Dialogue  July - September, 2002 , Volume 4  No. 1

Fiscal Mismanagement in Nagaland
Huska Sumi

With the inauguration of the statehood on December 1,1963, the newly created State of Nagaland started functioning with the total budgetary provisions of Rs. 3.88 crore inclusive of plan and non-plan. The budgetary provisions kept on increasing gradually over the years confining to two digital figures. It took 15 years to reach the figure of Rs. 98.02 crores in 1977-78.

With limited budgetary provisions, a lot of development activities buzzed in the entire State of Nagaland till the appearance of a national political party. The implementing officers utilized funds judiciously and honestly. Every financial year, there used to be savings and the concerned officers responsible for savings used to get reprimanded. Over-drafts, liabilities and fiscal deficits were unknown.

The spectacular entry of the Congress I party into the political arena of Nagaland in 1982 was the turning point in the history of fiscal mismanagements in much as it became the regular feature over the years. Mrs. Indira Gandhi launched her party election campaigns announcing that she would build a ‘New Nagaland’ as a Christmas gift to the people of Nagaland which swept off the feet of the electorate. In keeping with her declaration, the tempo of enhancing financial allocations picked up momentum as the total budgetary provisions of Rs. 148.75 crore in 19981-82, it was enhanced to Rs. 222.58 crore in 1982-83, an increase of Rs. 73.83 crore. However, things were easier said than done. With the emergence of ‘New Nagaland’, entered the corrupt culture. Within a spell of one month of the installation of the Congress I Ministry, the first major scam in Nagaland surfaced in the wake of "Medical scandal of 1983", involving over Rs.10 crore. Inresponse to the public demand, a big public Rally was held in the local ground of Kohima. The angry public decided to submit it a Memorandum to the Prime Minister of India with a request for CBI probe into the shady deals. Accordingly, a well-documented memorandum was submitted to the GOI but in vain which opened up the flood gate corruption. The result was fatal.

The Congress I Ministers, MLAs and a few party functionaries vied with one another as to who could amass wealth more by grabbing whatever they could lay their hands on. In short, it became free for all. In the words of Mr. S.C. Jamir, the Chief Minister of Nagaland who also holds the Finance portfolio "Corruptions in public offices like a cancer have eaten into vitals of the Naga Society". Indeed, rampant corruption has been reduced to a system. Corruption in Nagaland ceased to be a disqualification rather than a sign of competency. The popular joke in Nagaland is, "Works are executed in heaven, but payments are made on earth". The LOC system introduced to check financial mismanagements had been converted into money-making and money-sharing system. The corrupt activities continued unabated, and climaxed in the emergence of the "State Lottery Scam" involving over Rs. 38,297.32 crore (from 1993 to 1997 only) which had been branded as the biggest scam in the post Indian Independence by the media people. Alarmed by the magnitude of the scam, Movement for National Awareness (MNA) filed Public Interest Litigation (PIL) in New Delhi High Court. Though the High Court had issued directives to the Centre/State and CBI to submit a final status report on the action taken by them in the matter of Nagaland State Lottery scam to be files by October 11, 2001, necessary action seemed to have not taken on the ground, Mr. S.C. Jamir is the only Indian nationalist to be trusted in Nagaland.

Judged from the budgetary figures, with the entry of the Congress I party in Nagaland in 1982, the State’s revenue expenditures have increased by geometrical progression whereas the developmental activities have decreased with diminishing returns. The total budgetary provisions to the tune of Rs. 148.75 crore in 1982, today, the total budgetary provisions have reached Rs. 2461.90 crore, an increase of Rs. 2313,15 crore. Ironically, the developmental activities decreased which came to a grinding halt in 1993. The pertinent question is, where have all the money gone? In a nut shell, the Government of India was the provider and the State government had performed disappearing acts of a magician. On top of it, the fiscal deficit figures kept on increasing. From the balance budget in 1982, it now stands at Rs. 218 crore and the State’s debt burden from a very negligible figure, it now stands at Rs. 2104 crore.

With a view to identify what ails the fiscal management in Nagaland, the Government of Nagaland set up a Commission on work charged and casual employees. Some of the relevant portions of its findings are reproduced below:-

Quote "The entire plan fund or CSS releases are unable to cover the expenditure on salary, then what happens to programme itself?". The answer is simple. The Congress I party Ministers and MLAs normally impressed upon their Private Secretaries to prepare a list of fictitious schemes and projects as already implemented and they would draw the amounts against such schemes and projects. In other words, funds made available for alleviating the welfare of the rural poor and the downtrodden never percolate to the grass root. Thus in papers there will be a lengthy list of achievements without corresponding activities on the ground. This fact was testified by the former Congress I party Chief Mr. N. Theyo on July 25 2002 in a meeting of concerned senior Naga citizens at Dimapur.

Quote: "to try to drive home the need for reforms… in the way we have been doing things…to point out some examples of our bigger projects:-

Quote: "Borrowing in itself has nothing wrong with it. In fact, loans taken are precious resources meant to be invested in productive and revenue generating programme and project. Going by the debt burden figure… investments made from this huge amount should be generating by now very substantial additional revenue for the State. The problem

with us appears to be that every time a loan is taken it becomes an added burden of the State Exchequer". The very fact, the internal revenue resources to the tune of Rs. 100 crore only out of Rs, 2461.90 crore of the total budgetary provisions for the year 2002-03, reflected that no justification for indulging in such heavy borrowings.

According to the CAG report, there are 25,000 ghost employees draining substantial expenditure on salary component. The pertinent question is, how this has happened? Considering the disproportionate strength of the Government servants, the Congress I Government in the State has put a blanket ban on creation of posts since 1989. Here, it is to be noted that way back in 1982, the total strength of Government servants was about 62, 000 only. Today, the strength of Government servants has crossed 1,17,000 despite the blanket ban on the creation of posts. Ironically, unemployment problem has been gaining momentum every passing day with 40,000 enrolled in the live register.

The Government of Nagaland has set up a Special investigation committee which has brought to light that 1064 pensioners are bogus as they had never served in the Government service in their life time, thereby, draining substantial amount of money from the State Exchequer. Also, crores of rupees had been involved in fraudulent draws.

Believe it or not, a certain Minister had drawn an amount of Rs. 40 lakhs from his own department against construction of a building without executing anything on the ground as already done. Later on, it was brought to the notice of the concerned authority. The concerned Minister defended himself by saying it was only borrowed and paid back to the Department. The Chief Minister endorsed the version of the Minister. In an earlier case, the Chief Minister as the Finance minister sanctioned Rs. 11,50,000 as against the proposal of the technical officer to sanction Rs. 1,82,000 for the repairs of a certain departmental office in Dimapur. If fiscal management is carried out in this fashion can we say it is in keeping with the principle of sound fiscal management?

In view of the State of Nagaland having been declared as the first state "to qualify for release of the bonus incentives under the MOU for achieving the Fiscal Reforms Target …commended on its fiscal management by the Planning Commission and the Reserve bank of India…" it has become necessary to review the performance of Mr. S.C. Jamir as the Finance Minister for the last nine years or so.

When Mr. S.C. Jamir took over the charge of the finance portfolio

in December 1994 with assurance to provide a better fiscal management, he presented his first budget for the year 1995-96, the opening deficit figure was Rs. 8.14 crore. Thereafter, he has presented seven consecutive budgets in which the fiscal health of the state deteriorated from bad to worse. The fiscal figures kept on going up year after year and today, the deficit figure stands at Rs. 218 crore, an increase of Rs. 209.86 crore. On the other hand, the State’s revenue expenditure has increased by manifolds from Rs. 584 crore in 1994-95 to Rs. 2461.90 crore in 2002-03, an increase of Rs. 1877.90 crore without corresponding growth rate of state’s economy. As such there are no reasons as to why there should be any steep hike in the fiscal deficit figure. On top of all this, the state government has been indulging in heavy borrowings at an alarming rate as indicated from the memoranda submitted to the successive Prime Minister of India as under:

Alarmed by the steep rise of fiscal deficit figure and ever increasing state’s debt burden, coupled with the absence of developmental activities, the combined opposition political parties appealed to the Government of India to take timely corrective measures by invoking the Article 360 of the Constitution of India which went unheeded. Had the Congress I Government been in New Delhi, in all probability, it could have taken appropriate constitutional actions to check the unwarranted borrowings being indulged by the Government of Nagaland. When the Government of India turned a deaf ear to their repeated appeals, the opposition parties gave up hands down. As a result, today, the state’s debt burden stand at Rs.2104 crore which should be considered as astronomical figure vis-à-vis the size of the state and population. In a nut shell, the State of Nagaland has landed on a Debt Trap because it will entail over Rs.400 crore as debt servicing as against plan allocation of Rs. 424 crore for the fiscal year of 2002-03.

As against the aforesaid dismal fiscal limbo, one wonders as to what yard sticks the concerned authorities had applied to award the State of Nagaland in qualifying as the first state to receive the incentive

bonus as well as commendable certificates. The actions of the concerned authorities have emboldened him to declare that his Kafkaesque budget for the year 2002-03 as for making "A model state of the country during the next ten years". Though, the fiscal mismanagement in Nagaland has gone too far, say too late, nevertheless, the saying goes that ‘better late than never’ for taking necessary corrective measures if the future of the people of Nagaland is to be redeemed.