Jammu, Jan 11: Appreciating the main banks in the state for managing demonetisation well, the Jammu and Kashmir government today said the note ban did not have any negative effect on the state and instead it helped bring down prices of the real estate which had once gone beyond reach.
"I don't think that the demonetisation has had any effect as it has been managed very well by the principle banks and I would complement J&K Bank for that," Finance Minister Dr. Haseeb A. Drabu told reporters after presenting the State budget today.
He said that the people of J&K have got used to certain situation of distress and when the strike is for five months and banks are not open so they stock cash, when there is uncertainty in the overall system then people take measures to keep cash so the transactional demand is very high.
"Also there is a lot of community banking in J&K and the number of people are very small -- 1.25 crore people -- it is not like Bihar and UP and I think we have managed the demonetisation part very well as far as personal finance go."
"I think the principle impact of demonetisation on the economy of J&K has been to soften the land rates. I think that is a big thing as you would find that there was an asset price bubble in the system where your assets like the house and land was way out of line with the other assets. I think that has softened that and I think that is a good thing that has happened,” he said.
Drabu said that there was one single point in this budget which is how to improve the efficiency of spending, how the state can spend well.
"Every year we spend thousands of crores, like this year we are spending around 75,000 crores. Does it get reflected on the ground and if it does not, then why -- because there is inefficiency in spending", he said.
He said that the principle focus of this budget is to build system processes so that the state can spend the money efficiently, usefully for the entire state and showcase a certain degree of progress and that is the key theme of the budget.
"I have taken a few initiatives which as we go along become very significant decisions. One of the principle one is to move from administrative budgetary to what I call the public management approach. It is a modern approach to it in terms of what should we track.
"Second is the interface between the government and the people in terms of payment whether it is salary, payments to contractors -- we had a system for the last 70-80 years, established system not just in the J&K but elsewhere the treasury system”, he said.
He said that as of now the government announces that it shall abolish the treasury system and by October 01, move to a modern system which is the "pay in accounts offices".
"Now there are many implications of this decision -- one of course, the ease of people getting paid because all will be online and will be backed up with an online computerized budget system called BEAMS.
"We have an integrated financial management system also, these three together will revolutionize the management of public finances of this country, and I can assure you within next year not only the most states will follow it some of these measures will be followed by the central government as has happened in the past," he said.
Drabu said that this was a big measure in terms of building a new system, which will bring lot more of transparency, lot more of speed.
"Today we have a situation where contractors are not happy to work with the government as the bills gets delayed, all that once the new system gets into place will be a thing of past," he said.
He said that the employees in the state government will not have to wait for eight months for their GP funds but the government has made sure they get it paid in just one day.
He said that there were people who were working in the state through centrally sponsored schemes and had to wait for months to get their salary after the central released it.
“The government has decided to pay them irrespective of when we get funds from the union government,” Drabu said.
The Finance Minister also said that from next year no project would be added in the budget if it is not accompanied by a complete Detailed Project Report.
He also announced that all works excluding the major ones should be completed in three years.
He said that soon after the budget is approved 50 percent of the funds would be allocated to the respective departments on February 10 itself.
He said that earlier 70-80 percent of the expenditure used to take place in the last quarter of the year, but from now onwards not more than 30 percent of funds would be spend in the last quarter.
Drabu said that none of the 28 public enterprises, in the state was profitable.
He said that the J&K Power Development Corporation whose capital base has grown to Rs 3,000 crore, will do generation of power and can get into power lending and borrowing money to fund power projects.
"It will become another source of energy and finance and revenue with for J&K government," he said.
He said that the government will make an Asset Reconstruction Company (ARC) along with J&K Bank in which 51 percent stake will be of J&K government.
“The (ARC) will buy all the distress assets and NPAs of banks so the effects of SARFASI Act will have no affect as I have made it clear in the budget speech that we have made a company the formalities of which are underway and from April 01 it will start working”, he said.
He said that while the state government will implement the seventh pay commission from April 01, 2018, it would also take steps to regularize the service of 61,000 daily rated workers in the state.
He said that the government will also start the crop insurance in the state.
He added that the three lakh construction workers in the state will also get insured for death, disability and disease.
"The workers will get an ATM card and in case of any disease or injury they will get an advance of Rs 10,000 before any paper work is done so that they can go ahead and start their treatment," he said.
He said that there was also a need to revive the recruitment plan of the state as the same has not been revived since the 1950’s.
He also said the state will support J&K Bank which suffered suffered a loss of Rs 600 crore in the last quarter.
"I have made provisions Rs 532 crore as infusion of equity into J&K Bank to finance its new growth and we have received hundreds of crores from J&K Bank as dividend over the 5-10 years," he said.
"I said it very clearly there was a governance failure in J&K Bank, management lapses were there, now the management has been changed there is a cleaning of balance sheets as well," he said.
He also said that power sector was the major sector which was impacting the finances of J&K government.
The Finance Minister said that GST as a system was very good and beneficial and 200 countries in the world follow it.
"I have been a big advocate of GST in general. As regard to the implementation of GST in J&K, constitutional amendment on which the GST has been based has not been extended to J&K as yet and once it applied we will see how to proceed ahead," he said.
He said that the power projects were the assets of NHPC and the government as per the “Agenda of Alliance: is working for their transfer to J&K.
Srinagar, Jan 11: State Finance Minister Dr. Haseeb A. Drabu on Wednesday said that the Jammu and Kashmir government has completed the formalities for incorporating the J&K Asset Reconstruction Company in partnership with the J&K Bank which will buy the impaired assets of the state-subjects.
"In my first budget, I had mooted the idea of an Asset Reconstruction Company. It was proposed as a practical solution to provide commercial banks a market route and avenues for recovery of bad assets. With the recent judgment of the Supreme Court on SARFAESI, it has gained news value. I am happy to report that we completed the formalities for incorporating the J&K Asset Reconstruction Company in partnership with the J&K Bank. The state government is a majority shareholder in this, while J&K Bank holds 49 percent," Drabu said in his Budget speech today.
The mandate of this state-owned Asset Reconstruction Company (ARC) is to buy the impaired assets of state-subjects that are mortgaged to financial institutions. These will, of course, include some of the assets of the commercial banks as well of other financial institutions like the State Finance Corporation, he said.
A special situations fund within the ARC shall focus on constructive investing in distressed assets for restructuring and turnaround of “state-subject owned businesses".
The business viability of the ARC is not in doubt as most of these impaired assets have substantial collaterals. Indeed, these are hugely over-collateralized. Or in other words, the assets of SMEs in J&K are grossly underleveraged, he said.