Recently, the Kelkar Committee published a roadmap for fiscal consolidation. The report stresses the need and urgency to address India’s fiscal deficit. A high fiscal deficit – the excess of government expenditure over receipts – can be problematic for many reasons. The fiscal deficit is financed by government borrowing; increased borrowing can crowd out funds available for private investment. High government spending can also lead to a rise in price levels. A full PRS summary of the report can be found here. Recent fiscal trends Last year (2011-12), the central government posted a fiscal deficit of 5.8% (of GDP), significantly higher than the targeted 4.6%. This is in stark contrast to five years ago in 2007-08, when after embarking on a path of fiscal consolidation the government’s fiscal deficit had shrunk to a 30 year low of 2.5%. In 2008-09, a combination of the Sixth Pay Commission, farmers’ debt waiver and a crisis-driven stimulus led to the deficit rising to 6% and it has not returned to those levels since. As of August this year, government accounts reveal a fiscal deficit of Rs 3,37,538 crore which is 65.7% of the targeted deficit with seven months to go in the fiscal year. With growth slowing this year, the committee expects tax receipts to fall short of expectations significantly and expenditure to overshoot budget estimates, leaving the economy on the edge of a “fiscal precipice”.
Figure 1 (source: RBI)
Committee recommendations - expenditure To tackle the deficit on the expenditure side, the committee wants to ease the subsidy burden. Subsidy expenditure, as a percentage of GDP, has crept up in the last two years (see Figure 2) and the committee expects it to reach 2.6% of GDP in 2012-13. In response, the committee calls for an immediate increase in the price of diesel, kerosene and LPG. The committee also recommends phasing out the subsidy on diesel and LPG by 2014-15. Initial reports suggest that the government may not support this phasing out of subsidies.
Figure 2 (source: RBI, Union Budget documents, PRS)
For the fertiliser subsidy, the committee recommends implementing the Department of Fertilisers proposal of a 10% price increase on urea. Last week , the government raised the price of urea by Rs 50 per tonne (a 0.9% increase). Finally, the committee explains the rising food subsidy expenditure as a mismatch between the issue price and the minimum support price and wants this to be addressed. Committee recommendations - receipts Rising subsidies have not been matched by a significant increase in receipts through taxation: gross tax revenue as a percentage of GDP has remained around 10% of GDP (see Figure 3). The committee seeks to improve collections in both direct and indirect taxes via better tax administration. Over the last decade, income from direct taxes – the tax on income – has emerged as the biggest contributor to the Indian exchequer. The committee feels that the pending Direct Tax Code Bill would result in significant losses and should be reviewed. To boost income from indirect taxes – the tax on goods and services – the committee wants the proposed Goods and Service Tax regime to be implemented as soon as possible.
Figure 3 (source: RBI)
Increasing disinvestment, the process of selling government stake in public enterprises, is another proposal to boost receipts. India has failed to meet the disinvestment estimate set out in the Budget in the last two years (Figure 4). The committee believes introducing new channels [1. The committee suggests introducing a ‘call option model’. This is a mechanism allowing the government to offer for sale multiple securities over a period of time till disinvestment targets are achieved. Investors would have the option to purchase securities at the cost of a premium. They also propose introducing ‘exchange traded funds’ which would comprise all listed securities of Central Public Sector Enterprises and would provide investors with the benefits of diversification, low cost access and flexibility.] for disinvestment would ensure that disinvestment receipts would meet this year’s target of Rs 30,000 crore.
Figure 4 (source: Union Budget documents, PRS)
Taken together, these policy changes, the committee believe would significantly improve India’s fiscal health and boost growth. Their final projections for 2012-13, in both a reform and no reform scenario, and the medium term (2013-14 and 2014-15) are presented in the table below: [table id=2 /]
Last week, the Assam Legislative Assembly passed the Assam Cattle Preservation Bill, 2021. The Bill seeks to regulate the slaughter and transportation of cattle and the sale of beef. It replaces the Assam Cattle Preservation Act, 1950, which only provided for restrictions on cattle slaughter. In this post, we examine the Bill and compare it with other state laws on cattle preservation. For a detailed analysis of the Bill, see here.
Cattle preservation under the Bill
The Bill prohibits the slaughter of cows of all ages. Bulls and bullocks, on the other hand, may be slaughtered if they are: (i) over 14 years of age, or (ii) permanently incapacitated due to accidental injury or deformity. Inter-state and intra-state transport of cattle is allowed only for agricultural or animal husbandry purposes. This requires a permit from the competent authority (to be appointed by the state government). Further, the Bill allows the sale of beef and beef products only at certain locations as permitted by the competent authority. No permission for such sale will be granted in areas that are predominantly inhabited by Hindu, Jain, Sikh and other non-beef eating communities, or within a five-kilometre radius of a temple or other Hindu religious institution.
Provisions of the Bill may raise certain issues which we discuss below.
Undue restriction on cattle transport in the north-eastern region of India
The Bill prohibits the transport of cattle from one state to another (or another country) through Assam, except with a permit that such transport is for agricultural or animal husbandry purposes. This may lead to difficulties in movement of cattle to the entire north-eastern region of India. First, the unique geographical location of Assam makes it an unavoidable transit state when moving goods to other north-eastern states. Second, it is unclear why Assam may disallow transit through it for any purposes other than agriculture or animal husbandry that are allowed in the origin and destination states. Note that the Madhya Pradesh Govansh Vadh Pratishedh Adhiniyam, 2004 provides for a separate permit called a transit permit for transporting cattle through the state. Such permit is for the act of transport, without any conditions as to the purpose of transport.
Unrestricted outward transport of cattle to states that regulate slaughter differently from Assam
The Bill restricts the transport of cattle from Assam to any place outside Assam “where slaughter of cattle is not regulated by law”. This implies that cattle may be transported without any restrictions to places outside Assam where cattle slaughter is regulated by law. It is unclear whether this seeks to cover any kind of regulation of cattle slaughter, or only regulation that is similar to the regulation under this Bill. The rationale for restricting inter-state transport may be to pre-empt the possibility of cattle protected under the Bill being taken to other states for slaughter. If that is the intention, it is not clear why the Bill exempts states with any regulation for cattle slaughter from transport restrictions. Other states may not have similar restrictions on cattle slaughter as in the Bill. Note that other states such as Karnataka and Chhattisgarh restrict outgoing cattle transport without making any distinction between states that regulate cattle slaughter and those that do not.
Effective prohibition on sale of beef in Assam
The Bill prohibits the sale of beef within a five-kilometre radius of a temple (which means an area of about 78.5 square kilometres around a temple). This threshold may be overly restrictive. As per the 2011 census, the average town area in Assam is 5.89 square kilometres (sq km) and the average village area is 1.93 sq km. The three largest towns of Assam by area are: (i) Guwahati (219.1 sq km), (ii) Jorhat (53.5 sq km), and (iii) Dibrugarh (20.8 sq km). Hence, even if there is only one temple in the middle of a town, no town in Assam – except Guwahati – can have a beef shop within the town area. Similarly, if a village has even one temple, a beef shop cannot be set up in a large area encompassing several adjoining villages as well. In this manner, the Bill may end up completely prohibiting sale of beef in the entire state, instead of restricting it to certain places.
Note that certain states such as Gujarat, Rajasthan, Uttar Pradesh and Haryana completely prohibit the sale or purchase of beef within the state. However, they also completely prohibit the slaughter of cows, bulls and bullocks. This is not the case under the Bill, which only places a complete prohibition on slaughter of cows. Further, in places such as Delhi, municipal regulations prohibit the sale of meat (including beef) within 150 metres from a temple or other religious place. This minimum distance requirement does not apply at the time of renewal of license for selling meat if the religious place comes into existence after the grant of such license.
The prohibition on sale of beef in areas predominantly inhabited by communities identified based on religion or food habits (non-beef eating) may also have an unintended consequence. With the food typically consumed by a community becoming unavailable or available only in select locations, it may lead to the segregation of different communities into demarcated residential areas. As per the 2011 census, the population of Assam comprises roughly 61% Hindus, 34% Muslims, and 4% Christians.
Onerous requirement for the accused to pay maintenance cost of seized cattle
Cattle rearing is essentially an economic activity. Under the Bill, cattle may be seized by a police officer on the basis of suspicion that an offence has been or may be committed. Seized cattle may be handed over to a care institution, and the cost of its maintenance during trial will be recovered from such persons as prescribed by the state government through rules. Note that there is no time frame for completing a trial under the Bill. Thus, if the owner or transporter of seized cattle is made liable to pay its maintenance cost, they may be deprived of their source of livelihood for an indefinite period while at the same time incurring a cost.
Cattle preservation laws in other states
The Directive Principles of State Policy under the Constitution call upon the state to prohibit the slaughter of cows, calves, and other milch and draught cattle. Currently, more than 20 states have laws restricting the slaughter of cattle (cows, bulls, and bullocks) and buffaloes to various degrees. Table 1 below shows a comparison of such laws in select states of India. Notably, north-eastern states such as Arunachal Pradesh, Meghalaya, Mizoram and Nagaland do not have any law regulating cattle slaughter.
