Economic and tax Reforms in Telangana - Telangana PCS Exam Notes

Economic and tax Reforms in Telangana:-

Telangana, has emerged as one of the fastest growing states in the country. In 2016 Telangana and Andhra Pradesh have jointly topped the ease of doing business ranking with a score of 98.78 per cent while Gujarat, the former number one, has slipped to the third position. With a buoyant economy, it has improved liquidity and enjoys the distinction of being allowed to borrow up to 3.5 per cent (Rs 25,019 crore) of its total GSDP, as against the normal three per cent, for the third year in a row since 2015-16. The Gross State Domestic Product of Telangana for 2017-18 at current prices is estimated to be Rs 7,49,893 crore. This is 14.6% higher than the revised estimate for 2016-17. Improved fiscal responsibility and budget management measures have helped cut wasteful expenses, increase revenue and welfare allocations.While boosting the GSDP, the state has consistently remained at the top of the ease of doing business (EoDB) rankings with the TS-iPASS-the single-stop clearance facility launched by Telangana Goverment in 2015. It ensures swift clearances to set up industries based on self-certification by the entrepreneur. Telangana is the only state that has accorded the investor a legal right to get industrial clearance, provided all compliances are in order. As part of EoDB, the state has launched 113 online services across 22 government departments, introduced inspection reforms and simplified procedures. Telangana has also implemented holistic development for flagship social sector schemes. Per person commercial bank credit extended in 2015-16 was Rs 99,344 as compared to the national average of Rs 66,683. This has also enabled the state to notch the second highest improvement in per capita services GDP after Karnataka (it increased from Rs 23,993 annually to Rs 64,496, an increase of 169 per cent between 2009 and 2014). On November 6 2017, Telangana became the first state in the country to provide round-the-clock uninterrupted supply of power free of cost to farmers. We are top ranked in ease of doing business.

Highlights of Economy as per Budget 2017-18:-

The Gross State Domestic Product of Telangana for 2017-18 at current prices is estimated to be Rs 7,49,893 crore. This is 14.6% higher than the revised estimate for 2016-17.
Total expenditure for 2017-18 is estimated to be Rs 1,49,646crore, a 33.4% increase over the revised estimate of 2016-17.
In 2016-17, there was a decrease of Rs 18,225crore (14%) in the revised estimate over the budget estimate.
Total receipts (excluding borrowings) for 2017-18are estimated to be Rs 1,19,940 crore, an ncrease of 36% over the revised estimates of 2016-17. In 2016-17, total receipts fell short of thebudgeted target by Rs 16,661crore (15.9%).
Revenue surplusfor the next financial year is targeted at Rs 4,571crore, or 0.61% of the state Gross Domestic Product(GDP). Fiscal deficitis targeted at Rs 26,096crore (3.49% of state GDP).
In 2016 Telangana has reported a 27.45% growth in own tax revenues, probably highest among the states, during the first two months of current fiscal. Telangana has reported Rs 7,687 crore of state own tax revenue as against Rs 6,031 crore a year ago, reflecting a growth of Rs 1,656 crore.
The state’s economy is dominated by the services sector, which constitutes 63% of the state’s economy in 2016-17. This is an increase from 53% in 2011-12.
Industry sector constitutes 22% of the state’s economy,a decline from 31% in 2011-12.
Agriculture sector of the economy constitutes 15% of the economy.
Agriculture sector saw a volatile growth in the last four years. The sector saw negative growth of 9.5% and 6.3% in 2014-15 and 2015-16.
Industry sector saw its highest growth of 9.7% in 2014-15 for years between 2012-13 and 2015-16.The sector recorded its lowest growth of 0% in 2013-14.
Services sector saw a steady growth among all the sectors of the economy. 2014-15 saw the highest growth of 12.7% , followed by 11.4% in 2015-16.

The government of Telangana had progressively made reforms in policies, processes and the Governance, on the whole, to enhance the business ecosystem in the state across sectors in a simplified manner. Three most impactful reforms made by the State Government to enhance Ease of Doing Business:

Industrial Policy Frame Work

Telangana State Government has launched an “Industrial Policy Framework of the state “in the year 2015 – It lays out the framework on how the industrial activity will be promoted in the State. The new Telangana State Industrial Policy strives to provide a framework which will stabilize and make existing industries more competitive, and also attract and realize new international and national investments in the industrial sector. The focus is on core manufacturing sectors, with the creation of employment for urban and rural youth and adding value to existing skills emphasised at all stages. Some of the salient features of the Industrial Policy framework are shown below.

Salient Features of New industrial Policy Framework:

Minimum inspection and Maximum facilitation
Effective Industrial clearance mechanism through innovative ICT solution called TS-iPASS
Right created for delivery of single window services. If the Right is violated, there is a penalty provision, on the lines of the Right to Information Act. Accountability will be established among the officials through the creation of this Right.
5 lakh Acres of readily available industrial land bank
10 % of water from Irrigation sources is reserved for industries. Allocations up to 0.2 TMC per unit does not require any clearance from irrigation department.
24/7 power supply
Approvals to Mega Projects(with investments more than Rs.200 Cr.) within 15 days
Focus on 14 identified thrust areas and core sectors
Special focus on SME’s/ Micro industries
Ancillary/ Vendor development
Preventing Incipient Sickness among SMEs

Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS):

The government of Telangana has enacted the Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS) act. Telangana is the only state in the country that has made it a right to get industrial clearances.

Salient features of the TS-iPASS system:

Approvals based on Self-certification by the applicant.
End-to-End online System where an investor will be guided in each step, can upload the required documents, make online payment, track status of approvals, view and download the issued approvals
Model documents to be attached are provided on the Web portal.
The number of attachments were reduced to 10 which are common to all departments
The portal provides for online pre-scrutiny of applications within 72 hours. This ensures that the applicant is informed of any shortfalls before making payment.
Clearances are issued online which can be downloaded by the applicant and verified by any third party.
The applicant is entitled to know the reasons for the delay in getting the clearance within time limits.
Provision for imposing penalties on the officers who failed to accord clearance within time limits
Chasing Cell
Government of Telangana constituted an Industry Chasing Cell in the office of Hon’ble Chief Minister which focuses on major investments and investments which are of strategic importance with the following key functions:
Address all protocol requirements and facilitation services for identified potential investors.
Coordinate with various agencies and ensure timely approvals as per Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS).
Provide effective facilitation to implement “Right to Clearance”.
Provide requisite facilitation to the industry until it is established and goes on stream in accordance with TS-iPASS timelines.
Identify process constraints at various stages of setting up of new industries / expansion/ revival etc., and make recommendations for streamlining.

Impact of the Reforms:-

A maximum of 30 days are fixed for obtaining any state clearances, however, the permissions are accorded much earlier.

For example –

M/s. Amazon India Ltd. was accorded all pre-establishment clearance within 15 days.
M/s. Bhagwati Products Ltd., (Micromax Mobile Manufacturing Company) got all the approvals within 15 days including allotment of Land in September 2015. The unit is planning to commence its production in January 2016.
The least possible Turn-Around-Time (TAT) for Consent of Establishment for all major industries in only 15 days.

Key Reforms under implementation:-

Labour Reforms
Filing of applications and issue of approvals, renewals and inspections under all labour acts are being made online.
Joint inspection system on risk base is under evaluation. Low-risk establishments will be inspected only once in 10 years, medium risk once in 5 years, and high risk once in a year. These inspections will be carried out jointly by all the departments viz., Labour, Factories, Boilers etc., which require inspection. Previously all units irrespective of the level of risk has to undergo multiple inspections by many departments
The schedule of inspections will be determined through online computer-based risk management system.
Introduction of Self-Certification and third party inspection system in Boilers Department

Development Permission Management System (DPMS):-

Hyderabad MetropolitanDevelopment Authority (HMDA) has come up with an innovative ICT solution called “Development Permission Management System” (DPMS) an online portal where a common citizen/business organization is empowered to know approval procedures, end-to-end assessment process from HMDA and other linked departments.

Key Outcomes of DPMS:-

Increased Citizen Satisfaction by providing 24X7 online services
Transparency provided into the end-to-end assessment process & also ensure data integrity
Ensures uniformity and adherence to DCR guidelines through automation of technical scrutiny.
The number of visits to the HMDA department is reduced
Increased Efficiency and quality of services
Simplification of procedures and processes
Project Development Agreement(PDA) enabled Site inspection
Increased Accountability and Timely delivery of services
Real time information on dashboards to make better and faster decisions
Integrated document management process for easy storage and retrieval of digital documents at any date.
Integrations with Payment Gateways, GIS, Master plan, Website and RTI – Real-time access to data
Maintenance of comprehensive Data & Information Systems.

Industry-institution Interface

The government is planning to take Industry Specific Skill development programmes in consultation with the Industry so that the trained candidates meet industry requirements. Modalities for interfacing the Industries and Institutions Accordingly are being worked out by a High-Level Task Force committee under the Chairmanship of the Chief Secretary.

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