Supplement to Memorandum00001

							                        SUPPLEMENT TO THE MEMORANDUM
                                 SUBMITTED TO
                      THE THIRTEENTH FINANCE COMMISSION




A. Transfer of Plan-Posts to Non-Plan Account:

              In continuation to our comments on the para 6 (ix) of the Term of Reference
of the XIII Finance Commission which may be seen at the paragraph No 10 of our main
memorandum where we have expressed the reservation on our part to accept the
restriction of the consideration of committed expenditure on completed plan schemes to
only non-salary component, we felt it extremely necessary to draw the kind attention of
the Commission on the serious difficulties face by the Government of Mizoram in the
maintenance of plan-posts. As already highlighted at our note on Topic number 17, while
what ought to be the practice remained that all completed plan schemes as well as plan
posts are to be transferred to non-plan account after the expiry of the plan period, a very
tight situation on non-plan account especially during the Eight, Ninth & Tenth Five Year
Plans periods hinder the State Government to transfer maintenance expenditure of
completed schemes to non-plan account. The main reasons contributing to the tight non-
plan account were inability on the part of the State to sufficiently generate its own
revenue resources on the one hand, and relatively lower transfer of resources by the
previous Finance Commissions till the Tenth Finance Commission. As a result of this, posts
created up to the end of the Seventh Plan period and only a part of the plan posts created
during the Eight Plan period have been committed to non-plan during 2007-’08. This
inevitably leads to perpetual huge plan expenditure on salary for Plan posts, which
ultimately leads to non-availability of a large portion of plan fund for developmental works
and creation of capital assets.


              By the end of the Tenth Plan period (2006-07), 11,433 Plan posts were
maintained and the total expenditure for these plan-posts in 2006-07 was Rs.152.16
Crore, which was 25.54 percent to the total plan expenditure during that year. Out of
11,433 plan-posts created up to the end of the Tenth Five-Year Plan, 4,209 posts were
transferred to non-plan account during the period of 2007-08 to 2008-09 leaving 7,225
plan-posts to remain under Plan. However, the total number of Plan-posts remains as high

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as 8,480 in 2008-09 due to creation of another 1,255 plan-posts after the commencement
of the Eleventh plan period which still necessitated huge plan expenditure on salary. The
percentage of salary expenditure is bound to increase as the State Government is
intending to review the pay of its employees in line with recommendations of the Sixth
Central Pay Commission. However, actual estimation on the impact of this pay revision
could not be arrived at this stage due to the fact that the Government of Mizoram
constituted a Fitment Committee on 14th October 2008 under the chairmanship of the
Principal Secretary, Finance Department to, inter alia, determine the basis on which
fitment of the existing grade and pay scales shall be made in the revised grades and pay
scales; and to make appropriate recommendations for its rationalization. The Committee is
yet to submit its report. Initially, the Committee is expected to submit its report within 45
days. However, its tenure is extended upto 31.5.2009. Therefore, until and unless the
Committee submits its report, actual requirement can not be worked out. Nevertheless, it
is assumed that while the annual plan is usually increased by ten percent, the salary of the
employee is roughly estimated to increase by the maximum of fourty percent. During the
five years period cover by the Thirteenth Finance Commission (2010-11 to 2014-15), the
total committed expenditure on salary in respect of 8,480 Plan-Posts is estimated at
Rs.1039.83 Crore (Pre-revised Pay scales) out of which Rs.872.57 Crore is for the 7,225
posts created prior to the Eleventh plan period. On the adoption of the recommendations
of the Sixth Central Pay Commission, the total committed expenditure on plan-posts for
the same period is estimated at Rs.1350.67 Crore out of which about about Rs.1150.39
Crore is for the said 7,225 posts. During the same period, the committed liabilities of the
Government of Mizoram on salary under non-plan in the pre-revised pay is estimated at
Rs. 3,896.41 Crore whereas the estimated committed expenditure on the adoption of
revised pay under non-plan stands at Rs. 5,584.23 Crore. Therefore, if all the 7,225 Plan-
posts created before the Eleventh Five-Year Plan are to be transferred to non-plan
account, the total committed liabilities of the State Government on salary under non-plan
account in the pre-revised pay during 2010-11 to 2014-15 will be Rs.4,768.98 Crore, and
in the revised new pay it will be Rs.6,734.62 Crore.


             At the same time, it is important to note that it is practically impossible for
the State Government to drastically reduce the number of its employees not only due to
administrative and humanitarian considerations but also due to economic reasons. Due to
its geographical isolation, absence of both industries and surplus agricultural produce,
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small population and the absence of economic base worth mentioning, the economy of the
State heavily relies on circulation of money through the salaries of about fifty thousand
employees of the Government. The local markets in all the sectors-services, agriculture
and industries are closely intertwined with cash flow from the Public Exchequer in which
salaries of Government employees play decisive roles as it shapes the aggregate demand
on which the economy pivots. From pan-biri shops and wayside vegetables markets in the
villages to super markets in the towns, and in almost all activities in service sector, the
cash flow from salaries of employees have been the main foundation upon which the
activities depend. Hence, while any drastic steps having negative effects on the existing
number and salaries of employees may have positive effects on the Government as it
functions as any other ordinary organizations, the same is bound to have negative effects
on the State's economy at the macro-level. It is, therefore, important to maintain status
quo, at the least. To avoid the tight plan fund situation, however, transfer of plan-posts to
non-plan account is urgently required so as to enable the State to fully utilize plan fund for
developmental works to build the economic base of the society for sustainable
development.


               Therefore, we would like to request the Thirteenth Finance Commission to
look into the demands for resources of the State to transfer major portion of plan posts,
especially those created before the commencement of the Eleventh Plan period, into non-
plan account. In doing so, we would also like to request the Commission to have into
consideration the obligation on the part of the State Government to revise the pay of its
employees in line with the Sixth Central Pay Commission's recommendations.




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