THE EVOLUTION OF PROVINCIAL FINANCE IN BRITISH INDIA

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PART II: PROVINCIAL FINANCE: ITS DEVELOPMENT

 Contents

Budget By Shared Revenues

 

CHAPTER VI

BUDGET BY SHARED REVENUES

1882-83 to 1920-21

At every step in the direction of enlarging the Provincial Budgets the crucial question, as has already been pointed out, was with regard to the difficulties of balancing the revenues and charges proposed to be incorporated therein. The two steps heretofore taken, one in 1871 and another in 1877, in the direction of the evolution of Provincial Finance, were marked by two distinct methods of balancing the Provincial Budgets. On the former occasion the Imperial Government supplied the Provincial Governments with fixed lump sum assignments from the Imperial treasury. On the latter occasion this mode of supply was partly replaced by assigning certain sources of revenue for the use of provincial Governments. The plan of assigned revenues, though it went a great way to remove the most serious defect of the measures of 1871-2, which transferred to the Local Governments the responsibility of meeting charges which had an undoubted tendency to increase, with income which, although not quite fixed, had little room for development, fell short of the requirements of Provincial Finance from the standpoint of elasticity. Superior to those of 1871 though they were, the measures of 1877 were so short of the fullest requirements of elasticity in finance that the Government of Madras refused to accept the enlarged scheme and preferred to abide by the arrangements of 1871. The scheme of 1877 was not offered to Burma or Assam. But when the Government of India made such an offer in 1879 it was obliged to turn over a new leaf, for, though the difficulty of meeting expanding charges with fixed assignments was overcome in some of the provinces by economy and good management, it was considerably felt by the province of Burma. The expenditure of the province in the seven years preceding the scheme of Provincial Finance aggregated to Rs. 1,98,45,970, while the assignments for the  following seven years, aggregated apart from special additions, Rs. 2,20,22,770, showing an excess of Rs. 21,76,800, in all or about 3 lakhs a year. But the expenditure during the same period amounted to Rs. 2,40,77,885, being an excess of Rs. 42,31,915 in all or about 6 lakhs a year. The difference therefore between the excess assignment of 3 lakhs, and the excess expenditure of 6 lakhs a year, had to be made good by the Imperial Government by special grants averaging 2 3/4 lakhs every year to maintain the solvency of the Province. [f1]  The Government of India while making the supplementary assignments was not unconscious of the demoralising effect of such doles. In fact it was admitted that it would have been much better to have augmented the provincial assignments to Burma by 22 1/2, lakhs at the start had it foreseen the necessity for it, than to have been obliged to grant an equal amount in the form of supplementary aids so detrimental to economy and good management. The experience of Burma had driven home the fatuity of assignments as a mode of supply and the Government of India had realised that elasticity in revenues was a vital condition for the success of Provincial Finance. To assign revenues to Burma was therefore inevitable. Being overborne by the needs of the Province and by the fact that the Province yielded a substantial surplus to the Imperial treasury, the Government of India conceded that the Province was " entitled to have its real wants supplied more liberally than heretofore." [f2]  It is in the method adopted for the purpose of giving a liberal treatment to the province of Burma that the new step in the method of supply to the Provinces was taken. In the settlements made in 1877-8 with the five Provinces—Central Provinces, N.W.P. and Oudh, the Punjab, Bombay and Bengal—the Heads of Account under Revenue and Expenditure comprising the Indian Budget were grouped under two distinct categories : (1) wholly Imperial and (2) wholly Provincial. But in the case of Burma the Heads of Account were grouped under three distinct categories : (1) wholly Imperial, (2) wholly Provincial, and (3) jointly Imperial and Provincial3 In so far as items of revenue and expenditure were in the exclusive keeping of the Imperial or the Provincial Government, the settlement did not differ in spirit from that obtaining in other provinces. The difference consisted in carving out a third category of Account to be made of jointly Imperial and Provincial. By it certain revenues and charges were marked off from the rest and were shared between the Imperial and the Provincial in some definitely fixed proportion. The object of the arrangement was to replace rigidity in the Provincial revenues by elasticity. In the finances of the other Provinces there was elasticity in so far as their assignments were replaced by assigned sources of revenue. But to the degree in which their revenues were made up of fixed assignments their finances inevitably suffered from rigidity. In the case of Burma, however, the substitution of shares of growing revenues for fixed assignments gave complete elasticity to the Provincial revenues without which it had become so difficult to shoulder the responsibility of meeting expanding charges. - In recasting the framework of the Provincial Budget of Burma on the principle of shared revenues, all the heads of receipts and charges were made wholly Provincial, with the exception of the following, which were treated as wholly Imperial :

(1) The Army                                  Receipts and Charges.

(2) Postoffice                                                   

(3) Telegraph       

(4) Account Department  

(5) Meteorological Department...         

(6) Political                                                       

(7) Remittance of Treasure and  

Premium on Bills of Exchange and

unclaimed Bills of Exchange.

 

The third category of revenues and charges, namely, jointly Imperial and Provincial, covered the following items :

(1) Land Revenue, including capitation tax, but excluding Fisheries, with such Land Revenue Refunds, charges of collection and settlement as cannot be attributed to Fisheries only.

(2) Forest revenue. Expenditure and Refunds.

(3) Export Duty on rice, and Refunds.

(4) Salt Revenue, Expenditure and Refunds.

Items comprising the third category were divided between the Imperial and Provincial Governments in the proportion of five-sixths to the former and one-sixth to the latter. By adopting this method of supply Burma, unlike other provinces, secured funds of an elastic character, for, even though the shares remained fixed the amount they brought in any one year varied with the variation in the total yield of the revenues assigned or shared. Of course everything depended upon how Burma nursed the revenues delegated to its control. But if it did its duty, unlike the other provinces, its labours were not to be unrequited.

The same principle of shared revenues was applied to the province of Assam, which had hitherto continued on the old basis of 1871. Although the settlement with that Province had been made after that with Burma had been carried out, the principle of shared revenues as a mode of balancing the Provincial Budget was not adopted on any appreciable scale. The reason for this break in the progressive realisation of the principle is not to be attributed to any spirit of hesitation on the part of the Government of India, but is to be ascribed mainly to the necessity of the case. As it was contemplated to reincorporate the province into Bengal it was deemed expedient to frame the Provincial Budget of Assam on the same plan as that of Bengal so that their financial fusion might be as easy as the administrative. Thus the heads of revenue and expenditure which were provincial in Bengal since 1877 were also made provincial in Assam in 1879, including " Law Officers," which for temporary reasons were reserved as Imperial in Bengal. The only point at which the new principle was applied consisted in making the Land Revenue head in Assam a joint head to be shared by the Imperial and the Provincial Governments in the proportion of four-fifths of its net yield to the former and one-fifth to the latter. [f3] 

The beneficial results of the new settlement with these two Provinces are easily to be seen from the following comparative table of the estimates of their budgets as prepared on the old basis and as recast on the new :

 

000 omitted

 

Assam Budget Estimates

Bt. Burma Budget Estimates

 

Old Basis

New Basis

Old Basis

New Basis

 

1878-79

1879-80

1878-79

1879-80

1878-79

1879-80

1878-79

1879-80

 

Revenue Expenditure Surplus

Deficit

Closing Balance

2115

2253

 

138

206

2110

2261

 

151

55

3657

3480

177

 

521

3596

3566

30

 

555

4013

4169

 

156

873

4078

5111

 

1033

161

9459

8926

533

 

1562

9673

10119

 

526

1436

From the Resolution of the Government of India in the Department of Finance and Commerce, No. 1249, dated March 13, 1879.

 

Once the new principle of shared revenues was established in the case of Burma and Assam it was not possible for the Government of India to withhold its application from the other Provinces. The settlements made in 1877 with the several Provinces were not only of short duration but were also of unequal durations. It was only in the case of Bengal and Bombay that the settlements were made for five years commencing from 1877-8. In the case of the Central Provinces and the Punjab the period fixed was three years, while in the case of the North-Western Provinces it was as short as two years, from 1877-8. It is evident from this that the settlements with some other Provinces were to have expired soon after those with Burma and Assam had been completed, and would have required to be reconstituted on the basis of shared revenues. The Government of India, however, delayed the process, and in that it did wisely, for it was too soon to make the new principle of shared revenues and charges a basis for universal application. It was nothing but prudent to have regarded it as it were in its experimental stage. Secondly, the disadvantages of the ex-parte treatment of the Provincial Budget had come to be realised. It then dawned upon the Government of India that the several provincial Budgets were only parts of an organic whole, viz., the Imperial Budget, and it was manifestly inadvisable to frame the Provincial Budgets each by itself without regard to the claims, needs and exigencies of all others. But in order that this comparative and compromising operation of judging the claims of one in the light of the needs of others be performed with the desired effect of treating the different provinces in an equitable manner, it was essential that all the Provincial Budgets be dealt with simultaneously. The importance of this consideration and the desire to gain time in order to profit by the experiences of Burma and Assam led the Government of India with the consent of the Provincial Governments to extend or shorten, as the case may be, the duration of their financial agreements with the Provinces so as to bring about a synchronous expiry of them all on March 31, 1882.

 

Financial Settlements of 1882-83

The new settlements made with all the provinces with effect from 1882-31[f4]  were marked by an extension of the principle applied to Burma since 1878. Certain heads, as few in number as possible, of revenues and charges were wholly, or with minute local exceptions only, grouped as Imperial. Others were classed as wholly Provincial. The remaining were placed in an intermediate category designated as joint and were in most part shared equally between the Imperial and the Provincial Governments. In those cases, however, where the provincialised expenditure exceeded the resources from the provincialised as well as the shared revenues, the balance instead of being provided as heretofore by fixed assignments from the Imperial exchequer was rectified for each Province by a fixed percentage on its land revenue—a wholly Imperial head of revenue except in the case of Burma, where the percentage was extended to the Imperial rice export duty and salt revenue as well.

Along with the enlargement of the scheme of Provincial Finance in 1882 the Government of India was also anxious to introduce simplicity and uniformity in the matter of grouping the different heads of revenue and expenditure under the three categories now established. It will be remembered that the agreements effected in 1877 were marked by diversity and intricacy. The same charges were not provincialised in all the Provinces. A charge which was Provincial in one was Imperial in another. Again, in transferring charges a grant was often broken up so that a part was made Provincial and a part reserved as Imperial. On the revenue side the arrangement was not a little intricate. The computations owing to the proviso in respect of the assigned revenues made the calculations far from simple. Both these defects were, however, removed when the settlements were framed in 1882, and it is to indicate what heads of revenue and expenditure were provincialised, what were imperialised, and what were divided and to what extent, that the following attempt is made.

 

Revenues—.

 

Imperial

Provincial

Land Revenue

The whole except as entered in the Provincial Column

In Burma, Fisheries; in the

N.W.P. and Oudh collections from the Terai, Bhabar and Dudhi Estates, Rents of Water-Mills  and  Stone Quarries; in Bombay, Rents of Resumed Service Lands and Service Commutations.

In all Provinces, a fixed percentage on the Imperial land revenue to cover the difference between Provincial Revenue and Provincial Expenditure

11 Tributes

The whole.

Nil.

III Forest

Half.

Half.

IV Excise

Do.

Do.

V Assessed Taxes

Do.

Do.

VI Provincial Rates

Nil.

The whole.

VII Customs

All except as entered in the Provincial Column

All items other than Customs Duties: and, in Burma only, the same percentage on Export Duties as on the Land Revenue.

VIII Salt

All except as entered in the Provincial Column

All items other than Duty on Salt and sale of Salt; and, in Burma only, the same percentage on the salt Revenue as on the Land Revenue

IX Opium

The whole.

Nil.

X Stamps

Half.

Half.

XI Registration

Do.

Do.

XIII Post Office

Nil.

The whole.

XIV Minor Departments

Do.

Do.

XVI Law and Justice

Do.

Do.

XVII Police

Do.

Do.

XVIII Marine

As at present.

As at present.

XIX Education

Nil.

The whole.

XX Medical

Do.

Do.

XXI Stationery and Printing.

Nil.

The whole.

XXII Interest

All except as entered in the Provincial Column.

Interest on Government securities (Provincial).

XXIII Pensions

Book transfers from the Military and Medical Funds and subscriptions to these Funds

The remainder.

XXIV Miscellaneous

Gain by Exchange on Imperial transactions, Premia on Bills and unclaimed Bills of Exchange

The remainder.

XXV Railway

As at present.

Whatever is now provincial in each Province.

XXVI Irrigation and Navigation.

Do.

Do.

XXVII Other Public Works

Receipts from Military Works

The remainder.

XXXI Gain by Exchange on Transactions with London

The whole.

Nil.

 

Expenditure

1. Interest

The whole except as entered in the Provincial Column.

Interest on local Debenture Loans. 4 1/2 percent, on the capital cost to the commencement of the year, and 2 1/2 per cent. on the capital cost during the year, of all Public Works, whether classified as Productive Public Works or not, of which Capital and Revenue  Accounts  are kept: excepting, always, any portion of their cost supplied from the Provincial Revenues or by Local Debenture Loans. The rate of interest on the cost of Protective Public Works will be the subject of a special agreement.

2. Interest on Service Fund's and other Accounts.

 Interest on Service Funds and deposits in Savings Banks.

The remainder.

3. Refunds and Drawbacks

 Of the Imperial share of revenues.

Of the Provincial share of revenues.

4. Land Revenues

 The same percentage on charges for collection of Land Revenue and on the cost of Surveys (including expenditure hitherto charged in the Accounts of the Central Government) and Settlements elsewhere than in Bombay and Madras, as is   retained  of   Land Revenue.

The remainder.

5. Forest

 Half

Half. Do. Do. The whole. Do. The remainder.

6. Excise

 Do.

Nil. Half. Half. The whole. Do.

7. Assessed Taxes

 Do.

"

8. Provincial Rates

Nil

 

9. Customs

Do.

 

10. Salt

In Madras the whole. Elsewhere the purchase and manufacture of salt; and in Bengal the cost of preventive lines and operations: in Bombay charges connected with the administration of Salt Revenue in Portuguese India.

 

11. Opium

The whole

 

12. Stamps

Half

 

13. Registration

Half

 

15. Postoffice

Nil

 

16. Telegraph

Do.

 

 

17. Administration

Account and Currency Offices and allowances to Presidency Banks.

 The remainder.

 

18.Minor Depts

Archaeological and Meteoro logical Depts., Census Gazetteers and Statistical Memoirs.

The remainder.

 

19. Law and Justice

Nil.

The whole.

 

20. Police

Frontier Police and Police employed on Imperial State Railways on Salt preventive duties.

The remainder.

 

21. Marine

Whatever is now Imperial.

Whatever is now Provincial.

 

22. Education

Do.

Do.

 

23. Ecclesiastical

The whole.

Nil.

 

24. Medical

Nil.

The whole.

 

25. Stationery and Printing

Stationery purchased for Central Stores.

The remainder, including cost of stationery obtained from Central Stores.

 

'26. Political

The whole.

Nil.

 

27. Allowances and Assignment

The whole except as in the Provincial Column.

In Bombay, items now Provincial

 

28. Civil Furlough and

The whole.

Nil.

 

Absentee Allowances.

 

 

 

29. Superannuations

Items not provided for in the Al Provincial Column.

pensions and gratuities, except pensions payable from the Military and Medical Funds brought to account in India: each Government being responsible for pensions and gratuities which it now pays, or hereafter grants or recommends, however earned and wherever paid.

 

30. Miscellaneous

Remittance of treasure, and discount on Supply Bills.

The remainder.

 

31. Famine Relief

Secondary liability.

Wholly Provincial.

 

32. Railways

As at present.

Whatever is now Provincial.

 

33. Irrigation

Do.

Do.

 

34. Other Public Works

Military Public Works, and except in British Burma, Offices of the Supreme Government; Works in the Salt, Opium, Post Office, Imperial Telegraph and Ecclesiastical Depts. And Mint and Currency Offices; and Bengal Surveyor General's Offices.

The remainder.

 

38. Loss by Exchange

The whole.

Nil.

           

 

On the transactions of 1881-82 the Government expected to gain 470,000 a year. Of this sum, however, it returned to the Central Provinces 77,900, for improving the position of the subordinate civil services and other general purposes; to Madras, 20,000, for provincial public works; and to the N.W.P. and Oudh, 326,000, of which 10,000 was for additional Kanungoes in Oudh, and the remainder, 316,000, for a remission of local taxation. Besides these benefactions the Government of India gave for a favourable start to Bengal, 285,000; Burma, 20,000; N.W.P., 55,000, to be added to their balances before the close of the year 1881-2. These benefactions, which amounted to 496,000 a year, were expected to turn the annual gain of 470,000 into an annual loss of 26,000 to the Imperial exchequer[f5] 

In this connection it must also be recalled that the Government of India reimbursed the Provincial Governments of the amount of the benevolences it had levied on them in the years 1879-80 and 1880-1. But not long after the revision of 1882 the financial position of the Government of India, which had permitted of such a liberal treatment, suffered a reverse, and the necessity for levying benevolences on the balances of the Provincial governments reappeared in 1886-7. In presenting the financial Statement for that year the Finance Member of the Government of India argued:

"22. Since the estimates for 1885-6 were presented...... Indian administration and finance have entered on a new phase. The brief period of rest which the country had enjoyed since 1882 had drawn to a close...... By the events of the late years in Central Asia, India finds herself almost in contact with one of the great European Powers, and she cannot hope to escape the necessity which the position imposes on her of increasing her military strength. Events impending have occurred which have changed, as it was known they must change, the face of our estimates, and have thrust us violently out of the peaceful path of internal progress in which we had hoped to have been left undisturbed."

Among the other means employed to weather the storm the Government of India resorted a second time to nibbling at the provincial resources, and gathered a sum of 400,000 in the year 1886-7 by appropriating from their balances the above amount.

 

The condition of Provincial Finance during this period may be summarised in the following table :

 

 

Annual Surpluses and Deficits

Provinces

1882-3

1883-4

1884-5

1885-6

1886-7

 

C.P.

33,775

76,212

18,047

22,080

115,656

Burma

171,207

—90,030

—89,725*

#

71,743**

Assam

13,887

—5,216

—40,577

25,299

28,576

Bengal

539,611

146,027

48,910

26,777

52,911

N.W.P.& Oudh

281,222

357,630

—69,276

—180,060

—12,408

Punjab

—110,966

—15,765

—41,545

42,447

3,106

Madras

108,421

10,820

—87,284

146,692

—78,689

Bombay

—149,894

—2,585

6,006

291,976

—161,369

*No balance left at the dose of the year.

# Equilibrium.

**Balance obtained by excess of current revenue over current expenditure of the year.

Compiled from the annual Finance and Revenue Accounts of the Government of India.

 

The settlements entered into with the Provincial Governments in the year 1882-3 not only differed from the preceding settlements in the replacement of fixed assignments by shares in the Imperial revenues, but they also differed in another important respect, namely, their duration. Though the results of the scheme of provincial Finance have been presented in one Table covering the period 1871-7, it must not be supposed that the settlements with the various Provinces were made for the period of six years. On the other hand, the settlements were only annual and lasted up to 1877 by the process of constant renewals. The results have been presented together for a continuous period not because the settlements were made for that period, but because the principle on which they were based endured for that period. After 1877 the settlements no doubt were made for a longer period. In two cases they were for five years and for the rest the period ranged between two and three years. The short duration system, like the fixed assignment system, was of immense advantage to the Imperial treasury. The object of these settlements, it will be recalled, was firstly to put a definite limit on the demands of the Provincial Governments on the already too scanty resources of the Imperial Government. Evidently this object would have been better served had the duration of the settlements been longer than it was. But a longer duration would have deprived the Imperial treasury of its right to profit by an early revision of the revenue side of the contract. It was this consideration of not remaining too long out of pocket, that had hitherto prevailed upon the Government of India to shorten the duration of contracts as much as possible. But what was an advantage to the Imperial treasury was from the standpoint of the Provincial Government a serious drawback. Owing to the short durations of the settlements the Provincial Governments were not in a position to distribute the funds at their disposal on the incorporated services so as to open a new page in their financial history. They could not adopt a definite financial policy, for they feared that the new terms on renewal might compel them either to give up the policy or modify it so seriously as to prejudice its results. A single budget may seem nothing more than the conspectus of financial happenings of the year to which it pertains, yet to the financier who frames them year after year they embody a definite policy running towards its consummation. But a policy, however wisely adopted, may be thwarted by an unwise disturbance of the uniformity of conditions on which its fulfilment depends. This was just the flaw that deteriorated the sound working of Provincial Finance. Constant renewals had a general disturbing effect, and the duration between any two of them was indeed too short to give a stable state of conditions. Being impressed by the fact that the advantages of a short-duration-contract to the Imperial treasury were enormously counterbalanced by its disadvantages to Provincial Finance, the Government of India, on the occasion of revising the settlements in 1882-3, made it a definite rule that they shall be quinquennial in duration ; that is, they shall not be subject to revision before the end of the fifth year from their commencement.

Revision of 1887-88

By virtue of this rule the settlements made in 1882-3 expired in 1887. The revision then undertaken, as well as the subsequent ones, left as a rule undisturbed the two categories of revenue and expenditure, namely, those wholly Provincial and wholly Imperial. It became almost a convention to leave them as they were since the separation in 1882, when the constitution of Provincial Budgets was thoroughly overhauled and consolidated. The only heads of revenue and expenditure that were revised, as revision fell due, were those that were grouped under the third category, namely, jointly Imperial and Provincial, otherwise known as " Divided Heads."

In the revision of 1887-8 the decisive factor was the unsatisfactory position of the Imperial Finances already referred to. To improve its financial position the shares in the joint heads were altered so that each Local Government was allowed to appropriate three-fourths of the stamps and one-fourth of the excise revenue, and required to bear the expenditure under those heads in like proportion. The proportions of land revenue were also altered so that three-fourths of it was made Imperial, and one-fourth Provincial. But the needs of the Imperial treasury were so great that the Government of India even revised some of the heads of the other two categories, namely, Salt, Customs, Interest, Irrigation and Railways, to its own advantage. The details of the gain to the Imperial treasury are as given below :

 

Revenue

Imperial Share Increased —Decreased

Net Gain

 

 

 

Land Revenue

437,500

 

 

Stamps (share reduced from 1/2 to 1/4 Excise (share increased from 1/2 to 3/4) Salt revenue of Burma imperialised Customs revenue of Burma imperialised Assessed taxes—divided in moieties

—810,000 947,500 } 5,000 155,000 —290,000 }

215,000

 

State Railways gross earnings— Nagpur Chhattisgarh Patna-Gaya }

—310,000

 

 

Cawnpore-Achneyra }

 

 

 

Eastern Bengal, provincialised

—540,000

 

 

Expenditure

Increased —Decreased

Net Gain

Land Revenue, entire provincialization of survey and settlement

145,000

 

 

Salt in Bombay imperialised

—90,000 {

 

 

Customs in Bombay imperialised

—50,000

 

 

State Railways—

 

 

 

Working expenses:—

 

 

 

Provincialised

305,000 {

 

395,000

Imperialised ...

—215,000

}

 

Interest—Provincialised

—70,000

 

 

Imperialised

—65,000

}

 

Irrigation—Provincialised. Bengal

65,000 {'

 

 

Irrigation—Provincialised Madras

230,000

}

 

Add—Small items of accounts unenumerated

 

20,000

 

 

This gain to the Imperial treasury was distributed in the following proportion among the various Provinces :

 

Provinces

Increase of annual resources under the principal Provincial Heads of Revenue as estimated on comparison of 1882 and 1887

Amount by which Annual Provincial Resources were reduced by the Revision of 1887

 

Land Revenue

Stamps and Excise

Total

 

 

C.P.

2,200

45,500

47,700

15,600

Burma

4,700

9,200

13,000

 

Assam

22,300

21,300

43,600

24,600

Bengal

N.W.P.

19,200

8,000

171,550 1

30,150

190.750 138,150

103,600

100,000

Punjab

Madras

32,800

27,750

23,100 1

42,550

55,900

150,300

174,400

Bombay

99,000

198,550

297,550

221,900

Total ...

195,950

741,900

937,850

640,100

 

This would have been the net gain to the Imperial treasury had it not been for the fact that it conceded to Burma the sum of 10,000. The net gain was thus reduced to 530,100 per annum. The condition of Provincial Finance during the period of 1887-92 may be judged from the following table presenting the annual surplus and deficit of each of the different Provinces :

 

 

Annual Surpluses and Deficits

 

1887-88

1888-89

1889-90

1890-91

1891-92

 

Rs.

Rs.

Rs.

Rs.

Rs.

c.p.

13,148

22,583

—12,322

—31,573

17,540

Burma

77,028

11,560

64,072

106,216

50,598

Assam

7,751

26,343

20,090

—17,871

31,185

Bengal

131,007

—65,792

102,547

—120,377

—11,934

N.W.P. & 0udh .

—53,900

45,949

102,710

—12,544

—4,399

Punjab

12,446

32,142

29,264

31,367

—1,719

Madras

105,371

113,932

144,571

—136,739

—241,770

Bombay

—24,574

18,322

41,361

—123,887

—53,189

Compiled from the annual Finance and Revenue Accounts of the Government of India.

 

Revision of 1892-3

The next revision of provincial settlements under the rule of quinquennial revisions occurred in 1892-3. The new settlements to commence from that year did not differ in principle from those of 1887-8. The shares in the Joint Revenue were so readjusted as to give to the Imperial treasury a larger gain from the growing yield of the provincialised sources. The amount resumed by the Imperial Government at this revision through readjustments of shares was estimated as follows :

 

 

Province

Increase of Revenue in 1891-92 (Revised Est.) as compared with the Estimate for the Contract of 1887-88 to 1891-92

Amount resumed by the Government of India

 

Rs.

Rs.

C.P.

119,200

22,700

Lower Burma

334,900

58,900

Bengal

517,700

51,900

N.W.P.&Oudh

53,300

56,900

Punjab

195,400

41,000

Madras

313,200

103,800

Bombay

399,200

131,100

Assam

99,800

 

Total

2,042,700

466,300

 

But this gain to the Imperial treasury seriously disturbed the equilibrium between the expenditure of the Provinces estimated as normal for the ensuing period and the normal estimated yield of revenues left to them. To restore equilibrium between their normal expenditure and normal revenue the Government of India reverted to the discarded method of fixed adjusting assignments, so that while the actual revenues and charges deviated from what was estimated as normal for the period of the settlement, the adjusting entry allowed by the Imperial Government to each of the provinces remained fixed throughout the whole period. The following is a statement of estimated normal expenditure and revenues of the different Provinces with their respective adjusting assignments as fixed for the new period :

 

Provinces

Provincial Revenues

Provincial Expenditure

 

Ordinary Revenue being a share of certain Receipts

Adjusting Assignments

Total

 

Rs.

Rs.

Rs.

Rs.

C.P.

567,600

220,500

788,100

788,100

Lower Burma

1,427,500

414,300

1,841,800

1,841,800

Assam

657,700

—112,700

545,000

545,000

Bengal

4,249,300

—143,900

4,105,500

4,105,900

N.W.P. & Oudh .

3,403,500

—250,000

3,152,900

3,152,900

Punjab

1,370,400

348,500

1,718,900

1.718,900

Madras

2,479,300

325,400

2,804,700

2,804,700

Bombay

3,123,900

771,400

3,895,300

3,895,300

 

The evil effect of large resumptions and fixed assignments will be clearly seen in the condition of Provincial Finance as indicated by the annual surpluses and deficits over the period of the settlement:

 

 

Annual Surpluses or Deficits

Province

 

 

1892-93

1893-94

1894-95

1895-96

1896-97

 

Rs.

Rs.

Rs.

Rs.

Rs.

C.P.

—21,798

—60,772

—105,108

19,653

—37,408*

Burma

66,642

—90,653

—272,319

226,505

780

Assam

9,336

28,532

—27,422

30,507

—25,421

N.W.P.&Oudh

—16,752

—25,155

—165,987

—139,798

—164,740

Bengal

—9,826

36,887

169,796

149,808

—186,558

Punjab

—106,050

—22,699

—24,811

—7,156

—64,073

Madras

—159,081

33,636

92,328

44,118

—200,579

Bombay

—23,888

19,443

—102,472

100,690

—221,119

*No closing balance left.

Complied from the Annual Finance and Revenue Accounts of the Government of India.

 

It must, however, be admitted that the financial arrangements of the Provinces during this period were considerably disturbed by the outbreak of plague and famine towards the close of the settlements. The expenditure which the Provinces were obliged to incur to meet these two calamities depleted the resources of all and brought the Central Provinces and the North-West Provinces to the verge of bankruptcy, from which they were rescued by the following contributions made by the Government of India in aid of their balances in the year 1896-7 :

To Central Provinces       ... Rs. 526 lakhs.

 To N.W.P. and Oudh        ... Rs. 1,609 lakhs.

 

Contents                                                                             Continued…


 [f1]1 Finance Department Resolution No. 1488 dated March 26, 1879, para. 2.

 [f2]2.Ibid., para. 22. 3Financial Statement, 1879-80, para. 24.

 

 [f3]Finance Department Resolution No. 1598, dated April 17, 1879.

 

 [f4]Resolution of the Government of India in the Department of finance and Commerce, No. 3353, dated September 13, 1881.

 

 [f5]Financial Statement for 1882-83, p. 15.