a
device by which the government obtains
the vote of the legislature for a sum
sufficient to incur expenditure on various
items for a part of the year. This is a stop-
gap arrangement that enables the
government to function till the budget is
approved by the legislature.
Zero-deficit Budget
A zero-deficit Budget is merely one
where estimated receipts and estimated
expenditures are equal implying all items
of expenditure have been budgeted only
after identifying the resource to fund
them.
 I N F O C U S
THE MONEY MOVEMENT

Revenue Account Revenue Receipts recovery of its own loans advanced to

The revenue account comprises
expenditures covering the routine
administration of the State, such as
wages, salaries, maintenance and
repairs, telephone expenses, day to day
office running expenses and other
overheads. Expenditures relating to the
creation of assets - and this includes most
(but not all) of Plan expenditure - are in
the Capital account.
Revenue receipts are all those incomes
which do not incur repayment liability.
These include, in addition to the State's
own revenues, grants from the Central
Government for the financing of State
Plans, as well as non-plan grants.
Capital Receipts
Capital receipts include internal debt,
loans from the Center and the State's
State Corporations, Co-operative
Societies, etc., and are entered in the
capital account. On the outlay side of the
capital account, there are expenditures
corresponding to the State's own
investment outlay and disbursements,
which are comprised of repayment of
State public debt and the loans and
advances made by the State to the
various entities. Thus, both the capital
and debt portions of the Consolidated
Fund are under the Capital budget.

Why Epilogue
The northern most state of India bordering Pakistan towards Northwest and China towards North, Jammu and Kashmir remains to be most
favourite dateline for the world's news media. With Kashmir as center of discord, India and Pakistan the two South Asian neighbors divided
by history have already fought almost four wars and a low intensity conflict is on in this region since 1989. Of late India and Pakistan going
nuclear have already added to the global anxiety over the prospects of peace and stability in South Asia. The scourge of violence has its own
realm and the politics of conflict does not seem to end in near future. On August 13, 2003, the United States Deputy Secretary of State,
Richard Armitage, while delivering a lecture in Sydney said, Kashmir, along with Palestine and Israel, is the most dangerous place in the
world. Armitage went on to say, there are a lot of other dangerous parts in the world. India and Pakistan over Kashmir come to mind.
Conflict is still on and the raging tension is yet to settle down, violence is a daily routine, but this is not the bottomline of the story. Jammu
and Kashmir State has hundreds and thousands of stories to tell the world and which the world too must know to understand the conflict and
the strides life is making behind that conflict. It is not only the conflict for which Jammu and Kashmir State should be known world over
there are many other facets which need to be looked afresh. A tourists paradise, Asia's largest fresh water lake, unique geography and
topography, a cold desert, one of worlds most strategic peaks, worlds highest and coldest battle field, worlds highest motor road, worlds
highest motor bridge, worlds highest railway bridge, large hydro-energy resources, world class handlooms, saffron fields, willow clefts,
international quality fresh fruits, India's second most frequented Hindu shrine, secular values of a Muslim majority state in a Hindu majority
country, the only special status Indian state with constitution and flag of its own, over 10 million population, diverse ethnic identities,
expanding economy, emerging institutions and rich biodiversity are some of the features of Jammu and Kashmir which offer an alternative
news paradigm. With an overwhelming focus on conflict, the areas of reportage covering social, economic and cultural aspects of the life in
Jammu and Kashmir have not got much attention in the mainstream media. With Jammu and Kashmir becoming more and more important in
international thinking, news from this State and about this State is believed to be highly important to rest of the world.
In this backdrop EPILOGUE as an online news resource and monthly magazine serving as an authentic and accurate source of information
on Jammu and Kashmir came into being with an aim to collect a widest possible variety of news and views from all nooks and corners of the
state and disseminate the same with a professional construction to those who have always been keen to know the developments in this
Himalayan territory.
With a team of highly professional, sharp and sensible journalists we concentrate on local, national and global processes effecting the
economic, social, political and cultural development of the people of Jammu and Kashmir in particular and the context of such news in
relation to the South Asian region in general. We strive to disseminate genuine, meaningful, useful and easy to comprehend news and
information from Jammu and Kashmir and on Jammu and Kashmir to the people across the globe. Apart from spot reporting, in-depth
coverage of issues and follow-up is cornerstone of our news dissemination process.
The constituent elements of EPILOGUE are an independent policy, a pioneering spirit, a highly motivated professional team, state-of-the-
art technology, strategically located Correspondents spread all over Jammu and Kashmir, and above all a sense of mission. We have a deep
appreciation of what independence actually takes and how difficult it is to uphold. Out financial independence lies in the independence our
editorial policy.
The core policy at EPILOGUE is to impart an up-to-date factual and unbiased panorama of the state of affairs in Jammu and Kashmir, as it
stands today and as it is expected to unfold in the future.

Epilogue Ø
24 ×
January 2008

‘Figures Fuged,
Statistics Faked’
Abdul Rahim Rather
I wonder what the Finance Minister has
sought to convey by taking pride in the
proposed high spending of Rs 87,000
crore during its six years rule.
Instead, the Finance Minister should have
drawn a comparison on what NC
Government had achieved from Rs
45,000 crore spending in its six year rule
and what the coalition regime did with Rs
87,000 crore.
In case of more spending the growth rate
of Gross State Domestic Product (GSDP)
too should have gone up. However, this
was not the case. The Economic Survey
has showed that during 9th plan period,
State's growth rate was 11.98 but it went
down to 9.96 during 10th plan.
Agriculture and allied services accounted
for 5.92 per cent in 2001-02 when
National Conference was in power but
this again came down to 1.32 per cent
during 2004-05.
The overall economic scenario has been
following an unhealthily trend over all
these years. Take for example; the state's
imports are increasing. This is not a
healthy sign. The import of grains and
pulses was 86 lakh quintals in 1999-2000
which had gone upto 89 lakh quintals in
2005-06, an increase of 2.67 lakh
quintals. Similarly, import of vegetables
was 9.73 lakh quintals in 1999-2000
which was now 23 lakh quintals, a jump
of 13.84 lakh quintals. Fodder's import
has gone up from 4.79 lakh quintals to 11
lakh quintals. What does all this show?
While the imports are following an
upward trend, at the same time, our
agriculture production and exports have
I N F O C U S
THE MONEY MOVEMENT
gone down. For example, the export of
carpets, which was worth Rs 489 crores
during 1999-2000, had gone down to Rs
300 crore in 2005-06.
The survey conducted by country's
leading magazine India Today in its series
of “Best and Worst States” is an
independent analysis of the shift
economic condition of Jammu and
Kashmir since the coalition government
took over from National Conference. In
2002-03 when we had just demitted
office, the India Today survey placed
Jammu and Kashmir at 12th rank in terms
of agriculture production while the latest
survey places us at 16th rank. Continuing
with the present trend of ignoring the
agriculture sector we may soon be at 20th
rank. Similarly, in the primary health
sector, we were at number one during
2002-03 survey but the latest survey has
placed us at seventh rank. This is enough
for the government to understand as
what they have done to the state's
e c o n o m y. In infrastructure
development, the State's ranking has
gone down from 8th to 11th, in consumer
market from 6th to 8th and in law and
order from 13th to 15th.
There is deterioration in every sector.
Take the example of power sector.
despite the Government's claim of
reforms in power sector including
increase in tariff, installation of meters
etc, the power losses have gone up from
Rs 559 crore in 2002-03 to Rs 1281 crore
this year and are projected at Rs 1295
crore next year.
The Finance Minister has claimed an
exemplary performance of the coalition
Epilogue Ø
25 ×
January 2008
government. Before claiming credits, he
should refer to October 17, 2007
statement of his party patron and former
Chief Minister Mufti Mohammad Sayeed
wherein he said that his party was not
happy with performance of the coalition
government for its deviation from the
political and economic agenda. Does an
outsider need to tell them about the
scenario.
Then the Finance Minister claims that the
coalition government has brought
Jammu and Kashmir out of the fiscal
mess. I would rather say that they have
actually pushed Jammu and Kashmir into
a fiscal mess. Whether dishonoring of
Government cheques by Government
Departments is hallmark of credibility of
the Government"? As per my information
generated from credible sources, as on
January 14, (two days ahead of the
presentation of budget for 2008-09) bills
amounting to Rs 548 crore were pending
in the treasuries while Rs 165 crore worth
bills were pending in the Secretariat
treasury alone which including salary of
the employees. Overdrafts of the
Government with Jammu and Kashmir
Bank have gone up to an all time high at
Rs 2250 crore. Limits of both normal and
power ODs has been exhausted.
Employees were not getting their own
GPF. Ministry of Railways' money kept
with the Government for payment of
compensation to the people has also
been used. Cheques issued to earthquake
victims are getting bounced. How can the
Government, in such a situation, boast of
a zero deficit budget"?. Isn't it fudging of
figures and postponing of liabilities.
One must understand that the Over

Drafts are obtained from the Bank to
overcome temporary mismatch between
expenditure and flow of funds from
Centre. However, in the present case,
the Over Drafts have never gone down
from Rs 1800 crore. If the budget is really
Zero Deficit, as claimed by the Finance
Minister, on last day of the financial year,
the Over Drafts should have been Zero.
But in the present case this is more than
Rs 2200 Crores. Isn't it fudging of figures?
I remember, when we had demitted
office, the Over Draft was Rs 817 Crores.
Let me go back to the last year's budget
speech of the Finance Minister. He had
talked about Venture Capital Fund,
Employment Mission and Self Employment
Schemes. But nothing has been seen
Epilogue
because there is more to know
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EARLIER STORIES ?
Write to
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I N F O C U S
THE MONEY MOVEMENT
happened on the ground in this connection
and interestingly the current year's budget
speech of the Finance Minister is
completely silent on these issues.
They talk about the fiscal discipline
and bringing the state out of the mess.
Look at the figures and find out the
claims for yourself. On April 1, 2002,
Jammu and Kashmir had a total debt
burden of Rs 9800 crores and,
therefore, the per capita debt was at
Rs 9703. If we compute the figures as
expected to emerge on April 1, 2008,
the total debt burden would have
reached Rs 20,561 Crores and
accordingly the per capita debt would
be Rs 20,375. Is this the fiscal
discipline, the coalition government
Epilogue Ø
26 ×
January 2008
has been talking about.
If we take an overall look at all these
factors, one can understand that the
state is headed towards a fiscal disaster.
The situation which has assumed over
these years is the one where no political
would like to take the responsibility of
the Finance Minister and no bureaucrat
would accept the assignment of Finance
Secretary. I am surprised, under such a
gloomy scenario; the Finance Minister
describes the budget as 'Zero Deficit'. It is
a classical case of fudging of fudging of
figures.
ABDUL RAHIM RATHER is leader of
opposition National Conference. He was
Finance Minister of J&K till 2002.
June 2007
Looking Beyond “K”
May 2007
Peace Process
April 2007
PDP-Congress Coalition
Schism
March 2007
Baglihar
February 2007
The Promise Ahead
January 2007
Book of the year
 I N F O C U S
THE MONEY MOVEMENT

‘We Have Brought Turn

Around In Economy’

Tariq Hameed Karra

We must ask ourselves the basic question as to who has brought out the Economic Survey? It would appear from the
speech of Hon'ble Leader of Opposition that the opposition has prepared it! We must appreciate that it is our initiative. So
when you quote from the Economic Survey, please remember, we, the government, have given the figures. You have not
got them from some own private source.

My friends from the opposition need to
make up their mind, whether the
Economic Survey figures are right or
wrong. You can't run with the hares and
hunt with the hounds! When it suits you,
you quote Economic Survey; e.g on rate
of growth of SDP. And not take you don't
like it, you call it manipulated.
Let us take economic growth, for
example Economic Survey has showed
that during 9th plan period, State's
growth rate was 11.98 when went down
to 9.96 during 10th plan. Agriculture and
allied services accounted for 5.92 per
cent in 2001-02 while it came down to
1.32 per cent during 2004-05. You are
talking of nominal growth. The rate of
growth of 12 percent in 9th plan comprises
two components viz, real growth and
inflation. In the ninth plan, out of 12 per
cent, 7 per cent was inflation (please see
page 47 eco survey) and 5 per cent was
real growth; during 10 plan, GSDP was 10
percent of which only 4 pr cent was
inflation and 6 per cent was real growth.
The same is true for all sectors.
On rising imports, I have a couple of
points to make:-
Higher imports do not necessary mean
that they are not a healthy sign. We are a
consuming state. If we have the incomes,
and as I showed, per capita income has
increased, it is quite consistent and
expected that imports will rise.
Two things have to been seen:
Imports as a percentage of GSDP (import
intensity): This has not increased.
Total Exports as a proportion of imports:
This is increasing indicating that a larger
part of the imports are being financed
from exports and hence there is a
resource flow from the country to the
state. During NC rule there was a net
resource outflow from the state to the
outside.
Carpet exports have gone down, because
of global reasons and competition. Let
me remind that in the past tax exports
were taxed and concessions were given
to imports!! This is contrary to common
economic logic. It amounts to penalizing
your producers and subsidsing the
outside producers. Toll on horticulture is
a case in point.
Per Capita Income
While referring to the status of Per Capita
Income (PCI) during the period 1997-98
(Rs.7128) to the year 2002-03 (Rs.7675),
the income figures have been reckoned
at constant prices based as the old series
of 1993 -1994.
As regards the Per Capita Income
Rs.19899 for 2008-09, the following two
changes/aspects need to be understood:
Although per capita income has been
quoted at constant prices only, and that
too in relation to NSDP, the numbers have
been based on the new series of 1999 -
2000 series.
Economic Survey gives out a table where
Per Capita Income (PCI) for the year
2006-07 has mentioned as Rs.16779. I
have made an assumption 6.5% growth
for the current year and 7% growth for
the next year and, based on such
assumptions with regard to growth ,I
have quoted a figure of Rs.19899, for the
year 2008- 2009.
Therefore, Hon'ble Leader of Opposition
is absolutely correct in stating the per
capita income figures based on 1993-
1994 series. The problem has mainly
arisen because a comparison has been
made in my speech between two sets of
figures: one based on the old series and
other based on the new series and also
taking into account assumption of growth
for the current year and the next
financial year. I trust this should clarify
matters.
To also put the matter further in the
correct perspective, Page 10 of the
Statistical supplement of Economic Survey:
states that Per capita Income has
increased by 4 per cent in real terms over te
10th plan and by 0.31 per cent in 2000-01 and
declined in 2001-02!

Epilogue Ø
27 ×
January 2008

Also, at page 6 of the Statistical survey of
the Economic Survey. The Index of per
capita Income has increased from 100 in
1999-000 to 104 in 2002-2003. Four per
cent increase over a five year period upto
2002-03. It has increased from 104 then
to 126 in 2005-2006. That is a 22 per cent
increase. That is what is in the budget.
Yes, we have projected it for
the year-end. But then every
single number is the budget is
a projection.
III. India Today Survey
Any criticism, based on this
survey, is subject to three
major limitation:-
This is a survey based on
sample method of survey. This
can not be a substitute for a
Government's report.
Data generation and
reporting has been a problem
in J&K. It is not clear as to
what set of data/ figures this
survey is based upon.
It cannot be pre-supposed
that other states will not grow
or have not done better. Any
slippage in position does not
necessarily mean hat our
performance has gone down.
The performance of other
states may have improved.
As the Hon'ble Chief Minister
spoke for three hours in the house giving
you graphic details on every single
developmental work that we have done.
So where is the need to repeat it.
SPECIFIC BUDGET RELATED ISSUES
I. Finance Accounts
I N F O C U S
THE MONEY MOVEMENT
Appropriation Accounts and Finance
Accounts for the State of J&K for the year
2006-07 were first received in the
Finance Department on 15.11.2007 but
were sent back to the Accountant
General, J&K for re-checking and
correcting the same as some
discrepancies and wrong figures were
discovered in the Draft Accounts;
particularly relating to “Power
Receipts”. The discrepancies arose on
account of the two overdraft accounts
and the processes relating to inter-OD
transfers.
After making necessary corrections, the
Finance Accounts were processed by the
Finance Department for approval of the
Epilogue Ø
28 ×
January 2008
Governor and his consent was received
on January 14, 2008. The same have now
been submitted to the Hon'ble Chairman
Legislative Council / Hon'ble Speaker
Legislative Assembly on 22.01.2008 for
laying in the respective Houses.
Comptroller and Auditor General of
India's Report for the State of
J&K for the year 2006-07 also
stands received in the
Finance Department on
07.01.2008 and after passing
through various stages has
been submitted to the
Presiding Officers of both the
House of Legislature on
22.01.2008 for laying in the
House as prescribed under
rules.
There is no question of any
deliberate attempts to delay
the presentation of the
Reports.
II. FRBM
Passed in August 2006 and
operative from 1.4.2007.
Draft rules since prepared
and legally vetted by Law
Department on December 7,
2007.
Rules formally approved and
sent for notification in Govt.
Gazette on 22.1.2008.
Govt. of India have suggested that the
State Act should be brought in line with
the national act with regard to the cut off
date for :
Eliminating revenue deficit by
31.3.2010.

Our Act envisages reduction of fiscal
deficit to 3% GSDP by 31.3.2010. Central
Government has suggested that the cut
off date should be 31.3.2009 to make J&K
also eligible for incentives along other
states.
An amendment bill has been drafted for
submission to Cabinet for approval.
The issue highlighted by Hon'ble Leader
of Opposition on presentation of
statements alongwith the Budget is
absolutely valid. But, in the absence of
Rules and the prescribed formats, the
laid down requirement could not be met.
As soon as FRBM rules are notified, all
requisite information on prescribed
formats will be placed before this House.
It is also assured that after the required
statements are prepared and presented
before this House; an independent
agency will be engaged for evaluation
and authentication of the performance
as reflected by the statements.
III. Debt Position
Hon'ble Leader of Opposition had stated
that state had a debt of Rs 9,800 crore on
1/4/2002 which comes out at Rs 9,703
crore per capita while as on 1/4/2008,
the debt will touch Rs 20,561 crore (Rs
20,375) per person.
The Hon'ble House needs to appreciate a
few aspects:
I am paying past dues. As I said, Rs 1,008
crore was unpaid. NSSF Rs 683 crore was
unpaid, which I propose to pay. Baglihar
bonds, I have paid.
Debt/SDP ratio
You have to compare debt with income.
Suppose, I have a debt of Rs 1,000 and
I N F O C U S
THE MONEY MOVEMENT
you have a debt of Rs.200. Am I more
indebted than you are? Not necessarily.
One has to see the income also.
If my income is Rs 10,000 and yours is Rs
1,000, then I am less indebted than you
even though my absolute debt is higher.
Similarly, if my income has gone up 20 per
cent and debt has increased by 10 per
cent, I am not worse off. Nor am I in a
debt trap. Please, do more sophisticated
economic analysis.
A large part of this debt is “debt in
perpetuity”. This is related to pension
funds. This will rise as and when
government employment rises. Hence
pensions also rise.
IV. Overdraft
At the outset, I must say that, as a part
of the last year's Budget Speech, the
Government took the decision to share
the details of overdraft of the State
Government with J&K Bank. In this
context para No. 23 to 25 of my Speech
may be referred to wherein it had been
stated that, over the years the
overdraft with JK Bank has shown
significant increase. Power deficit has
been one of the major reasons for this.
The overdraft stood at Rs. 2,190 Crore –
Rs. 1,942 crore as normal overdraft and
Rs. 248 Crore as power account
overdraft on the date of presentation of
Budget last year.
Overdraft has to be seen in relation to
total expenditure. As a percentage of
total expenditure, the overdraft
amounted to 15.33 % in 1996-97. The
percentage worsened to 18.37% in 1997-
98. On March, 31, 2007, the ratio stood
at 15.44%. The overdraft at the end of
the third quarter i.e. on December 31,
2007 was Rs 2,110 crore i.e. below the
March 2007 level. The Government will
Epilogue Ø
29 ×
January 2008
make every effort to bring down the
overdraft in the first instance to 14.5% of
expenditure.
A very large part of the overdraft has
assumed the character of a “structural
deficit”. We need to break the current
level of overdraft into two components-
a long term liability and a short term
“ways and means” facility. We could
possibly look at meeting the first
component through a combination of
grant from Central Government, issue
of bonds by J&K Government and raising
of Additional Market borrowings. In any
case, therefore, the most practical way
and perhaps the only way to go forward
is to replace the structural part of the
overdraft by a long-term debt.
V. Position in Treasuries
Hon'ble Leader of Opposition referred to
the position on January 14, 2008. Let me
give the specific details.
The overdraft position as on 14.01.2008
is as under :-
OD-I = (-) 2092.57 crore
OD-II = (-) 195.64 crore
= 2288.21 crore
Total Pendency as on 14.01.2008 in all
the Treasuries of the state was Rs.551.66
crore. The amount includes amount
payable to FCI Rs.85.00 crore.
Total pendency in Civil Secretariat
Treasury as on 14.01.2008 was Rs.129.51
crore and not Rs 165 crore.
Total pendency under Salary, Pension and
wages as on 14.01.2008 was Rs 6.06
crore. The demand was cleared on the
same day.
I may add that all outstanding bills across
the treasuries in the state relating to
salary/pension /Wages/ CDF/TE-OE-

POL/Drug & Diet/Cash Assistance to
Migrants stand cleared upto 19.01.2008.
Gratuity Commutation payments stand
cleared upto 20.12.2007.
G.P.Fund payments have been made upto
18.12.2007.
Contractors/Firms, Material/ Supplies
and Self- help-Group payments stand
cleared upto 19.12.2007.
As regards pendency as on 22.01.2008
under Railway Land compensation, the
same was Rs. 8.19 crore only. Bills
received during 2007-08 amounted to Rs
20.07 crore. Bills aggregating Rs 11.88
crore stand cleared.
VI. Expenditure of Rs 45,000 crore Vs
Rs 87,000 crore
The simple point I have made is that in
the past money was spent on salaries and
I have used it for capital expenditure.
The most telling achievement that
expenditure has been doubled and capex
increased five fold is the real point. We
have spent on developmental works.
VII. Transfers from Centre
In Revised Estimates 2006-07 the total
Receipts were estimated at Rs 14163
crore and the Actual Receipts were
Rs.14080 crore
The variation between Total Receipts,
Revised Estimates and Actuals is 0.1 %
Total Revised Expenditure Estimates for
2006-07 were Rs 14163 crore and the
Actual Expenditure is Rs.14,627 crore.
The variation between RE and Actual so
far as expenditure is concerned is 3.3 %
I N F O C U S
THE MONEY MOVEMENT
TAX RELATED ISSUES
I. Placement of Raw Tobacco & Bidis in
Zero percent rate category under VAT
The Empowered Committee of State
Finance Ministers took the decision for
placement of raw tobacco and bid is in
zero percent rate category.
It is a decision not relating to J&K along.
Most of the member states have already
adopted the decision of the Empowered
Committee
The trading fraternity during the pre-
budget consultations also demanded
placement of the said items in zero
percent VAT category for purposes of
uniformity and to check diversion of
trade.
The Government is conscious about the
health hazards of these demerits goods
and believes that it requires educating
the consumers about the ill effects of
these and other like goods.
II. Exemption of VAT on CSD Goods: -
The VAT regime does not recognize any
exemptions.
Concessions in other forms are available
to the defence personnel both serving as
well as ex-servicemen in the state.
Excise duty concession on liquor sold
through CSD is available to the personnel
of the army forces.
Total collection of Excise Duty on liquor
throughout the country is Rs 28,000
crore.
Excise duty concession in the country on
liquor sold through CSD is Rs.400 crore.
Epilogue Ø
30 ×
January 2008
The State Government has been
providing concession in the form of
excise duty on liquor sold through CSD to
the tune of Rs.60 crore
This concession accounts for 15% of the
total concessions provided throughout
the country.
The Government is seized of the concern
of ex-servicemen of the state. A Cabinet
Sub-Committee has been constituted to
work out a mechanism for providing a
relief package for them.
III. Placement of rice, paddy, atta,
maida, Suji etc in zero rate category
It was solely with the intention of
providing relief to the common man that
the Government went ahead with the
continuation of placement of these
commodities in zero percent VAT
category for one more year. Other states
are yet to do so.
DEVELOPMENT ISSUES
I. Pre-ponement of Budget
The basic idea of pre-ponement of
budget was to optimally utilize the lean
winter months for seeking legislative
approval of the budgetary proposals
much ahead of the norm so as to
maximize the limited working season for
implementing and monitoring plan
schemes.
Accordingly, the meeting between
Hon'ble Chief Minister and Deputy
Chairman, Planning Commission for
finalizing the Annual Plan 2007-08 was
held on 13th December 2006.
The approved copy of the “Scheme of
Financing (SoF)” was however, received
only on 9th of April 2007. In the absence
of SoF, neither the District Plan nor the

State Plan could be finalized.
The delay in the receipt of SoF tended to
neutralize the advantage of early
finalization of Annual Plan 2007-08
outlays. On 5th of April 2007, Planning
and Development Department
authorized all the Departments and
District Development Commissioners to
incur expenditure on on-going schemes
upto 25% of last year's approved plan
outlays both under Revenue and Capital
components during the current financial
year.
The approval of the Planning Commission
for the Scheme of Financing for Annual
Plan 2007-08 was received in the
Planning and Development Department
on the 9th April, 2007. In order to ensure
that developmental works do not suffer,
50% of plan outlay was authorized to the
Departments on June 27, 2007 and 100%
plan outlay was authorized on July 31,
2007.
In so far as the District Sector is
concerned, based on the sectoral outlays
for district plan obtained from the Heads
of Departments, district-wise plan
outlays were communicated to the
District Development Commissioners on
09-05-2007, and while doing so,
authorization was also given to incur
expenditure upto 50% of current year's
approved plan outlays on on-going
schemes.
The district plan outlays could not be
taken as final at that stage because of
the then on-going exercise for redrawing
the boundaries of the districts. The
Re v e n u e D e p a r t m e n t i s s u e d a
Notification regarding the boundaries of
the districts only on May 22, 2007 under
SRO 185. Accordingly, sectoral outlays for
districts were again obtained from the
Heads of Departments and final outlays
communicated to the districts on June
15, 2007.
I N F O C U S
THE MONEY MOVEMENT
In doing so, all the District Development
Commissioners were also advised to get
their plans approved by the District
Development Boards, which met during
the month of June, 2007 and first week of
July, 2007.
II. Current year's expenditure
If we compare the expenditure of the
current year with the last year ending
November, the %age of expenditure
under Capital Component for the State as
a whole for 2006-07 was 30.71%, and for
the current year it is 30.47%. Similarly,
under the District Plan, the expenditure
under the Capital Component during last
year ending November was about 32.72%
and during the current year it is about
28.19%. The main reasons for the low
expenditure are:
An amount of Rs.40.00 crore was
provided under the approved plan outlay
for creation of new districts has
remained under-utilised, as adequate
staff has not been posted yet. Similarly,
an outlay of Rs.45 crore was provided for
establishment of infrastructure in the
new districts. As it took some time to
finalise the designs etc, the expenditure
is only now picking up.
One of the key reasons for low
expenditure is the fact that the new
districts continue to be disadvantaged by
way of non-availability of full
complement of staff, which is hampering
developmental activities.
Against the tied allocation of Rs.355
crore under Externally Aided Projects
(EAP), only Rs.79.60 crore has been lifted
so far.
Against the loan of Rs.635 crore, only an
expenditure of Rs.73.49 crore has been
made ending November,2007. It took
some time in finalizing the priority of
Epilogue Ø
31 ×
January 2008
NABARD projects and finally the sanction
has been received as such expenditure
will now pick up. Besides, HUDCO loan of
Rs.100 crore has not been released due to
default on repayment. Similarly, the LIC
loan (Power Sector: 95 crore, PHE: 20
crore) loan has not been lifted so far due
to some outstanding.
Power Sector is the major consumer of
plan funds, both under the State Plan and
the PMRP etc. The utilization of funds,
however, in this sector has been low
under the schemes like APDRP,
Strengthening of T&D etc.
In actual terms, the work done on the
ground is much higher than the
expenditure incurred. It always picks up
during the last months of a financial year.
III. Shortfall in Receipts in 2006-07
Transfers from Centre were estimated at
Rs.7,985 crore and the Actual Receipts
were Rs. 6,977 Crore i.e. a short fall of
Rs.1,008 Crore. Short fall was in the
following items:-
Rs. 700 crore were estimated under CSS
but actual receipts were Rs. 539 crore -
shortfall Rs. 161 crore.
Power Reform grant of Rs. 300 crore was
not released - short fall Rs.300 crore.
Amount for EAPs not claimed as no
scheme was put forth. Amounts for EAPs
are included in Plans by design and
usually remain unclaimed - shortfall
Rs.298 crore.
Security Related Expenditure was
estimated as Rs.325 Crore but actual
expenditure was less and amount
reimbursed was Rs.163 Crore. Hence less
reimbursement - shortfall Rs.171 crore.
As will be seen from above the total short
 I N F O C U S
THE MONEY MOVEMENT

fall of Rs. 931 crore is on account of such
schemes for which the amounts are
either not spent till money is received or
in respect of schemes for which GoI is
committed to release money and is
claimed subsequently
IV. District Planning
As neither the District Plan outlays nor
the State Sector outlays could be
finalized in the absence of the Scheme of
Financing (SoF), it was considered
expedient to authorize the District
Development Commissioners to utilize
funds upto the extent of 25% of last
year's approved outlays for ongoing
schemes. This was done vide Planning
and Development Department's letter
No.DP-16/2007-08/PS-901 dated:
05.04.2007.
The SoF was received from the Planning
Commission only on the 9th April,2007.
Immediately on receipt thereof, an
exercise was initiated in consultation
with the Administrative Secretaries and
the Heads of Department to work out the
outlays for the District Plan and the State
Sector Schemes. In respect of the district
outlays, this exercise was initially carried
out on the basis of the recommendations
of the Bloeria Committee, which was not
final at that stage. It was, however,
considered expedient that while
acceptance of the report of the said
Committee may take some time, the
planning process at the District level
should be kick started. Following this
exercise, District Plan outlays were
conveyed vide this department's letter
No. DP-16/207-08/PS-901 dated:
09.05.2007. While doing so, it was
stipulated that except in the case of
Kupwara, Kargil, Leh, Poonch and Rajouri
Districts (not affected by ongoing
exercise for re-organisation of district
boundaries) the outlays may be treated
as provisional as these may undergo
changes after finalising boundaries of the
other districts. Through this
communication, the District
Development Commissioners were also
authorized to utilize funds upto 50% of
the outlays.
The final notification regarding the
boundaries of the Districts was issued by
the Revenue Department vide SRO 185
dated the 22nd May, 2007. In order to
align the District Plan outlays with the
district boundaries notified by the
Revenue Department, it was considered
expedient to have further consultations
with the Heads of Department. Finally,
based on these consultations, District
Plan outlays were communicated vide
this department's letter No. DP-16/2007-
08/PS-901 dated: 15.06.2007. District
Development Boards met in the months
of June and July (First week) to approve
their respective District Plans.
In due course, authorization was also
given to the District Development
Commissioners to the utilization of 100%
of outlays under District Plan, 2007-08
vide this department's letter No. DP-
16/207-08/PS-901 dated: 08.08.2007.
The total expenditure in case of districts
upto November, 2007 is 32.67% of which
46.28% is the Revenue and 28.19% is the
Capital. Statement showing district-
wise outlays of Revenue and Capital and
the % expenditure ending November 2007
is given in the table annexed at 'A'.
It is seen that in case of older districts,
expenditure of Capital component is
about 31% and in case of new districts the
%age expenditure of Capital component
is 24.41%. This shows that the
expenditure of newly created districts is
comparatively less as compared to the
old districts. This is because of the
following reasons:
In case of new districts Rs.5.00 crore
each was earmarked for infrastructural
development for which projects had to
be prepared/finalized and construction
agencies also had to be nominated.
Full component of Staff not positioned
in the newly created districts. This has
also resulted in under-utilization of an
amount of Rs.40.00 crore earmarked as
Re v e n u e C o m p o n e n t , b e s i d e s
hampering developmental activities.
The projects for infrastructure
development and agencies have now
been approved by the Committee
constituted for the purpose and most of
the staff has also been sanctioned.
Keeping these points in view, the
expenditure is expected to pick up.
V. Agriculture growth
The main reason is the reduction in the
allocation of IWDP project. While as in
2001-02, the allocation of IWDP was
Rs.56.66 crore which represented about
3% of total plan allocation of Rs.2,050
crore, the allocation of this project in
2006-07 was Rs.51.42 crore which
represents about 1.47% of the total plan
outlay of Rs.3,500 crore excluding PMRP.
If allocation on account of IWDP is netted
out, the relative %age capital outlays as a
share of total capital outlays for
Agriculture & Allied Sector for 2001-02
and 2006-07 work out to 4.2% and 3.4%.
Moreover, in respect of Agriculture
Sector alone , the comparative
percentage under Capital Component are
3.06% (2001-02) and 2.44 % (2006-07). An
amount of Rs.90.77 crore was also
available under the Centrally Sponsored
Schemes (which include Central Share of
Rs.84.13 crore of Central Share) during
2006-07.
VI. Industrial production
In respect of Handicrafts, the production
has risen from Rs 821 crore during the
year 2003-04 to Rs 950 crore during the

Epilogue Ø
32 ×
January 2008

year 2006-07. Out of this production, the
exports have risen from Rs 595 crore
during the year 2003-04 to Rs 785 crore
during the year 2006-07. Carpet, Woolen
shawls and paper machie have been the
main items in the handicrafts sector
In respect of SSI, the economic survey
says that there is an annual average
growth of 6.03% by number of enterprises
and 6.82% in employment during the
period 1998-2005.
The production by the existing SSI units
has been normal and in most of the cases
flourishing, an increase of 29% in the
investment haws been registered in this
sector in Kashmir Division during the past
year along (2006- 07), with setting up of
833 industrial units with an investment of
Rs 36.07 crore. However, a decline of
around 65% in investment has been
registered in Jammu Division during that
year. In Jammu division, against an
investment of Rs 100 crore in the year
2005-06, only an investment of Rs 65.74
crore was registered during the year
2006-07, only an investment of Rs 65.74
crore was registered during the year
2006-07 due to non-availability of land in
the industrial estates. Nevertheless, this
year the trend has been on reverse as
upto ending November, 2007, 216 SSI
units have been established with an
investment of Rs 81.81 crore in Jammu
division.
In large and medium sector, again the
existing industrial units have been
flourishing as no sickness/ closure has
been reported in this sector during the
past year, which could denote decreased
production and resultant decline in
export. The investment mobilization
during 2006-07 is almost equivalent tot
aht mobilized in 2005-06. The
investment in large and medium sector
has been Rs 869 crore during the year
2004-05, Rs 674 crore during the year
2005-06 and Rs 673 crore during the year
I N F O C U S
THE MONEY MOVEMENT
2006-07 respectively.
OTHER ISSUES
Power Reform Grant is not
something different but
forms part of negative BCR
in our Resources assessment
statement which is
considered by Planning
Commission while fixing
our Annual Plan. In view of
our huge negative BCR it
was considered to address
our power sector separately
as it was the main issue
responsible for huge deficit.
State Government had to
enter into an agreement for
enforcing power reforms in
order to claim the grant.
This necessitated taking of
some hard decisions so as to
ensure reduction in power
deficit in three years when
power reform grant shall
cease to be available.
I. Power Deficit
Power Reform Grant is not something
different but forms part of negative BCR
in our Resources assessment statement
which is considered by Planning
Commission while fixing our Annual Plan.
In view of our huge negative BCR it was
Epilogue Ø
33 ×
January 2008
considered to address our power sector
separately as it was the main issue
responsible for huge deficit. State
Government had to enter into an
agreement for enforcing power reforms
in order to claim the grant. This
necessitated taking of some hard
decisions so as to ensure reduction in
power deficit in three years when power
reform grant shall cease to be available.
People in the State were suffering due to
increased power cut. Power cuts were
imposed for 9 hours in a day and even
more in some areas.
The reduction in power cut has meant
more power imports hence more
expenditure. This should have been
appreciated that we have been able to
reduce the sufferings of common people.
Some facts and figures may also be
quoted in respect of Power Purchase:-
Rs. In crore
Year Budget Actual
Provision purchases
1999-2000 605 669
2000-01 650 814
2001-02 670 954
2002-03 670 661 up to
Sept., 2002
An amount of Rs. 423 crore were
outstanding on account of power
purchase ending Sept., 2002 despite
having exhausted the Budget provision of
the year. It may also be indicated that an
outstanding of Rs. 1204.66 crore were
converted into Bonds in the year 2002
II. Public Sector Undertakings
The financial position of the PSEs is
precariously poised. As of 31.03.2005, as
against a total paid-up capital of Rs. 206
crore, the accumulated losses of the
Corporation aggregated to Rs. 1736

crore. The liabilities on account of
statutory dues alone stand at RS. 318
crore. The PSEs employ manpower force
of around 22500 workers; half of which
appears to be surplus.
During the current financial year, an
amount of Rs. 40 crore is available with
Government to provide residuary support
to ailing PSEs in their endeavor of
offering GHS/VRS to their employees,
which is both voluntary and compulsive
in nature. In fact, PSEs in their revival
attempt will not only have to implement
GHS/VRS but also take some other
stringent measures simultaneously. As for
instance:
PSEs to identify assets free from
encumbrances and make those assets
fungible to meet the cost of GHS/VRS, to
pay off statutory liabilities and arrears of
salary/wages and also generate surplus
for working capital requirements etc.
Not to release any further COLA
installments until the statutory liabilities
and loans are fully discharged.
Conceive future business outlook for a
long term sustainability on their own and
chalk out business revival plan for the
coming five years which will include
replacement of obsolete machinery.
Close down units/activities which are
beyond any scope of revival and
restructure, both professionally and
technically, the potentially viable units.
In other words, budgetary subventions
could come only as last resort for such
PSEs as do not possess disposable assets,
or, to fill the gap between the cost of
implementing GHS/VRS and the funds
realized from sale/exchange of assets in
the case of others.
Kundal Committee while giving model
I N F O C U S
THE MONEY MOVEMENT
GHS/VRS, have also identified 2225
workers of 5 ailing PSEs who could be
The financial position of the
PSEs is precariously poised.
As of 31.03.2005, as
against a total paid-up
capital of Rs. 206 crore, the
accumulated losses of the
Corporation aggregated to
Rs. 1736 crore. The
liabilities on account of
statutory dues alone stand at
RS. 318 crore. The PSEs
employ manpower force of
around 22500 workers; half
of which appears to be
surplus.
considered for exit in the first phase.
Likewise, an indicative list of disposable
assets of ailing PSEs has also been given
which holds a promise of potential of
generating about Rs. 200 crore. The
Committee have further identified 253
units of various PSEs that need to be
closed down.
Since implementation of VRS/GHS is a
sensitive issue, it may take some time for
implementation. Some Corporations
have already initiated action in this
direction and proposals are under
examination at various stages.
The position is proposed to be reviewed
by Chief Secretary towards the end of
January, 2008.
TARIQ HAMEED KARRA is Minister for
Finance, Jammu and Kashmir
Epilogue Ø
34 ×
January 2008
‘J&K Is Headed For
A Severe Debt Trap’
Interview with
Mohammad Shafi Uri,
former Finance Minister
The coalition government says that
the National Conference regime (1996
to 2002) pushed Jammu and Kashmir
into a financial mess which they
claimed to have corrected in next five
years. Can you recall your assessment
of the economic scenario in 1996
when you took over as Finance
Minister?
Situation in 1996, when we took over
after six years of Governor's rule was
quite disappointing. There was no tax
compliance. People in Kashmir did not
pay taxes at all and as an effect the
collections in Jammu region too were
negligible. Same was the case with non-
tax revenue between 1990 and 1997.
The Security Related Expenditure, a
huge burden on the state exchequer,
was not being fully reimbursed by the
central government. I remember, when
we took over, besides an ailing economy
the immediate burden before us was
the implementation of the
recommendations of fifth pay
commission. We had to clear arrears
worth Rs 800 Crores. The debt burden
was above Rs 1400 Crores.
Infrastructure was gutted. The power
tariff collection was negligible and
Transmission and Distribution Losses
were highest. Another serious problem
before us was alarming problem of
unemployment which had to be
addressed at priority to save our youth
from going astray.
Was there an easy way out?
No, there was not. Since the issues were

too precarious and list of problems too
large, therefore, we generated an order
of priority to address the issues. We
pleaded before the central government
for reimbursement of the Security
Related Expenditure which was running
around some Rs 700 Crores. We also
took up with them the reconsideration
of special category status to address the
serious problem of grant and assistance
ratio. The 90:10 ratio had been
applicable to the North Eastern States
ever since the inception of the scheme
in 1969-70 but there was a
discrimination in case of Jammu and
Kashmir.
We wanted this assistance pattern with
retrospective effect which could have
written off our Rs 1400 Crore debt
burden. We also gave a memo to the
central government for resources to
address the unemployment problem.
The case of compensation on account of
Indus Water Treaty was also taken by
with New Delhi as our waters are used
for the benefit of entire country but the
discriminatory clauses against us are
resulting into an annual loss of Rs 6000
Crores to Jammu and Kashmir.
Was Center forthcoming in helping
you out in that situation?
Unfortunately the Central Government
did not help us the way we had wanted
and the way we rightfully deserved. We
did struggle but finally we had to spade
work at home instead of wanting for the
desired response from the Center.
So, what immediate measures did you
propose at that time as Finance
Ministers?
Perhaps I was the first and last Finance
Minister who had to take some harsh
I N F O C U S
THE MONEY MOVEMENT
measures. Besides putting in place a
regime of austerity measures, taking up
strict fiscal management initiatives, I
had to impose some tough taxes on a
variety of sectors. I remember the
opposition saying that “only air for
breathing has been spared in the new
tax regime”.
In our 1997 budget, we proposed a
general amnesty for the tax defaulters
and the taxes were rationalized under
different slabs. Power tariff was revised
and an effective campaign was
launched for tariff collection in order to
recover, at least, the cost of
maintenance. Under a slew of measures
to put the derailed system in order,
interim recommendations (Madhav)
Godbole Committee on Financial
Reforms were implemented. With the
passage of time some semblance or
order returned to the system, tax
collection improved and thinks started
looking up.
In 1998-99 a new industrial policy was
out in place with a slew of incentives to
revive the sick units and attract new
investment. The policy showed
tremendous results. When I had left as
Finance Minister (and took over as
Education Minister) the tax collection
had reached three times higher and we
had already started gearing up for the
VAT regime. My successor (Abdul Rahim
Rather) further improved the system.
Muzaffar Hussain Baig took over as the
first Finance Minister of coalition
government in November 2002. He,
and also the Economic Advisor to the
Government Dr Haseeb Drabu, claims
that Jammu and Kashmir was headed
towards a serious fiscal crisis when
they had taken over. They say, the
Epilogue Ø
35 ×
January 2008
problem of managing finances was so
critical that it was not possible for any
Finance Minister to present a regular
budget and therefore a Vote on
Account had to be sought for first
three months. How to you react to
this?
The Vote on Account was a ill conceived
terminology and highly politically
action of the government to show to the
people that things were not right. In
fact every thing was in perfect order
and there was no need to seen a Vote on
Account.
I admit there was some debt burden at
that time but that was due to Center's
default at the commitment. To
expenditure in limits, the Center had to
release funds which were not released
in time. There was absolutely no need
of seeking Vote on Account.
The Finance Minister Tariq Hameed
Karra has recently presented the last
budget of the coalition government.
You were the one who had presented
the first budget of National
Conference regime (in 1997). How do
you look at the scenario now?
I must say with authority that if
corrective measures are not
immediately taken up the state is
headed for a severe debt trap. This is
my basic assessment of the situation. I
often laugh at the Zero Deficit
terminology. Figures have been faked
and statistics fudged to portray a
colourful picture of finances. The Zero
Deficit term looses its very meaning
when you see that government does not
have enough of money to pay salaries to
its employees.