Summary of the Recommendations of KPEC from2006-2010-11 REVENUE.

1) Tax Revenue The Committee asks the Government to consider introducing disincentive for defaulters of VAT in order to improve the VAT collections.(November 2006) The Committee suggests redoing of the exercise of simultaneous reduction of rates of stamp duty and fixation of fair value with careful planning and coordination between Taxes Department and revenue Department.(November 2006) The Government must take steps to design an MIS(Management Information System) in the Commercial Taxes Department for collecting commodity wise information of collectible taxes.(December 2008) Preparing the VAT manual as early as possible and to implement the recommendations mentioned in Report of CAG of India relating to Revenue Receipts that include a)measure to entertain only genuine appeal cases b)reduce the discretion of assessing officers for fixing penalty for offences c)effective monitoring and disposal of pending assessments and collection of arrears within specified time period d)bringing unregistered dealers under tax net e) strengthen internal audit system.(2009-2010) Setting up of a Centralized Management Information System within ministry of finance to ensure that data on tax payers and tax paid from all sources are collected and stored for further analysis.(2009-2010) Improving the mechanism for tracking import of goods into kerala through railway and airports and improve cross verification of sales tax/VAT bills of goods brought for personal use.(2009-2010) The Government should have a GST cell in the Department of Commercial Taxes that should be ready with a draft bill for GST and Government should commission studies on estimating additional tax base for most recent year and also projections for future.(2009-2010)

Actions such as Operation Palakkad Gap2006-07, Operation In and Out 2010-11 etc. may be repeated at frequent interval without notice. Surveillance cameras weigh bridges etc. may be placed wherever necessary.(2010-11)

 Appropriate steps should be taken to control distortive tendencies of tax evasion,avoidance and trade diversion.(2010-11) Reconciliation of accounts of tax collection to ensure the recording oftransactions under proper heads of accounts(2010-11) Exhaustive study inthis respect by an expert group at the earliest(201011) 2) Non-Tax Revenue The Committee feels the need for user charges to be periodically adjusted for inflation and need for differential charges based on ability to pay.(December 2008) The Committee recommends putting in place multiple channels for payment of various user charges by the public.(December 2008) The committee recommends the state government to work out a road map by which reasonable rate of return is accrued to government on its equity capital in public sector enterprises around ten per cent.(2009-2010) A new cell may be established in Finance Department for the purpose of collecting department/item wise data on user charges and make suggestions for reviewing the rates periodically on a scientific basis.(2010) The Government may explore possibilities of enhancing revenue from other non tax sources such as mining of sand.(2010) The committee recommends that review petition and appeals in connection with taxes must be expedited.(2010-11)

The committee recommends that review petition and appeals in connection with taxes must be expedited.(2010-11) 3) Centrally Sponsored Schemes The Committee strongly feels that the Finance Commission of India should try to protect fiscal autonomy of States and urges State Government to voice its concerns over recommendations of Thirteenth Finance Commission at the appropriate level.(20092010)

 The Committee recommends that Finance Department may institute a necessary mechanism to periodically review the progress of reimbursement in the case of centrally sponsonered schemes.(2010) a cell could be established in Finance Department to monitor the progress, fund release and fund utilisation under centrally sponsored schemes.(2010) The declining share of centres transfer to the state has to be viewed seriouslyand presented at the appropriate forum by the State government to revert thetrend.(2010-11) State has to submit adequate and acceptable project proposals to the Centre in time for obtaining the entire grants awarded.(201011) Improvement in the tax buoyancy by revamping the tax administration.(2010-11) urgent measures to be initiated to avert a possible debt stress situation in the state(2010-11) immediate steps will have to beinitiated for restructuring the portfolio of borrowing of the state with least costobjective(201011) The Committee recommends that urgent steps may betaken to implement the remaining recommendations of 13th FC in a time boundmanner(2010-11)

Expenditure There should be a system for reclassification of expenditure as capital and revenue while preparing expenditure statements for PWD,LSG and similar departments.(December 2008) The Committee feels that there is no need of legislation specifying the use of Public Account accruals when there is already an Fiscal Responsibility Act specifying the level of fiscal deficit.(2010) The Committee recommends changes in fiscal policy and priorities in public spending to address this issue especially onsalaries to government

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staff, teaching grants to private aided educational institutions, pensions and interests Salary and Pensions The Committee suggest the Government to visualize a teacher exchange scheme whereby all the three parties, the teacher, Kerala State and the State buying services of the teacher are better off.(November 2006) The Committee emphasises the suggestion of first report of KPERC urging the State Government to move away rom a defined benefit system to a defined contribution system in the case of pensions.(November 2006) The State Government should initiate steps for collection and computerisation of relevant data of pension outgo and make an indepth study so as to arrive at some feasible parametric modifications.(December 2008) The Government should enhance the age of superannuation of employees and lower the age limit for initial appointment to service.(December 2008) The retirement age may be enhanced from 55 to 58 years initially and then to 60 years.(December 2008) The Government can create new temporary training posts, speed up recruitment process and enforce reporting of all vacancies to PSC promptly . (December 2008) The maximum age limit for applying for jobs can be reduced from 35 to 33 years and finally to 30 years and the Government can also institute a study on feasibility of reducing age of entry into service and extending the retirement age.(December 2008) The Committee suggest that it would be prudent to practice pay/pension revision once in 10 years.(2010)

The revision of salaries and pensions once in 10 years asfollowed by central government(2010-11) To reduce the item of expenditure throughintroduction of egovernance, payment of salaries, pensions, social welfare schemesthrough banks, introduction of email for official communications etc.(2010-11) Some of thesubsidiary activities like watch and ward, cleaning, gardening, transport of officials,delivery of mails etc. may be

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outsourced or given on contract basis without longterm financial commitments.(2010-11) The switch over to contributory pension scheme must be expedited.(2010-11) The Committee recommends that wasteful expenditure in payment of salaries may be curbed.(2010-11) The Committee recommends that necessary steps may be taken by the Departments and LSGIs to distribute the pensions every month through banks / epayment.(2010-11) . Subsidies Review of expenditure on subsidies.(2010-11) Social Security Grants in aid the practiceof starting new educational institutions and courses in private aided sector may be discontinued.(2010-11) The existing private aided educational institutions may be allowed tostart new course only in unaided stream.(2010-11) for social equity reasons thepresent system of recruitment in the private aided sector may be reviewed.(2010-11) constitution of an Expert Committee to review theacademic activities and finances ofKerala Agricultural University, Fisheries University and Kerala Veterinary andAgricultural Science University.(2010-11) The Committee recommends the constitution of regulatory agency, a State University Grants Commission to evaluate the activitiesand to allocate grants-in-aid on a regular basis.(2010-11) Devolution to LSG The financial profile of LSGs has to be computerised and updated periodically.(December 2008)

6) Capital Expenditure 7) Plan Expenditure The Committee urges the Government to ensure that increasing share of Public Account Accruals is used for Plan capital spending explicitly to enhance spending on physical infrastructure.(2010) steps may be taken to pass the budget in Marchevery year.(2010-11) Practice of supplementary demands for projects subsequent to the Statebudget may be discouraged and theplan proposals in the

supplementary demands for grants may be limited to thedeclaration in the budget speech.(2010-11) The name of the Department and theofficer responsible for implementing the scheme may be indicated in the budgetdocument of the annual plan.(2010-11) the Departments may take steps to strengthen the projectpreparation activities with the help of outside experts including retired people andagencies in public and private sectors.(2010-11) The Committee recommends that the existing system of monitoring plan expenditure must bestrengthened. appropriate action may be initiated against the officers responsible for these lapses.(2010-11) norms or guidelines may be prescribed for projectpreparation, scrutiny of projects and preparing the plan schemes one year ahead ofimplementation so as to get the administrative sanctions without hurdles.(2010-11) the present mechanism for scrutinizing and evaluating the viabilityof schemes at State Planning Board and Departments must be strengthened withprofessionals.(2010-11) The Committee recommends urgent need for etenderingof all plan activities.(2010-11) some exceptional situations, such as projectimplementation in difficult terrain and hilly areas, the rates should be flexible foreffective implementation.(2010-11) E governance may be urgently initiated in variousstages of project formulation, implementation, monitoring and evaluation.(2010-11) Monitoringmechanism of the parent departments over the offshoot/subsidiary agencies mustbe strengthened for achieving increasing accountability of the former.(2010-11)

Interest payments and receipts The Government may take steps to fix the terms and conditions of all loans sanctioned to the PSUs without delay.(December 2008) Committee recommended the Finance Department to monitor the payment of interest and timely repayment of principal loan amount and take steps to claim interest against loans advanced.(2009-2010)

 The Committee recommends that the Guarantee Redemption Fund may be operationalised at the earliest.(2010).

Debt Management The Committee requires the Government to provide information on the opening and losing stocks of unreported liabilities for the year 2006-07 with budget documents for the fiscal year 2007-08.(November 2006) the debt managementpractices of TN be reviewed for any lessons to be learned for Kerala(2010-11) Cost-minimising criteria for the choice of instruments for debt.(2010-11) management hereafter. Urgent steps may be undertaken to restructuring thePSUs and similar organisations for recovering the cost of borrowed funds.(2010-11)

DEFICIT The Committee urges the Government of Kerala to make available the data required for further fine-tuning the procedure for adjustment of revenue deficit and requires state government to persuade Government of India to permit adjustment of revenue deficit to exclude revenue expenditures towards creation of physical assets.(November 2006) The Committee feels that focus should be on expenditure restructuring and improving expenditure efficiency rather than on arbitrary cuts in expenditure.(December 2008) The Committee recommends amending Fiscal responsibility acct o 2003 to extend the time limit for giving enough time span to phase out revenue deficit completely.(December 2008) Amend the Kerala Fiscal Responsibility Act of 2003 and to eliminate revenue deficit by 2014-15 and cut down fiscal deficit to 3 percent of GSDP by 2013-14.(2009-10) The committee suggests that it is not financially prudent to invest in the Consolidated Sinking Fund when the state is under obligation to eliminate its revenue deficit and limit its fiscal deficit.(2009-2010) The Committee recommends that Public Account Management should be self liquidating in nature.(2010)

REPORT The Committee suggests the amending of KFR Act prescribing tabling of Reports of Committee before Legislative Assembly along with an action taken report.(December 2008) The Government may submit an Action Taken Report while submitting KPERC Report to the Legislative Assembly.(2010) DATA COLLECTION It is recommende to establish an MIS located in the Finance Department for collection,processing and updating of all valuable fiscal variables.(December 2008)

PUBLIC SECTOR UNDERTAKINGS The Committee recommends the Government to get the performance of the SLPEs thoroughly evaluated by professional experts and get their recommendations for improving the financial performance of PSUs.(Decembber 2008)