Only five percent of the population reaps the benefit of national wealth, hydropower according to the National Council.
When it comes to financing the pay revision, is the government counting the chickens before they hatch?
This was one of the concerns the National Council raised to finance minster Namgay Tshering during the presentation of pay revision Bill. The Opposition has also raised a similar concern during the deliberation in the National Assembly.
During the deliberation on June 12, eminent member Tashi Wangyel pointed out that Magdechhu is the main source to finance the pay revision. Hydropower, he said is a national wealth and should profit every citizen.
In 1997, he said 30 percent of additional revenue was used to revise the salaries of public servants. The country received an additional revenue of Nu 430M in 1999 and 64 percent of it was used for salary revision. The portion of additional revenue from proceeds of electricity used to source pay revision increased to 70 percent in 2005 and 100 percent in 2014.
“It is not morally right,” he said.
Pay revisions, before 2008 were done concomitantly to the power tariff revision and after 2008, when there were no tariff revisions, it was met through enhancement of domestic revenue and cost cutting measures.
This is because the Constitution mandates pay and allowances, being current expenses be met from domestic revenue.
In 2008, the first pay commission estimated a financial implication of Nu 2.28B annually but budget provision was kept for only Nu 700M. Additional revenue of Nu 1.28B from Tala and savings of Nu 200M from cost cutting measures financed the pay revision. To broaden the internal resource, additional tax measures were also introduced.
The gross financial implication of the revision of pay and allowances of public servants in 2014 was estimated at Nu 2.4B annually. The Second Pay Commission recommended increase in motor vehicle taxes.
In the current proposed pay revision, the source of financing is the same – Mangdechhu project revenue and broadening the tax base. The proposed pay revision has a financial implication of Nu 4.5B and is included in the outlay of the 12th Plan. The pay revision report also stated that revenue collection from sales tax and customs duty is also expected to increase domestic revenue besides promoting financial thrift and optimum use of resources.
However, a small portion of pay revision is sourced automatically since revision results in increased PIT collection.
Eminent member Tashi Wangmo also said that expected revenue from Mangdechhu annually after deducting the loan is about Nu 3.8B. She added that the there is already a budget deficit of Nu 6.5B in 2019-20 fiscal year. To make up for this deficit, the country has to resort to external borrowing.
“It is wise to use our additional internal revenue to narrow the deficit,” she said adding that if the revenue from Mangdechhu is put into other budgetary needs, the deficit could reduce to about Nu 900M.
While deliberating the pay revision Bill in the National Assembly, the Opposition Leader, Pema Gyamtsho (PhD) also questioned if the government is getting its priorities right by pitting in a major chunk of the country’s revenue into pay revision. “Mangdechhu is not even commissioned. How much can we rely on it?” he said.
If the economic situation is favourable, he said the public servants deserve more raise than the proposed. He pointed out that external debt is touching Nu 200B, unemployment rate is increasing and economic activities are dwindling. “It is time to tie our belt. We as legislators and policy makers should be concerned.”
He said the current revision in allowances of teachers would undermine the sustainability and quality of private schools where the government has given scholarship to thousands of students. “As the flood gate of allowances is now opened, everyone will ask for it,” he said.
Finance minister Namgay Tshering, however said that a domestic revenue of Nu 218B is expected in the 12th Plan and that only Nu 20B would be used for pay and allowance revision.
The Mangdechhu, he said if run on full capacity would earn Nu 12B annually. After deducting the transmission losses and loan repayment, he said the project would fetch Nu 6B in the first year since it would function as a project authority. From the second year onwards, as Druk Green takes over the project, Lyonpo said that expected earning on an average is Nu 5B annually.
The fiscal deficit he said would improve to Nu 24B against the projected Nu 29B in the 12th Plan.