ECONOMIC BACKWARDNESS OF THE HILLS OF MANIPUR: REVENUE SHARING

By: P. Vanmi, on behalf of Naga Think Tank Group, Ukhrul

INTRODUCTION

The state of Manipur occupies a total area of 22,327 square kilometers (sq. kms). Geographicallyspeaking, Manipur is divided into two contrasting landscapes – (1) the fertile Imphal valley area at thecentre constituting roughly about one-tenth of the total area and (2) the mountains and hills occupying theremaining nine-tenth of the total area. These mountains and hills encircle the Imphal valley from all sides.Prior to the creation of seven new districts, Manipur is divided into nine districts. The Imphal valley(referred to as valley) the comprising the four districts of Imphal East, Imphal West, Bishnupur and Thoubalhas an area of about 2,238 sq. kms (10%) and the five hill districts of Churachandpur, Ukhrul, Tamenglong,Chandel and Senapati have a total area ofabout 20,089 sq. kms (90%).

2.         The Imphal valley is densely populated whereas the hills are sparsely populated. As per the census 2011,the total population of Manipur is28,55,794 (sources: Registrar General of India and Statistical Handbook ofManipur 2017). Out of this total population, the Imphal valley has a population of 16,33,672 (57.20%) andthe hills have a population of 12,22,122 (42.80%).

ECONOMIC BACKWARDNESS OF THE HILLS OF MANIPUR

3.         As compared with the Imphal valley, the hills of Manipur are indeed economically very backward’ Thedivide between the valley and the hills is very wide and is increasing. ln his recent budget presentation forthe year 2O2O-2L, the Chief Minister of Manipur had acknowledged this important fact and informed theState Legislative Assembly that his government had taken great strides to bridge the divide between thevalley and the hill areas of the state. This is a positive development, but much more is required to be done.There are many critical reasons for the economic backwardness of the hills of Manipur which includemountainous geographical conditions, lack of resources, poor infrastructures, law and order situations,absence of entrepreneurship, low standard of education, poor governance and leadership, rampantunemployment, ignorance of the hill people, primitive subsistence farming, indifference and negligence onthe part of the stakeholders, and faulty implementation of government schemes. All these issues deserveserious consideration and action. However, in this article, we will focus on the issue of revenue sharingbetween the valley and the hills of Manipur.

REEVENUE SHARING

4.         On the 14th February,2O2O, the Chief Minister of Manipur presented the budget estimate (expenditure)of Rs.21,224 crore for the fiscal year 2020-21. The total receipts are estimated at Rs. 20,146 crore – revenuereceipts at 18,083 crore and capital receipts at Rs.2,063 crore. The total estimates of the state’s own tax andnon-tax are Rs.1,325 crore and Rs.257 crore respectively. The actual receipt from the state’s share in Centraltaxes and Duties is estimated at Rs.5,630 crore. Further, the revenue expenditure is estimated at Rs.16,445 crore while the capital outlay is estimated at Rs.3,356 crore. The fiscal deficit is estimated at Rs.1,363 crorefor 2020-21.

5.         From the yearly budget presentations, it can be seen that 90% of the total revenue receipt of Manipuris provided by the Central Government. ln other words, the state generates only 10% of therevenues/financial resources. The Central Government provides the 90% ofthe state’s revenues in the formof central taxes and grants-in-aid. The state is heavily dependent on the grants -in -aid from the Centre. Thestate normally receives the following grants: (1) revenue deficit grants (Rs.2,824 crore for 2020-21), (2) grants to local bodies, (3) disaster management grants, (4) sector-specific and performance-based grantsand (5) special or state-specific grants. Apart from this, the Central Government takes up CentrallySponsored Schemes such as Pradhan Mantri Gram Sadak Yojana (PMGSY), Mahatma Gandhi National RuralEmployment Guarantee Act (MGNREGA), etc. Let us see how the states of India or state of Manipur get theshare of revenue from the Central Government. As per the constitutional arrangement, the FinanceCommission (FC) allocates the states’ share in the divisible pool of central taxes based on a formula. The 15thFinance Commission has used six criteria for devolution of central taxes to states for financial year 2020-21and certain weight has been assigned to each criterion. The criteria and the weight assigned for eachcriterion are as below:

INCOME DISTANCE is the difference between the per capita income of a state with the average per capitaincome of all states. States with lower per capita income would be given a higher share to maintain equityamong states. Weight assigned for this criterion is 45.

POPULATION is an indicator of the expenditure needs of a state. Weight assigned for this criterion is 15.

AREA is used as a criterion because a state with larger area has to incur additional administrative costs todeliver services. Weight assigned for this criterion is 15.

FOREST AND ECOLOGY criterion is used because states with larger forest covers bear the cost of not havingarea available for other economic activities. Weight assigned for this criterion is 10.

DEMOGRAPHIC PERFORMANCE criterion has been introduced to reward efforts made by states incontrolling their population. Weight assigned for this criterion is 12.5.

TAX EFFORT criterion is used to reward states with higher tax collection efficiency. Weight assigned for thiscriterion is 2.5.

6.         The share of the valley and the hills 0f Manipur is worked out in a chart on the basis of formula used by the 15th Finance Commission(FC) for 2020-21 as under:

Sl. No. Criteria used by the 15th FC Weight assigned by the 15th FC Share of the Imphal valley Share of the Hills Basis for share of Revenue between the valley and the hills
1 Income Distance 45 26 19 Population ratio and higher per capita income of the valley and the lower per capita income of the hills.
2 Population 15 8.5 6.5 Population Ratio – the valley has 57.20% and the hills have 42.80Yo.
3 Area 15 1.5 13.5 Area Cover- the valley has about 10% and the hills have about 90%.
4 Forest and Ecology 10 2 8 The proportion of the valley forest cover to the state total forest cover is less than 2%.
5 Demographic Performance 12.5 8.5 4 The valley has performed better in controlling population. Hence higher weight assigned to the valley.
6 Tax Effort 2.5 2.5 0 Activities relating to tax collections are confined mostly to the valley.
TOTAL 100 49 51  

Note: Margin in assigning weight can be 1 to 2 percent plus or minus which will have no impact on the overall final conclusion.

7.         The above chart clearly shows that the hills of Manipur are not getting their legitimate share ofrevenues provided by the Central Government despite the fact that the share of the hills should be about51% of the revenues of the state. This is the main reason for big divide between the valley and the hills ofManipur. The deprivation of revenues to the hills has led to complete economic backwardness andmarginalization of the hill people of Manipur. As a matter of fact, the revenues of the state must be shared

equitably between the valley and the hills. The hill people must be actively involved in budget exercise ofthe state to ensure that revenues of the state are shared between the hills and the valley in a fair manner.The Budget Estimate for the year 20-21needs to be revisited and revised. All efforts should be made toensure that ninety percent of the total area of the state does not remain underdeveloped and neglected.The hill people of Manipur have the equal rights and entitlements to the revenues of the state.

CONCLUSION

8.         The Imphal valley is blessed by nature – very fertile land of 2238 square kilometers, moderateclimate, surrounded from all sides by beautiful green hills and mountains, streams and riversflowing down from the hills, the largest freshwater floating Loktak lake of North East India, andcommercially viable oil belt and huge reserves of natural gas. The hills of Manipur have beautifullandscapes, minerals, fast flowing rivers for hydropower projects, good and conducive climaticconditions for horticulture, sericulture, medicinal and cash crops. The people of Manipur can takefull advantage of the blessings given to them by nature. Singapore l72l sq. kms) with less thanone-third of total area of Imphal valley was a poor undeveloped country in the 1960s, but now it isone of the richest states in the world having top world-class educational institutions, vibranteconomy, roaring financial hub, best infrastructures, high standard of living, etc. Singapore did nothave natural resources except its strategic location. Singapore’s greatness is attributed to the farsightedpolitical leadership of the former Prime Minister Lee Kuan Yew and his strong financial andeconomic policies and corruption-free environment in the government. Singapore uses its smallsize to their advantage. Manipur’s immense untapped potential should now be unleashed andrealized as Singapore had done it. To overcome some of the state’s geographic disadvantages andeconomic backwardness, we must fully focus on quality education, good governance, humancapital and skill development, service sector, agricultural innovations, integrated and innovativefarming, eco-tourism, horticulture, sports, agro-based industries including food processing, andIT/ITES industries.

9.         To illustrate a horticulture scenario, we see a clear picture of Manipur becoming a stateproducing surplus high demand marketable fruits within a short period of say four to five yearsdown the line if the government of Manipur provides (starting this year) yearly at least five to sixcrores of (crafted) tree saplings of apple, kiwi, dragon-fruit, avocado, grapes, walnut, almond,orange, etc. free of cost to the farmers of the state particularly to the farmers of hill areas as theyown sufficient lands for such farming activities but too poor to invest in these new ventures. Thesefruit tree plantations of viable economic size will arrest the shifting method of cultivation anddeforestation to a large extent and also provide an alternative to the illegal poppy plantations inthe state. ln his recent budget presentation, the Chief Minister of Manipur has discussed the issueof illegal cultivation of poppy plants and informed the Legislative Assembly that a scheme has beenintroduced under the head ‘Cultivation of horticulture crops as an alternative to poppy plantationwith a very small amount of budget allocated to this scheme. The farmers, educated youth ofManipur and those who have lost their jobs to Corona virus and returned to the state are nowwilling to take up such innovative farming activities in a big way. The state can play a big role inthis field by allocating sufficient budget/fund and providing necessary incentives directly to thefarmers.

10.       The plain and the hill people of Manipur coming and working together can bring the required changes and make Manipur a much better place to live in peace, harmony and prosperity.

A Naga Think Tank Group, Ukhrul, Manipur

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