PUNJAB’s revenue budget for the next financial year projected to be 16 per cent heftier than this year’s original estimate of Rs654.6 billion.

While the current expenditure is expected to rise by up to 16 per cent to Rs505 billion from Rs435 billion, the provincial annual development programme (ADP) is likely to be increased by 14-17 per cent to Rs250-258 billion.

“The total outlay (including development programme) will be in the range of Rs750-60 billion,” a senior Punjab finance department official told Dawn early last week.

“All the numbers are tentative and a final decision as to the size of the provincial development plan and other matters related to the next year’s budgetary estimates would be made only after approval from the chief minister,” the official, who requested anonymity, said. Yet, he added, the department’s projections about the revenue income as well as expenditure would be accepted.

The ADP for 2012/13 is projected to include a core development programme of Rs185 billion and block allocations of Rs50 billion for the development of infrastructure like Lahore Ring Road, electricity generation, etc. The rest of the development funds coming from the current account will be shown as ‘below the line’ development expenditure.

This year, the provincial government has revised downwards its core development programme to Rs154 billion on account of a substantial decrease in the projected revenues and non-realisation of a large chunk of foreign assistance.

The revenue shortfall is said to have prevented the finance department from releasing funds from the Rs29.20bn special development package that included such projects as coal-based thermal power generation, Lahore Ring Road, medical colleges and district/TMA development programme.

Another Rs25 billion has been released for development schemes like Daanish Schools, low income housing project, etc that are being financed from the current budget (and shown as below the line development expenditure). Total development spending for the current year is likely to remain in the range of Rs180-185 billion, significantly lower than the original estimates of Rs220 billion.

Officials admit that the next budget, being the last of the incumbent provincial government before the new election in early 2013, will focus more on development of schemes and projects that could win the ruling Pakistan Muslim League-Nawaz votes.

“The focus of the development programme will be on schemes and projects that are visible to the voters,” an official of the planning and development department said on condition of anonymity.

He said the short-term schemes that could be completed before the formation of an interim setup or holding of new election would be preferred. Additionally, he said, the electricity generation projects would be launched in order to show to the people that the government was making efforts to reduce the power supply gap in the province.

Economists believe that incorporation of measures for reviving economic growth in the province for creating jobs and reducing poverty in the next budget will be a major challenge for the government.

Punjab’s regional economy is estimated to have increased at a much slower pace of annual average of 2.5 per cent than 3.4 per cent for ‘the rest of Pakistan’ during the four financial years to 2011 under the Shahbaz Sharif government.

A recent report has criticised the government’s development priorities that have done little to address structural weaknesses and infrastructure gaps.

It argues that the government must focus policies and programmes to develop agriculture, small and medium enterprises and the services sector while following a more expansionary fiscal policy to remove infrastructure gaps by aggressively mobilising provincial taxes on services, agricultural income and real estate for development.

Officials say the government is considering a proposal by a committee on tax reforms to do away with certain tax exemptions in the province and revise upwards the rates of some taxes to generate more revenues.

But, he said, the final decision on the proposed elimination of tax exemptions and revision of existing tax rates would be given by the chief minister.

According to him, the target for provincial tax revenue (excluding the provincial sales tax on services collected by the federal government on behalf of the provinces) was expected to be hiked to up to Rs50 billion from the original estimates of Rs40 billion for the current year.

An important feature of the budget, said the finance department official, would be the creation of a provincial revenue authority (Punjab Revenue Authority) for the collection of provincial sales tax on services on the pattern of Sindh.

“The purpose of creating the proposed authority is to ultimately reform all provincial taxes and combine the functions of the provincial board of revenue and excise and taxation department under one department.

However, the government has decided to go slow on tax reforms and decided to first create the new authority for handling provincial sales tax.

Later on it plans to reform each tax and hand it over to the new authority that will function like the Federal Board of Revenue,” the official said.—By Nasir Jamal