The book on ‘Non-tax Sources in India – Issues in Pricing and Delivery of Services’ highlights the Significance of non-tax sources in resource mobilising exercise of States, the trade off that exists between economically viable non-tax structure and pricing strategies, which are different for public and private goods. The book spells out its objectives - the structure and trends of non-tax revenue across States, suggestions for rational non-tax structure keeping in view the economic viability to generate larger resources, fiscal measures that is politically palatable and institutional preparedness. The introductory chapter delves on various facets of non-tax sources including its defi nition, component-wise analysis. The book, however, limits its scope to only those non-tax revenues which originate from administrative departments and departmental undertakings that are of non-commercial nature.

The second chapter sets out the ‘Fiscal Significance of States’ Own Non-Tax Sources’ not only in India but also in other countries. Trends in own non-tax revenue of the Indian states indicate that while there is an increase in absolute term over the years, as percent to aggregate receipts, it has gradually declined from 11.6 per cent in 1993-94 to 8.4 per cent in 2002-03 and further to 2.9 per cent in 2003-04. In terms of contribution of own non-tax revenue to Gross State Domestic Product (GSDP) some of the states indicate an increasing trend such as Goa, followed by Gujarat, Punjab and Tamil Nadu. The study concentrates on the recoveries from economic, social and general services as their growth is more reliable as compared to other sources such as interest receipts, dividend and profits. Though these sources of non-tax revenue have great potential yet these do not have much Significance in the State budgets for which policy restructuring is essential.

The third Chapter on ‘Pricing Strategy for Non-Tax Revenue’, reviews the literature relating to pricing theories for public utilities for different categories of non-tax revenue. The study highlights the difference in pricing strategy for a private good as against for publicly provided private goods and public utilities. The Chapter delineates various pricing theories and keeping in view the limitations of each theory, a mix of these theories is suggested. This Chapter also attempts to elaborate on application of these of theories in various types of utilities. In this context, principles of ‘user charges’ and related issues such as costs and problems in price measurement as well as issues involved in designing user charges are dealt in detail. Issues with regard to designing appropriate user charges, lack of information, the cost of collection, stickiness of user charges etc., are also set out in detail. Nevertheless, attempt needs to be made to move towards appropriate user charges keeping in view the specific benefits offered by public good/ utility. Further, the study observes the variation in States cost recovery policy in line with the stated objective which shows up in different cost recovery ratios across states.

This is followed by ‘Revenue Realisation from Non-Tax Sources’ in chapter four which besides focusing on the trends across States and comparative picture in different countries also emphasises the need for a State to improve their recovery rate juxtaposed with the data of other states. The study identifies a desired rate of recovery to its expenditure (RR/RE) for each service which is the norm for all states. Desired RR/ RE is ‘the rate’ which the States should aim at and make continuous efforts to attain. As a second step, the study compares the adequacy of the actual average RR/RE with the actual RR/RE of the best performing State from amongst the 15 major States for each service. An effort is made at estimating relative efficiency of States. The exercise reveals that the RR/RE varies among the services as also among States. Among the major States, Goa’s recovery from services as well as from the economic services has been highest as compared to other States. At disaggregated level, RR/RE has risen for only two services ( education and roads and bridges) in all States.

Drawing from the above, the chapter five on ‘Rationalising Structure of Non-Tax Revenue’ reviews the user charges for some of the services keeping in view the objective of equity and efficiency. The chapter attempts to analyse a few select services such as education, medical and public health, water supply and sanitation, etc. In doing so, the study draws parallel practices existing in other countries and suggests certain policy prescription in each of the above services to address the principle of equity and efficiency. A key omission in this section is the power sector, which has perhaps the greatest problems in the area of cost recovery. For example, in education, it is suggested that the primary education be subsidised while the user charges for secondary and higher education be designed in such a way that they are progressive according to the income groups. Greater private financing for higher education and involvement of private sector with strong government regulatory mechanism. These principles are of crucial importance for practical policy purpose. It is argued that states would have to accord greater priority to non-tax revenues as ability of government to tap important tax bases is limited.

Keeping in view the above issues, chapter six on ‘Procedural Reforms and Issues in Delivery of Service’ highlights the amount of pressure on the government in delivery of its services both effectively and efficiently which is greatly influenced by the complexities in the procedure of delivery of services. This undermines the real purpose of service delivery more being access to the needy. Detailing the limitations observed in providing services, the author suggests that there needs to be proper regulation and enforcement to raise awareness level and to create a sense of accountability amongst the service providers through effective use of information technology thereby ensuring efficient service delivery to the needy. To attain good governance and to strike a good balance between client-provider relationships, the study suggests that decentralisation can play a better role in service management.

The concluding chapter on ‘Issues and Policy Imperatives’ is a nutshell of all the above chapters. The chapter lists out policy prescriptions for select services with a view to garner more resources for the States. A study in non-tax revenue has its own limitations and the introductory chapter lays out some of these. As a result, other sources of non tax revenue like interest receipts and dividend and profits which forms about 13 per cent of States’ own non tax revenue are not covered in the study. For instance, the main limitation being data availability and the study observes clearly that there is no uniform practice in data presentation in the budgets across the State governments. Further, not all receipts by the government get accounted for in its consolidated fund. For instance, in education, though students pay a variety of fees, only the tuition fees are credited to the treasury. Similarly, in public health, in some States, the user charges paid by the outpatients are not put into the consolidated fund. The study does not cover power sector which is faced with lot of complexities in collection of resources. The exercise of RR/RE limits itself to the return in value terms and the externalities generated by these goods which are far more and have a long term benefit are not factored in. For example, expenditure in education, public health cannot be measured purely on return in value terms as they have long term benefits. Overall, as the yardstick for comparison of recovery rate being the same across the States, the methodology can be used for measuring inter-State efficiency in collecting the user charges.

R. Kausaliya*