Non Tax Revenue Report - Madhya Pradesh · 2010-11-12 · CDMC Clean Development Mechanism Cell NOC No Objection Certificate CDM Clean Development Mechanism NTR Non Tax Revenue CE

Financing Growth

Study on Avenues for Enhancing Non Tax Revenue

Strengthening Performance Management in Government, Government of Madhya Pradesh

Government Reforms & Infrastructure Development (GRID) Public Finance

DFID Supported Strengthening Performance Management in Government Programme

Long Term Consultant, Government of Madhya Pradesh

Study on avenues for enhancing non tax revenue

1 | P a g e PricewaterhouseCoopers

Table of contents

1 Executive Summary ........................................................................................................................................ 7

2 Introduction ..................................................................................................................................................... 9

2.1 Objective ............................................................................................................................................................... 9 2.1.1 Interstate comparisons – Ratio of ONTR to Total Revenues of States ...................................................... 11 2.1.2 Interstate comparisons – Recovery Rates for Various Sectors .................................................................. 11

3 Mining Sector ................................................................................................................................................ 14

3.1 Regulatory Overview .......................................................................................................................................... 14 3.2 As-Is Analysis ..................................................................................................................................................... 14

3.2.1 Stakeholder Analysis ................................................................................................................................... 14 3.2.2 Sources and Composition of Revenue from Minor Minerals ...................................................................... 15 3.2.3 Auction Mechanism for Extraction of Minor Minerals ................................................................................. 16 3.2.4 Monitoring Mechanism for Extraction of Minor Minerals ............................................................................ 17 3.2.5 Role of State Mining Corporation (SMC) .................................................................................................... 17

3.3 Good Practice Benchmarking ............................................................................................................................. 18 3.3.1 Auction Mechanism ..................................................................................................................................... 19 3.3.2 Monitoring Mechanism ................................................................................................................................ 19 3.3.3 Inter-State Comparison of Royalty Rates for Minor Minerals ..................................................................... 19 3.3.4 Revision of Royalty Rates ........................................................................................................................... 20

3.4 Estimates of Revenue Loss from Minor Minerals ............................................................................................... 20 3.5 Issues and Recommendations ........................................................................................................................... 21

4 Forest ............................................................................................................................................................ 24

4.1 As-Is Analysis ..................................................................................................................................................... 24 4.1.1 Stakeholder Analysis ................................................................................................................................... 24 4.1.2 The Mechanism for Sale of Forest Produce ............................................................................................... 25

4.2 Good Practice Benchmarking ............................................................................................................................. 26 4.2.1 Marketing Strategy and Demand Generation ............................................................................................. 27 4.2.2 Ecotourism .................................................................................................................................................. 27 4.2.3 Land Usage ................................................................................................................................................. 27

4.3 Issues and Recommendations ........................................................................................................................... 29

5 Water Resources .......................................................................................................................................... 32

5.1 As-Is Analysis ..................................................................................................................................................... 32 5.1.1 Stakeholders Analysis ................................................................................................................................. 32 5.1.2 Revenue composition and trends ............................................................................................................... 32 5.1.3 Revenue Collection Mechanism ................................................................................................................. 33

5.2 Good Practice Benchmarking ............................................................................................................................. 34 5.3 Issues and Recommendations ........................................................................................................................... 36

6 Education ...................................................................................................................................................... 39

6.1 As-Is Analysis ..................................................................................................................................................... 39 6.1.1 Stakeholder Analysis ................................................................................................................................... 39 6.1.2 Revenue Trends .......................................................................................................................................... 39 6.1.3 School Education ........................................................................................................................................ 40 6.1.4 Higher Education ......................................................................................................................................... 41





6.1.5 Technical Education .................................................................................................................................... 41 6.2 Good Practice Benchmarking ............................................................................................................................. 42 6.3 Issues and Recommendations ........................................................................................................................... 44

7 Water Supply and Sanitation ......................................................................................................................... 46

7.1 As-Is Analysis ..................................................................................................................................................... 46 7.1.1 Stakeholder Analysis ................................................................................................................................... 46 7.1.2 Trend and Composition of Revenue ........................................................................................................... 46 7.1.3 Service Delivery .......................................................................................................................................... 47 7.1.4 Operations and Maintenance ...................................................................................................................... 47 7.1.5 Revenue Collection Mechanism ................................................................................................................. 48

7.2 Issues and Recommendations ........................................................................................................................... 50

8 Cooperatives ................................................................................................................................................. 52

8.1 As-Is Analysis ..................................................................................................................................................... 52 8.1.1 Stakeholder Analysis ................................................................................................................................... 52 8.1.2 Sources and Composition of Revenue ....................................................................................................... 53 8.1.3 Sources of Revenue – Audit Fees and Other Minor Sources .................................................................... 53 8.1.4 Procedure for Conducting Audit .................................................................................................................. 54 8.1.5 Levy of Audit Fees ...................................................................................................................................... 54

8.2 Good Practice Benchmarking ............................................................................................................................. 55 8.3 Issues and Recommendations ........................................................................................................................... 56

9 Appendices ................................................................................................................................................... 57

9.1 Appendix I - Mining ............................................................................................................................................. 57 9.1.1 Estimate of Revenue Increase from Auction Reforms................................................................................ 57 9.1.2 Estimate of Revenue Increase from Inflation Indexing ............................................................................... 57 9.1.3 Estimates of Revenue Increase from SMC Reforms .................................................................................. 57 9.1.4 Estimating Lost Revenues through the Consumption Method ................................................................... 58

9.2 Appendix II – Forest ............................................................................................................................................ 60 9.2.1 Note on Forest Certification ........................................................................................................................ 60 9.2.2 Estimate of Revenue Increase from e – auction and Forest Certification .................................................. 60 9.2.3 Estimated Increase in Revenue from Development of Ecotourism ............................................................ 61 9.2.4 Case Studies - Carbon Trading ................................................................................................................. 61

9.3 Appendix III – Water Resources ......................................................................................................................... 67 9.3.1 Collection Efficiency of the WRD (in %) for 2008-09 .................................................................................. 67 9.3.2 Estimates of Increase in Revenues from Recommendations (WRD) – Three Scenarios .......................... 67 9.3.3 Note on Pricing of Water Resources .......................................................................................................... 68

9.4 Appendix IV - Education ..................................................................................................................................... 71 9.4.1 Estimates of Revenue Increase from Sharing Revenues of the Secondary Education Board .................. 71 9.4.2 Revenue Estimates from Alternative Utilisation of the Schools/Institutions Infrastructure ......................... 71 9.4.3 Note on School Sponsorship Scheme ........................................................................................................ 72

9.5 Appendix V – Water Supply and Sanitation ....................................................................................................... 74 9.5.1 Comparative Indicators across Cities ......................................................................................................... 74 9.5.2 Comparative Indicators across cities- water coverage and connections metered ..................................... 74 9.5.3 Note on KUWASIP Water Supply Model .................................................................................................... 75

9.6 Appendix VI - Cooperatives ................................................................................................................................ 78 9.6.1 Case Study – Sources of Revenue for the Cooperative Department ......................................................... 78





List of Tables

Table 1: Summary of Recommendations and possible revenues ................................................................................................ 7

Table 2: Revenue Collections from the sectors under study ........................................................................................................ 9

Table 3: Ratio of ONTR to Total Revenues of States (Five Year Average 2000-01 to 2005-06) .............................................. 11

Table 4: Recovery Rates for Various Sectors in Major States ................................................................................................... 11

Table 5: Major States Ranked According to Recovery Rates (All Sectors) ............................................................................... 12

Table 6: Stakeholders Analysis - Mining .................................................................................................................................... 14

Table 7: Minor Minerals- Administrative Authority for Auction .................................................................................................... 16

Table 8: Production Figures and Estimated Royalty for Select Minor Minerals (2007-08)......................................................... 16

Table 9: Major Mines of the SMC ............................................................................................................................................... 17

Table 10: Share of Revenue of SMC in Overall Revenue from Sand ........................................................................................ 18

Table 11: Royalty Rates of Minor Minerals (Various States) ...................................................................................................... 19

Table 12: Details of Revenue from Forest (Figures in Rupees Thousand) ................................................................................ 24

Table 13: Stakeholders Analysis – Forest .................................................................................................................................. 24

Table 14: Stakeholder Analysis - Water Resources ................................................................................................................... 32

Table 15: User charges for Agriculture ....................................................................................................................................... 33

Table 16: User Charges for Industries ........................................................................................................................................ 33

Table 17: Stakeholder Analysis - Education ............................................................................................................................... 39

Table 18: Details of Revenue from Education (Rs. Thousand) .................................................................................................. 40

Table 19: Fees and charges levied by the Board of Secondary Education, M.P ....................................................................... 40

Table 20: Number of Technical Education Institutions by Subject ............................................................................................. 42

Table 21: Stakeholder Analysis- Water Supply and Sanitation Sector....................................................................................... 46

Table 22: Trend and Composition of Revenue – Water Supply & Sanitation ............................................................................ 46

Table 23: Key Indicators (Water Supply) for Bhopal, Indore and Jabalpur ................................................................................ 47

Table 24: NPRE on Sewerage in MP ......................................................................................................................................... 48

Table 25: Water Supply Charges, Bhopal Municipal Corporation .............................................................................................. 48

Table 26: Water Supply Charges, Indore Municipal Corporation ............................................................................................... 48

Table 27: Average Tariff across ULBs (Bhopal, Indore and Jabalpur) ....................................................................................... 49

Table 28: Stakeholder Analysis- Cooperatives Sector ............................................................................................................... 53

Table 29: Composition of Revenue - Cooperatives .................................................................................................................... 53

Table 30: Calculation Chart for Value of Audit fees.................................................................................................................... 54

Table 31: Revenue Estimates – Auction Reforms ...................................................................................................................... 57

Table 32: Revenue Estimates- Inflation Indexing ....................................................................................................................... 57

Table 33: Revenue Estimates – SMC Reforms .......................................................................................................................... 57

Table 34: Potential Loss of Revenue from Sand- Conservative Scenario ................................................................................. 58

Table 35: Potential Loss of Revenue from Sand - Aggressive Scenario.................................................................................... 59

Table 36: Revenue Estimates: e-auction and Forest Certification ............................................................................................. 60

Table 37: Revenue Estimate – Development of Ecotourism ...................................................................................................... 61

Table 40: Chief Engineer-wise Collection Efficiency (in %) for 2008-09 .................................................................................... 67

Table 41: Source-wise Collection Efficiency (in %) for 2008-09 ................................................................................................. 67

Table 42: Scenarios for Estimates of Increase in Revenue ....................................................................................................... 67

Table 43: Revenue Receipts Trend – WRD (2003-04 to 2007-08) ............................................................................................ 68





Table 44: Projection of Revenue Receipts – WRD (2009-10 to 2013-4).................................................................................... 69

Table 45: Past Expenditure Data of the WRD (2003-04 to 2007-08) ......................................................................................... 69

Table 46: Trend Projections of Maintenance Expenditures of the WRD (2009-10 to 2013-14) ................................................. 69

Table 47: Ratio of Maintenance Expenditure to Revenue Receipts - WRD ............................................................................... 69

Table 48: Revenue Estimates from Sharing Revenues Secondary Education Board (SEB), MP ............................................. 71

Table 49: Estimate of Revenue from Alternative Utilization of School Infrastructure ................................................................. 71

Table 50: Sample Format of Certification ................................................................................................................................... 72

Table 51: Rate for Sponsorship of Schools ................................................................................................................................ 73

Table 52: Water Supply Indicators- Various Cities ..................................................................................................................... 74

Table 53: Water Coverage and Connections Metered - Various Cities...................................................................................... 74

Table 54: KUWASIP - New Revised Water Tariffs for Hubli-Dharwad and Belgaum w.e.f November 1, 2009 ......................... 76

Table 55: Revenue Break-up for Kerala Cooperative Department from 1997-8 to 2001-2 (Rs. crore) ...................................... 78 List of Figures Figure 1: Quadrant Analysis of Non Tax Revenue on Buoyancy w.r.t and as share of GSDP .................................................. 10 Figure 2: Own Non Tax Revenue (ONTR) of M.P (2003-4 to 2007-8) ....................................................................................... 11 Figure 3: Minor Minerals Value and Royalty Revenues (in Rs. crore) ....................................................................................... 15 Figure 4: Composition of Production (value terms) from Minor Minerals (2007-08) ................................................................. 15 Figure 5: Recovery Rates in Mining, Various States .................................................................................................................. 18 Figure 6: Revenue Collection Trend - Forest ............................................................................................................................. 24 Figure 7: Recovery Rates in Forest, Various States (2007-08) .................................................................................................. 26 Figure 8: Revenue and composition of revenue from water resources, MP .............................................................................. 32 Figure 9: Recovery Rates in Irrigation, Various States .............................................................................................................. 34 Figure 10: Revenue Collection Trend – Education ..................................................................................................................... 39 Figure 11: Recovery Rates in Education, Various States .......................................................................................................... 42 Figure 12: Revenue Collection Trend- Cooperatives ................................................................................................................. 53 Figure 13: Revenue from Cooperatives, Various states (2007-8) .............................................................................................. 55 Figure 14: Recovery Rates in Cooperatives, Various States ..................................................................................................... 56 Figure 15: Sector-Wise Break-Up: Investment done in host country approved CDM projects .................................................. 62 Figure 16: Project cycle of a Forestry CDM Project ................................................................................................................... 64





Acronyms

AFPRO Action for Food Production MTEF Medium Term Expenditure Framework

AFRC Admission and Fee Regulatory Committee MoU Memorandum of Understanding

AR Afforestation and Reforestation MMRDA Mines and Minerals (Development and Regulation)

Act, 1957

BE Bachelor of Engineering NABARD National Bank for Agricultural and Rural

Development

BSE Board of Secondary Education, Madhya

Pradesh

NCDC National Cooperative Development Cooperation

CER Certified Emission Reductions NTPC National Thermal Power Corporation

CDMC Clean Development Mechanism Cell NOC No Objection Certificate

CDM Clean Development Mechanism NTR Non Tax Revenue

CE Collection Efficiency NPRE Non-Plan Revenue Expenditure

CAGR Compound Annual Growth Rate NGO Non-Governmental Organisation

CCS Co-operative Credit Structure O&M Operation and Maintenance

DNA Designated National Authority PRI Panchayati Raj Institution

DOE Designated Operational Entity PACS Primary Agricultural Credit Societies

DMO District Mining Officer PSP Private Sector Player

DPEP District Primary Education Program PDD Project Design Document

ETDB Eco-Tourism Development Board PIN Project Idea Note

EPRA Emission Reduction Purchase Agreement PPP Public-Private Partnership

EB Executive Board PDS Public Distribution System

GIS Geographic Information System PHED Public Health Engineering Department

GoI Government of India PWD Public Works Department

GoK Government of Karnataka RGPV Rajiv Gandhi Proudyogiki Vishwavidyalaya, Bhopal,

MP

GoMP Government of Madhya Pradesh RBI Reserve Bank of India

GSDP Gross State Domestic Product RE Revised Estimates

HCFP Haryana Community Forestry Project REDD Reducing Emissions from Deforestation and Forest

Degradation

JLR Jungle Lodges and Resorts SED School Education Department

KUWASIP Karnataka Urban Water Sector

Improvement Project

SEB Secondary Education Board

KP Kyoto Protocol ST CCS Short- Term Cooperative Credit Structure

LULUCF Land Use, Land-Use Change and Forestry SMC State Mining Corporation

LoA Letter of Approval TEQIP Technical Education Quality Improvement Project

LoE Letter of Endorsement tCER temporary Certified Emission Reduction

LoI Letter of Intent UNFCCC United Nations Framework Convention on Climate

Change

lCER Long-term Certified Emission Reduction USD United States Dollars

MPEB/M.

P.S.E.B

Madhya Pradesh State Electricity Board ULB Urban Local Body

MIS Management Information System WRD Water Resources Department, Madhya Pradesh

MCA Masters in Computer Applications WUAs Water User Associations





Preface

An interim presentation was made to the Finance Department, GoMP on the 15th of January 2010 on our findings and

emerging recommendations. Based on feedback received, analysis and benchmark information for all sectors selected

for the study was incorporated in the Draft Report on Avenues for Improvement in Non Tax Revenue. The Draft Report

was submitted on April 16th 2010. A presentation on the Draft Report was made to Finance Department and concerned

department officials on 24th April 2010.

The key comments and suggestions received during the presentation are tabulated below along with remarks on how

they have been addressed in this Final Report.

Comments/Suggestions from GoMP Remarks

Forest

Department officials stated that the increase in revenue assumed is probably on the higher side.

Expected benefit from a band of 2%-4% has been reduced to 1% - 2% of receipts from auction of timber based on further discussions with the department.

Department officials requested for an international case study on feasibility of Carbon Trading

A sub-section with International example has been added in this report. There has been a recent clarification of Government of India that Government Forest Land does not qualify for Clean Development Mechanism projects. Therefore, the recommendation related to this point has been dropped in this report.

Water Resources

Department officials informed during the presentation that Water Users Association are being made responsible for revenue collection

The option of revenue collection through revenue department officials accordingly has been dropped in the Final Report.

Department officials also informed that the pending revision of Water charges had been approved by GoMP.

The issue identification relating to “Non revision of rates since 2005” has accordingly been dropped from section 5.3 in the Final Report

Mining

Department officials informed that since the interim presentation of the report, penalty for illegal extraction has been increased from “maximum of twice the market value of illegally extracted mineral or ten times the applicable royalty amount” to “maximum of ten times the market value of illegally extracted mineral or forty times the applicable royalty rate”

Accordingly, the recommendation for making penalty for illegal extraction prohibitive has now been excluded in this Final Report.

Water Supply and Sanitation

Department officials agreed to the recommendations made and remarked that most of them are under various stages of implementation

The same has been acknowledged in the Final Report

Department officials asked for elaboration of acronym RPI-X used in section 7.2

Explanatory text has been added in section 7.2 of this Final Report.





1 Executive Summary

The purpose of this report is to identify avenues for enhancement of Non Tax Revenue (NTR) for Government of

Madhya Pradesh (GoMP).

The coverage of the analysis as per given scope of work includes the following sectors

• Mining

• Forest

• Water Resources

• Education

• Water Supply and Sanitation

• Cooperatives

In Madhya Pradesh (MP) while Non tax revenue remains an important source of income, the growth rate of non tax

revenue for MP is below the All India average rate of growth for non tax revenue1 underlining the scope for

improvement. Our analysis reveals that states like Orissa and Andhra Pradesh have performed well in collection of Non

Tax Revenue and Non Tax revenue is a significant source of income for them.

Our approach in this exercise has been to focus on stakeholder consultations as a first step (see the stakeholder

analysis section for a list of stakeholders) combined with desk based research. The next step involved using tools to

identify issues that limit revenue potential and to identify good practices in other states. The recommendations and their

revenue potential have then been derived from such benchmarking and quantitative analysis.

A summary of the recommendations have been shown below in Table 1. Wherever possible, we have also presented

an estimate of possible increase in annual revenue owing to the recommendations.

Table 1: Summary of Recommendations and possible revenues

Sectors Recommendation Estimate of annual

Increase in NTR (Rs. crore)

Mining

Revision of sand royalty of department mines 35

Pre-assessment of mines at directorate level to set floor price 8

Indexation of royalty rates to inflation 3

Reforms by State Mining Corporation (SMC) [increasing sand price] 2

Strengthening Monitoring Mechanism 3

Mining Total 51

Forests

e-Auction 8

Forest Certification 4

Eco-tourism Development 0.2

Carbon trading

Marketing Strategy and Information Cell * -

Forest Total 12

Water Resources

Recovery Mechanism & Water User Association (WUA) Reforms (Conservative Scenario)

4

Revision of Rates 3

Water Resources Total 7

1 Base data: Finance & Accounts of respective states.





Sectors Recommendation Estimate of annual

Increase in NTR (Rs. crore)

Education

Sharing revenues of the M.P Secondary Education Board 4

Alternate uses of physical infrastructure 0.45

Ceiling on corpus fund* -

School Adoption/Sponsorship* -

Education Total 4

Water Supply & Sanitation

Tariff Indexation 5

Metering of water supply* -

Sewage treatment maintenance* -

Water Supply & Sanitation Total 5

Cooperatives

No major source of revenue augmentation has been identified within the cooperative sector

-

The table to determine audit fees, as given in the M.P Cooperative Societies Rules, should be simplified

-

A functional review of the department is warranted owing to the societies now having an option to get audited by chartered accountants.

-

Cooperatives Total -

Total for all recommendations 79

Note: * Revenue enhancement directly attributable to this measure is not estimated





2 Introduction

2.1 Objective

Madhya Pradesh is one of the low income States in the country. The Government of Madhya Pradesh has been taking

steps to reduce poverty and improve human development.

The Department of Finance, GoMP is looking for ways and means to improve its Non Tax Revenue collection in an

effort to increase the resource base and create fiscal space for its developmental efforts. The purpose of this report is

to identify avenues for enhancement of Non Tax Revenues for GoMP. The focus of this report is therefore on the

financial aspects of the sectors identified.

The coverage of the analysis as per given scope of work includes the following sectors:

• Mining

• Forest

• Water Resources

• Education

• Water Supply and Sanitation

• Cooperatives

The current status of revenue collections from the above sectors is given in Table 2:

Table 2: Revenue Collections from the sectors under study

Sector Revenues

in Rs. crore (2007-08)

Share of

States Own NTR (%)

Mining 1125.392 41.09

Forestry and Wildlife 608.89 22.23

Water Resources 50.82 1.85

Cooperation 29.28 1.06

Education, Sports, Art & Culture 13.74 0.50

Water Supply and Sanitation 5.91 0.21

Total for the above six sectors 1834.05 66.98

State Own Non-tax Revenue 2738.18 100

Source: Finance & Accounts, M.P, 2007-08

The non-tax revenue of the State Governments consists of a wide range of receipts ranging from interest receipts on

the loans provided by the State Governments, dividends and profits received by the State Governments, revenue from

general services such as state lotteries and revenue from user charges imposed on different social and economic

services provided by the State Governments. Das Gupta describes Non-tax revenue as “government revenue that is

2 This amount includes revenues from coal and other major minerals worth Rs. 950 crore.





either requited or voluntary or both. In the case of voluntary requited payments a further distinction is made between

revenue from assets and revenue from sale of goods and services”3

Benefits of Non Tax Revenue –

• User specificity- Non Tax Revenue in the form of user charges follows the principle of equity as user charges

will enable the State Governments to pass on the cost of providing the services either fully or partially to the

public. This can prevent the financing of these services from the tax revenue of the Government, whose

benefits accrue to specific individuals rather than the society as a whole.

• Non Tax Revenue in the form of user charges for specific goods or services offered may also be useful in

limiting the usage of that good or service reducing the cost for provision, for example, tolls on roads can be

differentiated based on peak and off-peak hours. This will encourage the public to reduce the use of a particular

road or bridge during the peak hours, thus, reducing congestion.

• Non Tax Revenue in terms of user charges also forces the government to provide good quality of goods or

services

However, it should be noted that

imposition of user charges has to be for

private or non-merit goods and services

and for merit goods and services such as

healthcare and education, the State may

forego imposition of charges in public

interest.

In the absence of firm data on cost

recovery, the ratio of non-tax revenue to

non-plan revenue expenditure is taken as

a proxy for the cost recovery from these

services. This ratio stands at 4 % for the

social services and 32.3 % for economic

services in 2007-08 (RE), indicating low

cost recovery in respect of both these

services4. Figure 1 shows a scatter plot

for select states with Non Tax Revenue Buoyancy with respect to GSDP (Gross State Domestic Product) on Y-axis and

Non Tax revenue as % of GSDP on X-axis.

Figure 1 reveals that the states like Orissa and Andhra Pradesh have performed well in collection of Non Tax Revenue and Non Tax revenue is a significant source of income for them. The non tax revenue remains an important source of income for Madhya Pradesh. The growth rate of non tax revenue for MP is below the All India average rate of growth for non tax revenue indicating the scope for improvement.

3 Das-Gupta, Arindam (2005), „Non-Tax Revenues in Indian States: Principles and Case Studies‟, Paper prepared for Asian

Development Bank, „Policy Research Networking to Strengthen Policy Reform‟ 4 RBI Study on “State Finances: A Study of Budgets of 2008-09”

Andhra Pradesh

Assam

ChattisgarhJharkhand

Madhya Pradesh

Maharashtra

Orissa

Tamil Nadu

West Bengal

0

0.5

1

1.5

2

2.5

3

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%

No

n-t

ax r

eve

nu

e B

uo

yan

cy

Non-tax revenue as % of GSDP

Figure 1: Quadrant Analysis of Non Tax Revenue on Buoyancy w.r.t and as share of GSDP





Figure 2: Own Non Tax Revenue (ONTR) of M.P (2003-4 to 2007-8)

For the state of Madhya Pradesh, as

Figure 2 shows, own non tax revenue has

grown at a Compound Annual Growth

Rate (CAGR) of 7.40% over the period

2003-04 to 2007-08. The jump in 2004-05

relates to accounting adjustments, as the

state government took back a grant (of Rs.

2,800 crore) given to The MP State

Electricity Board (that it later gave as a

loan) which was accounted for under Non

tax revenue. If we ignore the year, we can

see that the revenue from non tax has

grown at a slower pace.

2.1.1 Interstate comparisons – Ratio of ONTR to Total Revenues of States The states chosen are those whose total own revenues (from Tax and Non- Tax) are comparable to that of Madhya

Pradesh. The indicator used for this study is the ratio of ONTR to Total (own) revenues collected by the state. The

index obtained is a simple average of this ratio for the six years from 2000-01 to 2005-06.

Table 3: Ratio of ONTR to Total Revenues of States (Five Year Average 2000-01 to 2005-06)

State Ratio

Orissa 0.2389

Madhya Pradesh 0.2385

Punjab 0.2152

Rajasthan 0.2150

Haryana 0.2024

West Bengal 0.1025

Kerala 0.0726

As is evident from Table 3, among the states, Madhya Pradesh ranks second only to Orissa that too by a small margin.

This implies the importance of NTR for M.P as it forms a considerable part of the total revenue receipt.

2.1.2 Interstate comparisons – Recovery Rates for Various Sectors Since recovery rates (defined as the own non tax revenue divided by the revenue expenditure on that line item) show

considerable fluctuations from one year to another, an alternate analysis was carried out. This involved taking a long-

term average to smooth out any fluctuations. Even after this normalization, the recovery rates for different states are

found to be widely divergent.

Table 4: Recovery Rates for Various Sectors in Major States

Sector Forestry and Wildlife Cooperatives Mining

State/Year 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08

Andhra Pradesh 0.98 0.33 0.30 0.11 0.29 0.27 84.33 72.69 120.70

Bihar 0.76 0.24 N/A 0.05 0.13 N/A 101.80 40.30 N/A

Gujarat 0.29 0.15 0.30 0.05 0.27 0.42 64.52 37.18 57.18

Haryana 0.25 0.46 0.16 0.26 0.31 0.06 22.32 13.53 15.93

Karnataka 0.67 0.37 0.34 0.36 0.33 0.02 13.82 25.36 53.06

-

1,000

2,000

3,000

4,000

5,000

2003-04 2004-05 2005-06 2006-07 2007-08Own Non Tax Revenue

Rs.

cr

ore





Sector Forestry and Wildlife Cooperatives Mining

State/Year 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08

Kerala 2.14 1.06 0.97 0.30 0.52 0.45 3.97 6.68 6.89

Madhya Pradesh 1.53 0.75 0.74 0.22 0.41 0.29 82.92 66.51 10.71

Maharashtra 0.71 0.42 0.47 0.40 0.32 0.15 36.43 51.46 9.33

Orissa 1.72 0.93 0.27 0.07 0.05 0.05 16.33 28.39 41.31

Punjab 0.27 0.14 0.28 0.14 0.09 0.09 2.43 3.51 12.67

Rajasthan 0.14 0.30 0.29 0.06 0.35 0.65 6.42 13.74 29.29

Tamil Nadu 1.33 1.43 0.83 0.18 0.17 0.05 27.31 104.41 91.22

Uttar Pradesh 1.23 0.41 0.80 0.11 0.14 0.07 14.88 24.58 24.29

West Bengal 0.45 0.14 0.27 0.12 0.09 0.09 6.83 5.20 7.65

Average 0.89 0.51 0.46 0.17 0.25 0.20 34.59 35.25 36.94

Sector Water Supply & Sanitation Education Irrigation

State/Year 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08 1993-94 2000-01 2007-08

Andhra Pradesh 0.023 0.053 0.004 0.022 0.033 0.010 0.153 0.010 0.010

Bihar 0.018 0.005 N/A 0.002 0.003 N/A 0.096 0.112 N/A

Gujarat 0.008 0.002 0.004 0.014 0.011 0.016 0.054 0.072 0.719

Haryana 0.106 0.126 0.115 0.028 0.017 0.044 0.103 0.189 0.167

Karnataka 0.006 0.002 0.003 0.015 0.012 0.012 0.047 0.030 0.209

Kerala 0.000 0.010 0.000 0.020 0.018 0.024 0.049 0.041 0.027

Madhya Pradesh 0.055 0.023 0.017 0.004 0.005 0.004 0.191 0.150 0.129

Maharashtra 0.045 0.005 0.005 0.009 0.004 0.007 0.097 0.037 0.385

Orissa 0.080 0.104 0.136 0.014 0.012 0.016 0.074 0.137 0.285

Punjab 0.110 0.100 0.168 0.009 0.006 0.020 0.121 0.045 0.196

Rajasthan 0.216 0.207 0.216 0.003 0.008 0.005 0.094 0.087 0.071

Tamil Nadu 0.008 0.036 0.004 0.015 0.013 0.027 0.037 0.031 0.046

Uttar Pradesh 0.000 0.000 0.000 0.013 0.030 0.007 0.199 0.243 0.091

West Bengal 0.008 0.008 0.007 0.003 0.004 0.004 0.040 0.020 0.056

Average 0.049 0.049 0.052 0.012 0.012 0.015 0.097 0.086 0.184

The following analysis uses a ten year average recovery rate (defined as the own non tax revenue divided by the

revenue expenditure on that line item), from 1998-99 to 2007-08, to rank the various major states in descending order

of recovery rates. This exercise has been carried out for all the key revenue areas.

The results are presented in Table 5:

Table 5: Major States Ranked According to Recovery Rates (All Sectors)

Forestry & Wildlife

Cooperatives Mining Water Supply & Sanitation

Education Irrigation

Tamil Nadu Kerala Andhra Pradesh Rajasthan Uttar Pradesh Gujarat

Kerala Rajasthan Tamil Nadu Punjab Haryana Maharashtra





Forestry & Wildlife

Cooperatives Mining Water Supply & Sanitation

Education Irrigation

Orissa Madhya Pradesh

Gujarat Haryana Andhra Pradesh Haryana

Madhya Pradesh Gujarat Madhya Pradesh

Orissa Tamil Nadu Orissa

Uttar Pradesh Karnataka Orissa Madhya Pradesh Kerala Madhya Pradesh

Karnataka Maharashtra Karnataka Tamil Nadu Gujarat Uttar Pradesh

Andhra Pradesh Haryana Bihar Andhra Pradesh Orissa Karnataka

Maharashtra Andhra Pradesh Uttar Pradesh Maharashtra Karnataka Punjab

Haryana Uttar Pradesh Rajasthan West Bengal Punjab Bihar

Rajasthan Tamil Nadu Maharashtra Bihar Bihar Rajasthan

Bihar West Bengal Haryana Kerala Rajasthan Kerala

West Bengal Punjab Punjab Gujarat Maharashtra West Bengal

Gujarat Bihar Kerala Karnataka Madhya Pradesh

Tamil Nadu

Punjab Orissa West Bengal Uttar Pradesh West Bengal Andhra Pradesh

As is evident from Table 5, Madhya Pradesh is well placed compared to most states in terms of recovery rates, with

one exception being the education sector.

We have undertaken sector wise analysis for analysing non tax revenue for each of the six sectors under this study.

The key sources of data used in the study were through stakeholder consultations and desk based research. Our

stakeholder consultations helped us to gain a deeper insight into the issues as well as for data requirements. Data was

also sourced from reliable secondary sources. The next step in this study was to identify issues that limit revenue

potential and good practices adopted in other states. A combination of benchmarking analysis, quantitative analysis of

the data collected, stakeholder consultations and certain assumptions have been used to make recommendations and

quantify the potential revenue gains from the implementation of such recommendations. The sector wise analysis and

recommendations are presented in the following sections.





3 Mining Sector

Madhya Pradesh is one of the major mineral producing states in the country ranking fourth in value terms after Orissa,

Chhattisgarh and Jharkhand. Madhya Pradesh has deposits of bauxite, coal, copper, diamond, dolomite, diaspore,

limestone, manganese, pyrophylite and rock phosphate. Besides, the state is fast emerging as a producer of

dimensional stone, which includes multi-coloured granite, marble, flag stone and sand stone.

3.1 Regulatory Overview

• The Constitution Seventh Schedule, List II (State List) Entry 50, includes taxes on mineral rights;

o Entry 53, List I gives the Centre power to regulate and develop oilfields and mineral development; and

o Entry 54, List I provides for Parliamentary regulation of this activity.

• The legal framework is given in the Mines and Minerals (Development and Regulation) Act, 1957. In particular,

this act distinguishes between major and minor minerals.

• The Centre has royalty rate setting powers for major minerals and the states for the minor minerals. Major

mineral rates are specified in the Second Schedule of this Act.

• The (Central) Mineral Concession Rules, 1960 under this Act lays down procedures for permits and licenses for

prospecting and operating mining leases on both government and private land – for major minerals.

• For states, a similar function is served by state-wise Minor Mineral Concession Rules, where they exist. Receipts

from minor minerals in Madhya Pradesh are regulated under Minor Minerals Rules (MM Rules), 1996 and

Madhya Pradesh Minerals (Prevention of illegal mining, transportation and storage) Rules, 2006 apart from the

rules and laws as prescribed under MMRD and other laws mentioned above.

Mining receipts comprise application fees for lease/permit/ prospecting license, royalty, dead rent, surface rent,

fines and penalties and interest for belated payment of dues. Given that states have limited influence on major

minerals (since it falls under the purview of Govt. of India), the focus of this study has been limited to minor

minerals.

3.2 As-Is Analysis

3.2.1 Stakeholder Analysis The institutions concerned with mining in Madhya Pradesh are the Department of Mineral Resources under which there

is a Directorate of Geology and Mining & State Mining Corporation, which is a Govt. of Madhya Pradesh undertaking.

The stakeholder analysis is presented in Table 6 outlining the responsibility of the institutions and the relevant revenue

streams for the government from them.

Table 6: Stakeholders Analysis - Mining

Stakeholder Responsibility Relevant Revenue Stream for the state

Government

Department of Mining/

Directorate of Geology &

Mining

The overall administrative body acting as the

custodian of mines in the state of Madhya

Pradesh

Monitoring of mining activities in the state

Royalty from Major and Minor Minerals

Other Income from fee and penalty

Contribution from State Mining

Corporation

Madhya Pradesh State

Mining Corporation (SMC) Mining of minor minerals

Most of the productive minor mineral mines

For sand, the SMC pays a fixed amount

as royalty to the department apart from

http://www.mp.nic.in/geologyandmining






Government

are under the jurisdiction of State Mining

Corporation

additional duty over and above the

royalty

For other minor minerals the SMC pays

royalty to the government.

3.2.2 Sources and Composition of Revenue from Minor Minerals

Figure 3 shows the trend of mineral production and revenue from minor minerals in MP over the last few years.

Figure 3: Minor Minerals Value and Royalty Revenues (in Rs. crore)

As can be seen from Figure 4 „Stone/

Gitti’ and Sand are the major

contributors of revenue from minor

minerals accounting for more than 75%

of the revenue in 2007-08.

2004-5 2005-6 2006-7

Value 231.90 391.04 440.18

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

Rs.

cro

re

2004-05 2005-06 2006-07

Revenues 51.2 92.48 128

0

20

40

60

80

100

120

140R

s. c

rore

Stone/Gitti39%

Sand35%

Murrum19%

Marble3%

Flag-Stone2%

Granite1%

Clay1% Lime Stone

0%

Fuller Earth0%

Figure 4: Composition of Production (value) from Minor Minerals (2007-08)





3.2.3 Auction Mechanism for Extraction of Minor Minerals The auction process for minor minerals is described in the Minor Mineral Concession Rules. The auction mechanism

for minor minerals has the following key features:

• Auction is conducted for a lease period of two years.

• The auction amount of last auction is fixed as the upset price (floor price) for the next auction. In case no bid is

made above the upset price, a representation can be made to the state government to lower the upset price.

• Table 7 presents the administrative authority for auction of each mineral. As can be seen from the table, the

Mineral Resources Department is responsible for auction of high value minor minerals. Directorate of Geology

and Mining administers the auction of mines, that are spread over large areas and the district administration is

responsible for auction of small mines.

Table 7: Minor Minerals- Administrative Authority for Auction

Authority Mineral Powers

Department of Mineral Resources

Dimensional stone- granite, dolerite and other igneous and metamorphic rocks used for cutting & polishing purpose

Full Powers

Marble which is used for cutting & polishing purpose for making blocks, slabs, and tiles of specific dimension

Full Powers

Marble stone for other purposes Full Powers

Flagstone used for flooring, roof top etc and used in cutting and polishing industry

Where the area applied for is more than 4 Hectares

Director- Geology and Mining

Limestone when used in kilns for manufacture of lime used as building material.

Where the area applied for is more than 4 Hectares

Stone for making gitti by mechanical crushing (i.e. use of crusher) Where the area applied for is more than 4 Hectares

Bentonite/ Fuller's earth. Where the area applied for is more than 4 Hectares

District Administration

Limestone when used in kilns for manufacture of lime used as building material.

Where the area applied for is NOT more than 4 Hectares

Stone for making gitti by mechanical crushing (i.e. use of crusher) Where the area applied for is NOT more than 4 Hectares

Bentonite/ Fuller's earth. Where the area applied for is NOT more than 4 Hectares

Ordinary clay for making bricks, pots, tiles etc. Full Powers

All schedule 2 Minerals as well as the mineral number 1,3,4 (schedule unclear) within Panchayat/Nigam/Nagar Nigam/Special Area and Nagar Panchayat

Full Powers

The rates of royalty and estimated revenue for 2007-08 from various minor minerals are presented in Table 8. The

department also receives additional royalty from State Mining Corporation for the extraction of minor minerals

undertaken by the Corporation.

Table 8: Production Figures and Estimated Royalty for Select Minor Minerals (2007-08)

Name of Mineral Production (Cu.M) Applicable Rate of Royalty 5 6

(Rs./ Cu.M) Royalty Amount (Rs. crore)

Building Stones 14,273,833 28 39.97

5 Suitable assumptions made in case more than one rate is applicable depending upon sub categories

6The rates have been revised subsequent to our analysis





Name of Mineral Production (Cu.M) Applicable Rate of Royalty 5 6

(Rs./ Cu.M) Royalty Amount (Rs. crore)

Ordinary Clay 765,787 17 1.30

Ordinary Sand 10,660,061 33 35.18

Murrum 8,366,656 17 14.22

Fuller's earth 15,440 17 0.03

Marble 99,061 700 6.93

Stone 18,624 800 1.49

Quartzite & sandstone N/A 400 N/A

Total (in Rs. crore) 99.12

3.2.4 Monitoring Mechanism for Extraction of Minor Minerals

The monitoring mechanism for extraction of minor minerals is as follows:

• The District Mining Officer is responsible for administering the auctions and monitoring the extraction of minor

minerals at each district collector‟s office

• The District Minor Officer is supported by mining inspectors

• At present, the department/ directorate does not have any check post

• The officials from the department visit mines and have mobile monitoring squads for monitoring purposes

• The penalty for unauthorized extraction and transportation is the maximum of 10 times the estimated royalty or

twice the market price of the unauthorized mineral extracted.

• The rates of royalty applicable are given in Table 8. These rates for minor minerals are currently in the process

of revision.

3.2.5 Role of State Mining Corporation (SMC) The SMC is a PSU that mines major and minor minerals and precious stones in the state of Madhya Pradesh. It

acquires mines, by purchase or grant, mining and other rights in the lands within the state of Madhya Pradesh. The

corporation depends on private contractors for extraction.

Table 9: Major Mines of the SMC

Mineral Name of Mines Districts

Rock Phosphate Meghnagar Jhabua

Rock Phosphate Hirapur Sagar, Chhatarpur

Bauxite Tamar and Narohill Satna

Bauxite Chachandih Anuppur

Diaspore & Pyrophylite Kari Tikamgarh

Dolomite Mugdhara Mandla

Granite Kathera, Hardwar, GarhiMalhara, Madwa and Ratanpara

Chhatarpur

Flag Stone Dongari Shivpuri

Sand Under suboffices Hoshangabad, Jabalpur,Katni, Harda, Dhamod, Morena, Dabra

Hoshangabad, Sehore, Raisen, Jabalpur, Narsinghpur, Morena, Dhar, Khargone, Khandwa, Barwani, Katni, Umaria, Dewas, Harda, Gwalior, Datia,





Mineral Name of Mines Districts

and Bhind

About 90% of the income of State Mining Corporation is through extraction of sand. The SMC conducts auction

process for extraction of sand from its mines. Under the current process, the rate of extraction for minerals is fixed and

the bidding parameter is quantity of extraction.

Table 10: Share of Revenue of SMC in Overall Revenue from Sand

Year Sand Revenue Share of SMC Revenue from Private

Contractors

% Share of SMC

2006-07 50.21 30.76 19.45 61

2007-08 55.80 30.09 25.70 54

2008-09 65.11 29.08 36.03 45

Source: Directorate of Geology and Mines, (All fig. in Rs. crore)

3.3 Good Practice Benchmarking

The states that have significant non- tax

revenue from minor minerals have

been selected for undertaking the inter-

state comparisons.

The states of Andhra Pradesh, Tamil

Nadu and Maharashtra have done

consistently well in revenue collections

with a high recovery rate (defined as

the own non tax revenue divided by the

revenue expenditure on that line item)

as seen in Figure 5). We have

undertaken a study of the practices in

these states towards identification of

success stories in generating revenue

from mining.

Figure 5: Recovery Rates in Mining, Various States

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

1993-94

2000-01

2007-08





3.3.1 Auction Mechanism Government of Punjab and Tamil Nadu do not auction their mines but allocate leases on preferential basis to

communities or contractors, based on their past performance. The advantage with this approach is that in such a

scenario, many mines which may be „non-working‟ and not generating any revenue could be possibly utilised for

generating royalty.

3.3.2 Monitoring Mechanism Outsourcing of check post function to Department of Commercial Taxes has been undertaken in the states of Kerala,

Tamil Nadu and Andhra Pradesh. This has resulted in better monitoring without additional cost of maintaining separate

check posts.

3.3.3 Inter-State Comparison of Royalty Rates for Minor Minerals See the table for a comparison of royalty rates of minor minerals in Rajasthan, Chhattisgarh, Karnataka, Maharashtra

and Uttar Pradesh.

Table 11: Royalty Rates of Minor Minerals (Various States)

# Minor Mineral M.P Rajasthan Chhattisgarh

Type Rs./Cu.M Type Rs./Cu.M Type Rs./Cu.M

1 Dimensional Stone-Granite, Dolerite and other Igneous and Metamorphic rocks which are used for cutting and polishing purpose for making blocks, slabs tiles of specific dimensions.

(a)Black Colour

1500 Big block (>70 Cm)

450 (a)Black Colour

750

(b)Other Colour

800 Small Block 120 (b)Other Colour

400

2 Marble (a)Block 700 Block (>35 Cm) 1080 (a)Block 200

(b)Other 200 Block (<35 Cm) 742.5 (b)Other 75

3 Flagstone-natural Sedimentary rock which is used for flooring, roof top etc.

(a)Black Colour

200 Cutting/Polishing 228 - 75

(b)Other Colour

150 Other 96-120 - 75

4 Ordinary sand, Bajri 33 - 22.4 - 15

5 Murrum 17 - 14 - 15

6 Stone (a) Boulder

22 - - - 30

(b) Gitti, road metal

28 - 14-22.4 - 40

(c) Dressed stone, Khanda, Dhoka

44 - 14-22.4 - 40

# Minor Mineral Uttar Pradesh Maharashtra Karnataka


1 Dimensional Stone-Granite, Dolerite and other Igneous

Granite (>1 m)

1500 - - (a)Black Colour

30000





# Minor Mineral Uttar Pradesh Maharashtra Karnataka


and Metamorphic rocks which are used for cutting and polishing purpose for making blocks, slabs tiles of specific dimensions.

Granite (<1 m)

1000 - - (b)Other Colour

2500

2 Marble

- - All colours 240 - 1200

Marble/ Marble Chips

135 - - - -

3

Flagstone-natural Sedimentary rock which is used for flooring, roof top etc.

All colours 180 All colours 288 - -

- - - - - -

4 Ordinary sand, bajri - 17 - 35 - 42

5 Murrum - 17-23 - 35 - 14

6 Stone

- 30 - 35 - 44

- 32-45 - 35 - -

- 30 - 35 - -

Source Data: Directorate of Geology and Mining

3.3.4 Revision of Royalty Rates

Even though department of water resources, Government of Madhya Pradesh fixes user charges every 3-4 years, it

increases the user charge nominally each year to keep pace with inflation. A similar practice can be followed for royalty

rates of minor minerals.

3.4 Estimates of Revenue Loss from Minor Minerals

The minor mineral that we have considered for the purpose of this study is sand. Sand royalties have been susceptible

to widespread leakage and an attempt has been made to quantify the potential revenue lost in the last few years. We

have developed two different scenarios and obtained the following results:

• Moderate Scenario: Estimates the loss at about Rs. 28 crore per year based on a four year average

• Conservative scenario: Estimates the loss at about Rs. 11 crore per year based on a four year average

The details of the methodology and calculations can be found in section 9.1.4.





3.5 Issues and Recommendations

Area Issues Identified Recommendations Estimate of annual Increase in NTR

(Rs. crore)

Royalty rate for departments sand mines

Comparatively low rate of royalty compared to other

states and to the rates at which sand is offered by SMC –

e.g. Sand price to contractors:

o SMC mines = Rs. 95/ Cu.m

o Department mines = Rs. 33/ Cu.m (Royalty)7

See Table 11 for royalty rates of minor minerals for other

states

Case for revising royalty to at least Rs. 66 / Cu.m

It is important to link this with recommendation 2

~ Rs. 35 crore (100% increase in Royalties for the department. The departments revenues from sand were around Rs. 35 crore in 2008-09)

Auction Mechanism

Upset price is fixed as the last auction price. In many

cases, if the last auction price is extremely high due to

intense competition in that auction the upset price for

the next auction is so high that the minerals cannot be

auctioned off. The table below details the large number

of such pending representations to the state

government which has not been disposed off. It is to be

noted that illegal extraction may be continuing in such

mines

Concession type Pending applications till 1st May 09

Mining Lease 1,317

Prospecting 4,366

Quarrying Lease 1,847

Collusion among local contractors has been recognized

by the department as an issue. Collusion among

contractors can often lead to very low (uncompetitive)

bids at auctions.

Given the degree of collusion and weak monitoring, it is

recommended that the process of granting lease should be

based on pre-assessment and a fixed price. This price

should be based on physical assessment and be determined

at the state level. The use of new technology such as GIS

(Geographic Information System) can be undertaken

assessment purposes. For quarrying, the capacity of the

crusher can be used for assessment. This approach is

expected to have the following advantages:

It will reduce local level collusion and corruption

It will allow the government to achieve fair revenue

realization

While a fair price may mean that some contractors may

not extract, it is fair to assume that department have an

overall gain given the current level of leakage from

operational mines.

As a supplementary option to auction, current lease holders

may be given an option to renew the lease on an agreement

of automatic 10% rise. The model of excise department may

be followed to draft guidelines

~Rs. 8 crore (10% of Auction Revenue) See section 9.1.1 for assumptions and method of estimation

7 Royalty rates for Sand have been subsequent to this analysis revised to Rs 53/Cu. M






(Rs. crore)

The royalty rates can be inflation indexed ~ Rs. 3 crore (At about 3% of annual revenue from royalty) See section 9.1.2 for assumptions and method of estimation

Monitoring Mechanism

Monitoring of Extraction (in Minor minerals, especially)

is weak. Minor minerals are often subject to thefts and

payments are often made on a per tonne basis, while

the amount being mined is not monitored.

During 5th - 20th October, 2009 drive to catch

offenders, 865 offenses were registered.

However, normally only 350-400 offenses are

registered per month. This gives an indication

of the level of cases going un-detected.

There is no state level analysis of production and

revenue data as detailed data for each district is not

collated at the state level

See section 9.1.4 for an estimate of the loss that weak

monitoring and extensive leakages cause, using the

example of sand royalties

Outsourcing of monitoring function through check posts to

Commercial Taxes Department.

~ Rs. 3 – 6 crore

Creating a MIS (Management Information System) in which

district level data is collated centrally. This may be useful in

analysing/comparing the district-wise data. Several issues

may become clearer through even a cursory analysis of such

data.

The accountability of the District Mining Officer (DMO) is

crucial for the transparency and efficiency of operations. The

tenure of the DMO and Mining Inspector at a particular district

should be fixed and there should be periodic rotation of the

district mining officials.

Reforms by State Mining Corporation (SMC)

The SMC has not revised the rate of sand from Rs.

95/ Cubic Metre for the last 5-6 years. The focus has

been more on enhancing extraction towards greater

revenue generation.

Presently, SMC asks bidders to bid on the amount of

minerals that they can extract while fixing the base

price. This provides wrong incentives in terms of

excessive extraction and SMC has not been able to

gain from increase in price of sand over the past few

It is recommended that the SMC may revise the rate of sand

at regular intervals and link the periodic revision to price index

of cement or inflation

~ Rs. 2 crore

(assuming the Govt‟s share also increases on a pro rata basis) See section 9.1.3 for assumptions and method of

The SMC may also revise its auction mechanism and ask

bidders to bid on rates as done by the department.

Such a system will not only allow periodic revision of rate of

extraction, it will also discourage excessive extraction.






(Rs. crore)

years. Table 10 shows the declining share of SMC in

overall revenue from sand.

estimation





4 Forest

Forest products play an important part in the socio-

economic development of the state. In addition to

meeting the bonafide needs of the villagers residing in

and around forest areas, sale of forest products

contributes substantially to the state exchequer.

Important forest products are timber, fuel wood, bamboo

and many non-wood forest products like Tendu Patta,

Harra, Sal seed etc. Figure 6 presents the overall trend

of growth in revenue from forests in M.P. The growth in

revenue has been nominal at 2.63% over the period

2002-03 to 2007-08.

As is evident from Figure 6 and Table 12, Madhya

Pradesh earned over Rs. 600 crore of revenue from

forests giving it the distinction of the highest revenue earner from this source.

Table 12: Details of Revenue from Forest (Figures in Rupees Thousand)

Source of Revenue 2005-06 2006-07 2007-08

Forestry 4,903,960 5,362,992 6,088,938

Sale of timber and other forest produce 374,332 584,173 179,006

Receipts from social and farm forestries 11 42,838

State Trading in Tendu Patta 1,974 2,888 2,463

State Trading in minor forest produce 175 1 135

State Trading in Timber 3,787,659 3,880,806 4,822,956

State Trading in Bamboos 218,275 265,394 362,329

State Trading in Khair 11,641 8,124 3,905

Other Receipts 509,904 621,642 675,312

Deduct-Refunds - 47 - 6

4.1 As-Is Analysis

4.1.1 Stakeholder Analysis The primary institution concerned with forest management in the state is the Department of Forest. The Department is

also supported by four state enterprises in its effort. The Stakeholder analysis is presented in Table 13 outlining the

responsibilities of the department and the state enterprises as well as their revenue streams for the State Government.

Table 13: Stakeholders Analysis – Forest

# Stakeholder Responsibility Relevant Revenue Stream for the state

Government

1. Department of Forest The overall administrative body acting

as the custodian of forest reserves in

the state of Madhya Pradesh

Sale of Teak, Bamboo and other major

forest produce

Transit permit (For Mineral and Other

Goods)

Receipt from wildlife and forest reserves

2. M.P State Minor Produce

Federation

Responsible for coordination with local

community and production and

marketing of minor forest produce

No revenue accrues to the state

government. (As per the latest state

policy, all the profits are distributed to the

Figure 6: Revenue Collection Trend - Forest

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Revenue 497.30 496.74 559.10 490.39 536.49 608.89

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

In R

s. c

rore





# Stakeholder Responsibility Relevant Revenue Stream for the state

Government

local community).

It is to be noted that the federation does

collect commercial tax on sale

3. Madhya Pradesh Eco-Tourism

Development Board (ETDB)

Responsible for development and

promotion of Eco Tourism in the state

of Madhya Pradesh


government.

4. Rajya Van Vikas Nigam Limited Responsible for up-gradation and

afforestation of degraded forests

State Government receives a share of

profit from auction of timber and other

produce from the reforested land

5. State Forest Research Institute,

Jabalpur

Responsible for conducting research

and providing technical inputs to

various stakeholders


government.

The focus of study in the forest sector has been limited to the institutions from which revenue accrues to the

government as presented in Table 13.

4.1.2 The Mechanism for Sale of Forest Produce

The normal procedure for sale of timber and other produce is a stepwise process involving harvesting, registration and

finally the actual sale of the produce through an auction mechanism. This process is detailed below:

4.1.2.1 Harvesting

• Working plans are prepared for management of natural forest areas. Normally, a forest division is the unit

for preparation of working plan. A working plan is prepared for a period of ten years after which it is revised.

• Disposal of forest products like timber, poles, fuel wood, bamboo, etc., is done through auction in

commercial depots.

• The harvesting operations are carried out based on scientific principles of forestry. The trees which are to

be felled are marked in the coupes which are due for felling.

• After marking, the coupes are handed over to the production divisions for felling.

• There are 42 commercial timber depots and 22 industrial bamboo depots in the state in which the forest

produce is stored

4.1.2.2 Registration

• Any person can purchase forest products from the depot after getting himself registered as a trader in the

office of local Divisional Forest Officer.

• A person residing outside the State can register himself in any Forest Division of the State,

• Local traders have to apply to the concerned Divisional Forest Officer where the trader actually resides.

• Registration fee is nominal (Rs. 200) and is collected annually. The registration is valid for the calendar

year.

4.1.2.3 Auction

• Before purchasing, there is provision for inspection of depots and lots to be traded.





• The approximate quantity which will be put to auction in each of the depot is also notified. The upset price

approved by Conservator of Forests (once every six months) is based on the rates obtained for different

species by length, girth and grades during the last six months in various depots

• Dates of auction for different depots are notified well in advance taking due care that dates of auction in a

particular depot, as far as possible, do not coincide with the dates of auction in the depots of neighbouring

areas. Auctions are normally conducted every alternate month in each depot. To ensure wider participation

and encourage competition, auction notices are issued in regional dailies before each auction in a depot.

• After arrival of the material in the depots, it is graded and lots of specific size and grade are put to auction.

The size of the lots may vary from 0.5 cu. m. to 5 cu. m

• Before bidding for a lot, the purchaser is required to deposit Rs.1,000 or 10% of the proposed bid amount,

whichever is higher.

• Purchaser has to deposit 25% of the sale value on the date of auction.

• The balance 75% of the sale amount has to be deposited within 45 days. However 30 days extra time can

be given under special circumstance, after recovering interest @ 18%. The material purchased has to be

lifted from the depot within a period of 120 days.


Madhya Pradesh has been an above average performer in generating revenue from its forests. However, states like

Kerala and Tamil Nadu have shown better recovery ratio in the forestry sector. We have analyzed the select practices

in Kerala and Tamil Nadu to identify success stories in generating revenue from forest sector.

0 0.2 0.4 0.6 0.8 1 1.2

HARYANA

ORISSA

WEST BENGAL

PUNJAB

RAJASTHAN

ANDHRA PRADESH

GUJARAT

KARNATAKA

Average

MAHARASHTRA

MADHYA PRADESH

UTTAR PRADESH

TAMIL NADU

KERALA

Figure 7: Recovery Rates in Forest, Various States (2007-08)





4.2.1 Marketing Strategy and Demand Generation Given below are examples from other states on successful marketing strategy and demand generation in the forest

sector.

• Kerala and Karnataka have e-Auction Mechanism for forest produce

• Karnataka and West Bengal have a marketing strategy and personnel for acting on the strategy are

deployed

• Tamil Nadu advertises their high quality timber on international tender websites

• In Kerala, forest department interacts with foreign customers to provide high quality produce and

commands a premium for the same.

4.2.2 Ecotourism The state of Madhya Pradesh has not developed a ecotourism development strategy and its focus on Ecotourism as a

potential source of revenue has been very recent as compared to other states. Two examples of good practices in

other states are given below:

• Periyar Tiger Reserve: Tiger Trails and camping trips are organised by reformed poachers which have been

hugely successful and have helped attract tourists in areas with dwindling tiger population.

• Jungle Lodges and Resorts (JLR)-Karnataka - JLR is more focused on interpretation of wilderness and

hence does not target a high number of tourists. Moreover, these tourists are usually the elite and ready to

pay a premium price, which reflects in JLR's tariffs.

4.2.3 Land Usage

4.2.3.1 Example 1: The Case of Uttarakhand

Uttarakhand has been making efforts to obtain certification from the UN Framework Convention on Climate Change

(UNFCCC) for carbon credits needed for carbon trading at the international level for zero carbon emissions and

protecting the environment. The state hopes to get its carbon credit validation on forests in the near future as the

inquiry process on the claims have started. Government of Uttarakhand has already set up a Clean Development

Mechanism Cell (CDMC) to coordinate work for earning carbon credits from international bodies.

4.2.3.2 Example 2: Haryana Community Forestry Project

The Haryana Community Forestry Project, co-funded by the European Commission, was implemented by Haryana

Forest Department, under which nearly 370 hectares of sand-dune affected lands, belonging to 227 farmers from eight

villages, were selected. The project helped stabilize shifting sand-dunes and wind-blown sandy soil, substantially

reducing dust storms and subsequent soil erosion. In addition to the ecological benefits, the project will benefit farmers

by creating over 11,500 carbon credits annually for a period of 20 years. It has been estimated that the net revenue per

hectare per year with these carbon credits will be Rs. 6,350 as compared to Rs. 1,196 per hectare per year without the

certification.

A detailed note on carbon trading is provided in section 9.2.4. The note introduces the concept of carbon trading before

outlining the status of forestry Clean Development Mechanism (CDM) projects in India in general while focusing on the

potential of Madhya Pradesh in particular. The note also includes further details on the above two projects apart from

the costs and revenues involved in carbon trading. The note concludes by outlining the basic procedures for earning

carbon credits.





4.2.3.3 Example 3: Returns to carbon abatement through biological sequestration, Nepal

B.S. Karky and M. Skutsch have estimated8 the economic returns to carbon abatement through biological sequestration

in community managed forest under future Reducing Emissions from Deforestation and Forest Degradation (REDD)

policy. For the estimation, the research relies on forest inventory data together with other socio-economic and

resources use data collected from forest users in three sites of Nepal Himalayas. The paper estimates the incremental

carbon from forest enhancement on a yearly basis over a five-year period using the value of $ 1 and $ 5 per tCO2 for

conservative analysis. The results based on the three sites indicate that community forest management may be one

of the least cost ways to abate carbon with a break-even price which ranges from $ 0.55 to $ 3.70 per tCO2.

However, bringing community forests into the carbon market may entail high opportunity costs as forests provide

numerous non-monetary benefits to the local population, who regard these as the main incentive for conservation and

management. An important finding of the research is that if forest resources use by local communities is not permitted,

then carbon trading will not be attractive to them as revenue from carbon will not cover the cost foregone by not

harvesting forest resources. (See section 9.2.4 for a detailed note on carbon trading)

8 Karky, B.S., Skutsch, M., The cost of carbon abatement through community forest management in Nepal Himalaya,

Ecological Economics (2009), doi:10.1016/j.ecolecon.2009.10.004






Area Issues Identified Recommendations Estimate of annual Increase

in NTR (Rs. crore)

Marketing Strategy and Demand Generation

At present, the auction is conducted at the depot. There

have been instances of insects degrading the produce to

be auctioned.

It has been observed that for non- timber/ non-bamboo

produce, many depots do not have a critical mass of

produce to attract specific merchants.

There is no e-Auction mechanism at present. Also the

department does not publish the auction prices for specific

grades and lots. Inadequate transparency in pricing has

an impact on the revenue maximization through the

auction.

At present there is no certification of forests and region for

high quality produce.

Presently, no concerted effort is made to market the

timber produce by the department with the Policy Analysis

Unit of the department playing a marginal role.

There is inadequate pro-active association with timber

merchants to ascertain the needs of the consumers.

Madhya Pradesh timber, inspite of superior brand image

receives 10% lower revenue per cubic meter of timber

compared to Kerala.

Implementing E-Auction:

Photograph of lots can be made available

The portal of the forest department providing grade wise depot

wise auction rates for the last year

Bid winner through E-Auction to be provided with information on

possible transport issues and cost involved

For high value lot, Tender process can be initiated with the help

of E-Tendering process at the initial stage.

~ Rs. 8 crore (See section

9.2.2 for assumptions and method of estimation)

Undertaking an exercise for Forest Certification

In order to meet the growing demand for forest certification in the

global market, the Indian industry has to look for certified

forests/plantations to source their raw materials. The increased

demand for forest certification is likely to affect the economic

prospects of many farm forestry/agro-forestry areas in India unless

these areas are certified.

Get higher international prices as demand is growing for wood for

certified areas e.g. IKEA has a long-term goal to source all wood

from forests certified as responsibly managed

See section 9.2.1 for more details on the procedure of Forest

Certification

~ Rs. 4 crore (See section 9.2.2 for assumptions and method of estimation)






in NTR (Rs. crore)

Average auction price (Rs./Cu.M)

Kerala 59,870

Madhya Pradesh 53,957

Source: Forest department, Kerala and MP (for 2009)

Marketing Strategy and Information Cell

There is a need for a marketing strategy and information cell to be

formed with the following mandate:

Marketing the forest produce to a wider international target

segment as MP Teak is considered to be premium quality

product

Impress upon the high value customers that MP timber is of

higher value and deserves premium over timber from other

states

Follow up on certification of MP Timber products to generate

premium for its produce

The revenue enhancement directly attributable to this measure is not estimated

Ecotourism Madhya Pradesh has started focusing recently on

ecotourism development and needs to catch up with many

other states which have managed to develop ecotourism

spots which not only generate revenue for the government

but also help maintain its many exotic locales. The state

has immense scope in this regard.

Madhya Pradesh Government has not yet developed an

ecotourism development strategy or an institutional

mechanism to develop the same.

Development of Eco-Tourism Destinations:

Though the revenue potential from eco-tourism is limited and there

are investment requirements to be able to get some additional

revenue, the following measures could be explored by GoMP as

these could have several positive economic spin off effects on

income of people in forest areas:

Using “Hides” and “Watch towers” for wildlife viewing, full day

permits for camping sites. Madhya Pradesh can focus on

creating the Forsyth Trail, Kipling Trail, Research tourism,

Angling, Elephant safari expedition.

Inland Navigation - Rafting Safaris at various locations in

Madhya Pradesh can be successful. Private cruises on these

inland navigation canals can also be considered. Mountain

biking is another possible option.

The ETDB should take membership of various well-known national

and international organizations and build partnerships and even

compete for global awards e.g. Green Globe and International

~Rs. 20 lakh

(See section

9.2.3 for assumptions and method of estimation)






in NTR (Rs. crore)

Ecotourism Society.





5 Water Resources

The state of Madhya Pradesh has 12 major rivers, namely, Mahanadi, Mahi, Narmada, Tapti, Chambal, Betwa, Sone,

Wainganga, Indrawati, Sabri, Ken and Pench. The state has a total net sown area of 150 lakh hectares comprising

48.97 percent of the total geographical area with more than 49 percent of the population dependent on agriculture.

Water resources comprise the third largest source of Non Tax revenue of the six sectors considered for this study.

5.1 As-Is Analysis

5.1.1 Stakeholders Analysis The primary institution concerned with the management of water resources in the state is the Department of Water

Resources. The Department is also supported by Water User Associations. The Stakeholder analysis is presented in

Table 13 outlining the responsibilities of the department as well as its revenue stream for the State Government.

Table 14: Stakeholder Analysis - Water Resources


Department of

Water Resources The overall administrative body acting as the

custodian of Water Resources

Revenue from Irrigation

Revenue from Municipal Corporations and

Municipalities for water supply

Revenue from Industries for water supply

5.1.2 Revenue composition and trends As presented in Figure 8, the major source of revenue from water is industries, comprising two-third of the revenue. The other major source of revenue is from farmers comprising a quarter of the revenue. Given below are the revenue trends for Irrigation as a whole (aggregate of major, medium and minor irrigation).

Figure 8: Revenue and composition of revenue from water resources, MP

Industries66%

Nagar Nigam

0%

Nagar Palika

1%Nagar

Panchayat0%

Gram Panchayat

0%

PHED0%

Farmers27%

Others6%

2003-04 2004-05 2005-06 2006-07 2007-08

Revenues 45.02 45.23 37.32 38.75 50.82

0

10

20

30

40

50

60

Rs.

cro

re





5.1.3 Revenue Collection Mechanism The major source of income for the department is user charges. The user charges and collection mechanism are

different for agriculture and industry, as detailed below:

5.1.3.1 For Agriculture

The process of collection of user charges from farmers has the following features:

• At the beginning of each crop cycle, the department signs an agreement with the farmers in the area

• The department has an estimate of the landholding pattern through coordination with revenue department

at the time of project construction.

• The department has field level workers or „Amins’ who visit and collect the user charges from the farmers.

The rates applicable are „per watering‟ as shown in Table 15.

• The department also provides on demand irrigation facility.

Table 15: User charges for Agriculture

S.No Crops/ Lands/ Sources

Rate per Hectare (in Rs.)

Previous (enforced from

1st Nov., 02)

Existing (enforced from 1st Nov 05)

9

1 Rice (Paddy) 215 85 each watering

Other Kharif Crops 130 50 each watering

2 Wheat Palewa 105 125 each watering

Wheat (for each watering) 65 75 for each extra watering

Other Rabi Crops 265 75 for each watering

3 Jute - -

4 Sugarcane 800 960

5 Others

i. Vegetables 525 630

ii. Paddy (Rabi) 525 155 each watering

iii. Fodder Crops 400 480

iv. Cotton Ordinary 185 70 each watering

v. Cotton Hybrid 400 -

Source: Water Resources Department, Government of Madhya Pradesh.

5.1.3.2 For Industrial and Other Usages

The Department enters into an agreement with the industrial users on the rates and usage of water resources. The

rates applicable as per agreement are given in Table 16:

Table 16: User Charges for Industries

S.No Classification Proposed tariffs for industrial purposes (Rates per KL) with effect from

1 Nov 08 1 Nov 09 1 Nov 10 1 Nov 11 1 Nov 12

A In official

sources

(Canal, tube

well, reservoir)

Private Sector

2.2 2.4 2.6 2.8 3

9 Please note that these rates are currently under the process of revision





S.No Classification Proposed tariffs for industrial purposes (Rates per KL) with effect from

1 Nov 08 1 Nov 09 1 Nov 10 1 Nov 11 1 Nov 12

Industries or

State and

Central

Government

Undertakings

Etc.

B Natural/ Self constructed source from river, lake or other natural bodies

B (i) Those

industries

whose

sources were

constructed

from their own

expenditure

0.16 0.17 0.18 0.19 0.2

B (ii) Those

industries who

are directly

extracting

water from the

source

0.53 0.56 0.59 0.62 0.65

Source: Water Resource Department, Government of Madhya Pradesh


Figure 9 presents the recovery rates,

defined as the ratio of non tax

revenues to the revenue

expenditure.

As can be seen from the figure,

Orissa, Gujarat and Maharashtra

have higher recovery rates in

comparison to other states.

Government of Orissa has made it

compulsory for all the farmers to be

part of the “Paani Panchayat” to be

eligible for the maintenance grant.

This ensures that almost all the

farmers are part of the reform

program resulting in improved

recovery levels.

The states of Maharashtra and Andhra Pradesh have allowed the WUAs to levy charges and maintain irrigation

systems. In Maharashtra, WUAs are allowed:

• To determine, regulate, and enforce distribution of entitlement for various categories of use, as well as

distribution of entitlement within each category of use;

Figure 9: Recovery Rates in Irrigation, Various States

0.0000.1000.2000.3000.4000.5000.6000.7000.800

1993-94

2000-01

2007-08





• To determine and regulate seasonal or annual water entitlements during scarcity;

• To establish a water tariff system for various categories of water use for the purpose of stable and self-

sustainable management of service delivery.

Gujarat has made provision for 15% rise every year for water charges for irrigation. In addition the state recovers more

than 70% irrigation revenue. In North Gujarat, Saurashtra and Kutch this recovery is 100% and farmers of this area pay

in advance the irrigation charges.

The rate of recovery from users for non agricultural purpose (except drinking water) is also around 80 to 90% and Rs.

200 crore are recovered every year from water supplied for non agricultural purpose.

Administration of irrigation projects in the entire state are given to water users association on “Andhra pattern” by

conducting election. The most important fact is that the water rates are fixed by such associations themselves, which in

general is higher than Government‟s rate. They are allowed to retain 50% revenue with them and use the same for

maintenance of the irrigation network.






Area Issues Identified Possible Reforms

& Way Forward

Estimate of annual Increase in NTR

(Rs. crore)

Recovery

Mechanism The WRD has more than Rs. 450 crore of arrears outstanding. (See

table below and 9.3.1)

The two industries with the largest arrears are NTPC (National

Thermal Power Corporation), Singrauli (Rs. 210 crore) and

M.P.S.E.B (Madhya Pradesh State Electricity Board), Betul (Rs. 165

crore)

Significant arrears also accrue from Nagar Palikas and municipal

corporations.

Chief Engineer Balance as on

1/4/2008 From Arrear

Current Demand (2008-09)

Total Arrears

Chambal & Betwa Basin 1855.03 1064.43 2919.46

Ganga Basin 16522.79 8122.64 24645.44

Yamuna Basin 4856.43 478.42 5334.85

Narmada & Tapti Basin 1874.78 687.78 2562.56

Operations and Maintenance 3749.17 1075.66 4824.83

Rajghat Canal Project 788.03 356.17 1144.20

Dhasan & Ken Basin 1400.68 108.13 1508.81

Wainganga Basin 1138.61 608.70 1747.31

Ayacut Bansagar Basin 0 1570 1570

Electrical & Mechanical 0 105 105

Engineer In Chief 0 45 45

Bureau of Design of Hydel and Irrigation

0 5 5

Project Implementation coordination unit

0 0 0

Total 32185.52 14226.9 46412.4

All figures are in Rs. lakh

Presently, the focus of the department is on implementation of the

major medium and minor projects. The collection of revenues is

currently a secondary activity and the collection efficiency is low

WUAs to be made responsible for full cost

recovery from irrigation projects and possible up-

gradation of irrigation systems.

If the collection

efficiency from

farmers improves

15% the department

can get about Rs. 7

crore per year

(moderate scenario).

See section 9.3.2 for

three alternative

scenarios.

Have a fixed timeline for signing agreement with industries

For renewal of agreements clear time-bound procedures should be in place outlining escalation mechanisms up to Engineer-in

3 % improvement in

recovery rate from

industries will result

in an increase in

revenues of about






& Way Forward


(Rs. crore)

(Recovery of fees as a ratio of current demand) - See section 9.3.1

for details.

Service delivery issues - At present WRD is the revenue collecting

authority for even minor irrigation projects, while the WUAs are

responsible for the Operation and Maintenance (O&M). This suggests

that there is absence of a link between the payment of service

charges and the prospect of improvement in services provided by the

system in response to the user requirements. It is perceived that

minor irrigation schemes handed over to WUAs may become

unviable due to limited capacity.

Large number of litigations

Weak monitoring mechanism

Non finalization of agreements with industries (~25 % of agreements

pending finalisation). As can be seen from the table below, out of the

52 industries, the agreements are yet to be finalised in 14 industries:

Category #

Not applicable 16

Agreement Done 22

Agreement Not Done 14

Chief‟s office

After a period of 6-12 months, the recovery of revenue from industries may be delegated to district magistrate

Rs. 4 crore

(moderate scenario)


three alternative

scenarios.

Reforms in

WUAs WUAs have not been handed any specific task based responsibility

Many of them have not been able to achieve end results as desired.

It is recommended that the WUAs are

specifically assigned the task of regular

maintenance for irrigation projects.

Devolution of grants to WUAs to be

contingent on participation of all farmers and

signing an agreement with the department

for payment of water charges.

Elections on a rotation basis for key officials

of WUAs to be ensured to avoid rent

seeking.

If the collection

efficiency from

farmers improves

15% the department

can get about Rs. 7

crore per year

(moderate scenario)

apart from possible

savings due to lower

regular maintenance

costs.


three alternative

scenarios






& Way Forward


(Rs. crore)

Revision of

Rates

Presently, the proposal for revision of rates is pending with

government for close to a year.

There should be a time bound revision of

rates.

Instead of changing rates once in three

years with values for each year increasing

arbitrarily, indexation of rates (e.g. to

inflation) is preferable.

Rates could be made progressive as against

a flat rate. Thus, each WUA may be given a

measured amount of water and a target for

collection efficiency can be set for each

WUA.

See section 9.3.3 on pricing of water

resources. The note provides an estimate of

the increase in rates required to cover at

least maintenance expenditures of the

department

~ Rs. 3 – 5 crore





6 Education

The education sector assumes central importance in the Human Development of any state. As per the present policy of

the state government, primary education is to be provided free of cost and similar policy is on the anvil in the upper

primary or middle schools. Thus, for this sector, our focus on generation of Non-Tax Revenue from the education

sector has been on Secondary, Higher and Technical Education.

6.1 As-Is Analysis

6.1.1 Stakeholder Analysis The following are the major stakeholders in Education from the Government of Madhya Pradesh.

Table 17: Stakeholder Analysis - Education

# Stakeholder Primary Responsibility Relevant Revenue Stream for

the state Government

1. Department of School

Education (SED)

Education from pre- primary to Higher secondary school.

(in Non- Tribal areas only)

No significant source of revenue

Board of Secondary

Education, M.P

Regulation of secondary education in the state Examination fees, recognition

fees, other fees are kept with the

Board itself

2. Department of Higher

Education

Collegiate education (excluding medical, veterinary,

engineering and agriculture colleges) and post graduate

education in arts, commerce and science faculties along

with policies thereof.

Fees from universities and higher

education

3. Directorate of

Technical Education

Implement technical education policies of GoMP and

Central Government, act as coordinating agency

between Government, industry and institutions and to

advice and assist the Government in the all-round

development of technical education.

Tuitions and other fees from

technical education colleges

6.1.2 Revenue Trends Revenue collections in education sector in MP are between 5-20% of Revenues collected in other major states.

10

Figure 10: Revenue Collection Trend – Education

10

Maharashtra, Kerala, Karnataka, Gujarat, Andhra Pradesh and Tamil Nadu.

2004-5 2005-06 2006-07 2007-08

NTR Education (Rs. crore) 13.17 11.85 10.93 13.72

0

2

4

6

8

10

12

14

16





As is evident from Table 18 the revenue from technical education has gone down significantly in recent years. The

reason for this is explained in Section 6.1.5.

Table 18: Details of Revenue from Education (Rs. Thousand)

Classification/Year 2004-5 2005-06 2006-07 2007-08

Total (General +Technical) 1,31,732 1,18,573 1,09,338 1,37,256

General Education 41,357 95,605 94,021 1,35,611

Elementary Education 222

Secondary Education 20,504

University and Higher Education 22,347 33,554

General 22,067 68,895 47,561 18,139

Other Receipts 27,125 24,888 85,348

Deduct-Refunds -1,214 -415 -775 -1,652

Technical Education 90,375 22,968 15,317 1,645

Tuitions and other fees 91,120 22,968 15,317 1,645

Deduct-Refunds -745

Source: Finance & Accounts of Madhya Pradesh (2004-05 to 2007-08)

6.1.3 School Education • Madhya Pradesh does not collect significant revenues from Secondary education that accrues to the state

government. The only source of revenue for the School Education department is type writing exam fees.

This yielded revenues of Rs. 7 lakh last year.

• The Board of Secondary Education, Madhya Pradesh collects revenues that it uses for its own operations.

The major revenue sources are the examination fees (levied on a per student basis) and recognition fees

that schools have to pay to the board. The recognition is renewed every year for which there is a separate

charge. Other fees include enrolment, mark sheet and tuition fees.

• The Board earns about Rs. 70 -75 crore of revenue each year, which they deposit with a nationalised bank.

They meet their expenditures of about Rs. 55 – 60 crore through this source.

Table 19: Fees and charges levied by the Board of Secondary Education, M.P

S.No. Exam and other fee details

Amount (Rupee)

Regular Swadhiyai Correspondence

High School

Higher Secondary

Commercial

S. School/ H.Sec/

Commercial

D.Ad.

A Fees paid by organisation

1 Exam application fee 30 30 30 150

2 Examination Fee 250 250 500 300

3 Mark sheet Fee 40 40 40 40

4 Registration Fee 80 80 80 80

5 Lab fee- Per Subject 30 30 30 0

6 All Examination fee

One Subject 105 105 105 0

two Subject 125 125 125 0

More than two subjects 285 285 285 0

7 Tuition Fee (Correspondence- D.Ad first/ second year)

0 751

8 D.Ad second chance





S.No. Exam and other fee details

Amount (Rupee)

Regular Swadhiyai Correspondence

High School

Higher Secondary

Commercial

S. School/ H.Sec/

Commercial

D.Ad.

One Subject 0 0 0 70

two Subject 0 0 0 90

More than two subjects 0 0 0 500

9 Affiliation fee - new fee 10000 12500 15000

Renewal 2000 2200 2500

10 Other legal fees (Subject/ Medium/Faculty/ central- modification)each

100 100 100 100

11 Educational research fee

12 Acceptance fees 200 200 200 200

B. Fees paid by Students

13 Copy document - Emergency Marksheet/ certificates

70 70 70 70

Immigration/visa/ enrollment 50 50 50 50

14 Re-checking fees per subject 100 100 100 100

15 Digest fee per subject 60 60 60 60

16 Complementary subject (Including all subject

50 50 50

17 D.Ad regular, second chance correspondence

0 0 0 250

18 Record verification fees 100 100 100 100

19 Other Fees 0 0 0 0

Source: Board of Secondary Education, Government of Madhya Pradesh

6.1.4 Higher Education • Opening up a new private college of higher education yields revenues to the department. Each new private

college has to pay the government Rs. 2 lakh rupees (recently revised upwards from 1 lakh). Before 2005,

no charge was levied for opening up private institutes.

• Private colleges are also charged Rs. 20,000 for opening up each new department (Adding subjects). This

fee was also revised upwards from Rs. 12,000 last year.

• As per the guidelines these charges can only be revised once every three years. Scope for an increment in

fees is therefore very limited in the next two years.

• Revenues from higher education were about Rs. 4.88 crore last year. Due to the revisions in rates, the

department expects this figure to increase to Rs. 5.5 crore.

6.1.5 Technical Education • As part of the TEQIP (Technical Education Quality Improvement Project- World Bank) Corpus fund, Staff

Development fund, Depreciation fund and Maintenance fund were created in each institution and steps

were taken to make available resources in these funds.

• More autonomy for universities and colleges in technical education has meant that the entire revenue

sources of the technical education colleges or universities are used for their own development. The

unutilised funds are accumulated in a corpus fund.





• The Directorate of Technical Education therefore collects no revenues. In fact, it distributes (Plan and Non

Plan) development grants to institutions.

• Fee structures for different universities and individual colleges are decided by the Admission and Fee

Regulatory Committee (AFRC).

Table 20: Number of Technical Education Institutions by Subject

Syllabus Autonomous Government Aided Self Financed Private Total Students Capacity

BE/ Architecture 4 4 6 148 162 52200

Diploma (Engg) 42 2 44 11225

MBA 2 2 10 125 139 9350

MCA 2 3 7 79 91 5610

B Pharma 0 1 3 89 93 7980

Hotel Management 0 0 0 4 4 230

Source: Directorate of Technical Education, Government of Madhya Pradesh


As can be seen from Figure

11, Madhya Pradesh has been

far below the 13-state11

average in terms of revenue

generation. Its recovery rates

are the lowest among the 13

states under consideration in

2007-08, even though

recovery rates are typically

very low in this sector in

general.

The success stories are Tamil

Nadu and Haryana. Apart

from having very high

recovery rates Tamil Nadu

also earns large revenues

from education. In 2007-08,

Tamil Nadu earned more than Rs. 100 crore from elementary education and secondary education each, and more than

Rs. 50 crore from technical education. As noted earlier the total revenue from general and technical education in MP

was around Rs. 14 crore.

Tamil Nadu – Case Study, Secondary Education

The State of Tamil Nadu collects revenues from secondary education under the following major heads:

Management Contribution: This is a onetime payment and the school management pays the management contribution

in the Government Account on the basis of number of students as follows:

• Up to 500: Rs. 10,000

11

See figure above for the thirteen states under study.

M.PW.

BENGAL

RAJASTHAN

U.PMAHARASHT

RAA.P

KARNATAKA

ORISSA

GUJARAT

PUNJAB

KERALA

TAMIL NADU

HARYANA

1993-94 0.43% 0.28% 0.32% 1.33% 0.94% 2.17% 1.46% 1.44% 1.38% 0.88% 2.02% 1.50% 2.77%

2000-01 0.51% 0.40% 0.77% 2.97% 0.35% 3.27% 1.19% 1.17% 1.09% 0.58% 1.83% 1.28% 1.72%

2007-08 0.38% 0.39% 0.51% 0.72% 0.75% 0.99% 1.16% 1.61% 1.62% 1.97% 2.38% 2.72% 4.39%

0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%

Figure 11: Recovery Rates in Education, Various States





• 501-750: Rs. 20,000

• 551- 1000: Rs. 40,000

• 1001-1500: Rs. 60,000

• 1501-2000: Rs. 80,000

• Above 2000: Rs. 1,00,000

Inspection fees: It is an annual payment by the schools. An amount of Rs. 2500 is collected for Matriculation schools

and Rs. 5000 for higher secondary schools

Application fees: It is paid every three years for opening, permission, recognition and renewal of recognition. An

amount of Rs. 10,000 is paid for upgradation and renewal and Rs. 1000 for opening additional classes.

Apart from these three heads the Government also collects a one time endowment fees of Rs.10,000 which stays in

the school account







in NTR

(Rs. crore)

Revenue collection by Secondary Education Board, M.P

Most states receive significant revenues from secondary education primarily because the departments are responsible for collecting the revenues. In Madhya Pradesh, the department earns nominal revenues as revenue is collected by the Board of Secondary Education for its own operations.

The Secondary Education Board earns a surplus of about Rs. 15 crore each year from the various fees and charges it levies on both students and private institutes.

It is recommended that the state government levy a share of 20% of the examination fee and about 40% of the renewal fee for affiliation. There are several other process specific charges which should remain fully with the Board.

Rs. 4.3 crore See section 9.4.1

Ceiling on Corpus Funds with additional money collected to be deposited in State Treasuries

Almost all the universities have a growing corpus amount. This has led to a lot of agencies in the education sector with idle money e.g.

RGPV (Rajiv Gandhi Proudyogiki Vishwavidyalaya) - Corpus of more than Rs 200 crore

Vyapam – Corpus of more than Rs 25 crore

More than Rs 5 crore (in a separate account) for providing NOC (No Objection Certificate) to private bodies

It is recommended that depending on the function of an institution, a ceiling on its corpus may be defined and amount above the ceiling can be utilised by the state government for other capital intensive projects

While the government will not receive a significant amount of revenues from this measure, such a step will incentivise the concerned agencies to better utilize the corpus and will place less demand on the state government for additional resources.

Using physical infrastructure for alternate uses

No initiatives undertaken for alternate uses of school infrastructure

After the teaching hours are over or at the end of the week when classes are not held institutions could lease out their grounds/ auditorium/ classroom facilities for fees. This is currently happening on a very small scale in the state and is therefore not yet a significant revenue source.

The existing infrastructure in government schools such as classrooms can also be utilized effectively by lending them out after school hours to private coaching institutes for

Approximately Rs. 45 lakh. Details in Sec 9.4.2






in NTR

(Rs. crore)

engineering/ MBA entrances and so on. Schools can earn significant revenues from this source.

A regulation of these charges for the entire state may also be a step in the right direction.

Sponsorship/ adoption of schools

Such initiatives have started in Madhya Pradesh (www.fundaschool.org) under the Rajiv Gandhi Shiksha Mission

For more details see section 9.4.3

Schools or school buildings, libraries etc. can be sponsored by individuals (or their nominees) or corporates.

Possible features of such a scheme (rates, certification etc.) are given under section 9.4.3

The revenue enhancement directly attributable to this measure is not estimated

http://www.fundaschool.org/





7 Water Supply and Sanitation

Government of Madhya Pradesh has recently made great strides in providing water supply and especially piped water

supply even to remote habitations. The percentage of rural habitations with less than 10 lpcd (litres per capita per day)

of water supply has drastically come down from 15.8% in 2003 to 0.1% in 2009. Also the percentage of habitations with

40 lpcd of water supply has increased from 59% to 97% over the period 2003 to 2009. Thus the state has made

considerable progress in terms of meeting the national norms for rural water supply.

7.1 As-Is Analysis

7.1.1 Stakeholder Analysis The following table provides the stakeholder analysis for water supply and sanitation in the state. The PHED, ULBs and

PRIs are the relevant stakeholders in this sector. Their primary responsibilities and revenue streams are also detailed

in Table 21.

Table 21: Stakeholder Analysis- Water Supply and Sanitation Sector

# Stakeholder Primary Responsibility Relevant Revenue

Stream for the state

Government

1 Department of Public

Health and Engineering

(PHED)

Construction of the water supply system is undertaken by

the centralized body -PHED and after the construction, the

assets are handed over to the Local Bodies.

PHED also provides technical assistance to Panchayati Raj

Institutions (PRIs) on need basis for O&M of the system

PHED is also responsible for operation and maintenance of

sewage treatment plants.

Service fee from

Contractors.

2 Urban Local Bodies (ULBs) Responsible for provision of water supply and sanitation in

Urban Areas

User charges collected and

retained by the local body

3 Panchayati Raj Institutions Responsible for provision of water supply and sanitation in

Rural Areas

User charges collected and

retained by PRIs.

While the revenue from this sector goes to the third tier of the government, we have focussed on three large municipal

corporations as enhanced revenue generation by such ULBs can in turn lead to less demand for grants from the state

exchequer.

7.1.2 Trend and Composition of Revenue

The PHED is the state level authority for levying and receiving user charges from the sector. As the table below

suggests, the receipts from user charges is minimal and decreasing as the authority to levy such charges has been

devolved to local bodies

As Table 22 suggests, there has been minimal trend growth in receipts as the receipts are mostly other receipts and

service fee from contractors for implementation.

Table 22: Trend and Composition of Revenue – Water Supply & Sanitation

Revenue Head 2005-06 2006-07 2007-08

Water Supply and Sanitation 55,886 51,345 59,106





Revenue Head 2005-06 2006-07 2007-08

Water Supply 18,731 17,140 22,332

Receipts from Urban water supply schemes 432 241 338

Services and Service Fees 18,327 16,899 21,989

Sewerage and Sanitation 37,155 34,205 36,774

Receipts from Sewerage Schemes 998 879 1,691

Other Receipts 36,157 33,326 35,083

Source: Finance Accounts, GoMP. All figures are in Rupees thousand.

7.1.3 Service Delivery

7.1.3.1 Water Supply

Construction of the water supply system is undertaken by the centralized body- PHED and then after the construction,

these are handed over to the local authorities. In case of large municipal corporations, they may decide to implement

construction projects on their own.

None of the ULBs in Madhya Pradesh have bulk meters installed.

7.1.4 Operations and Maintenance

7.1.4.1 Water Supply

For water supply schemes, the operations and maintenance cost is borne and administered by the respective local

body. The source of funding is typically user charges or untied funds from various schemes for PRIs. In rural areas,

Gram Panchayats are thereafter responsible for the operation and maintenance of the water supply system. The PHED

provides technical assistance to the Gram Panchayats on need basis in the operation and maintenance of the system.

Since separate accounting for maintenance on water supply is not done at the state level, an overall assessment of

actual maintenance cost cannot be done. For our analysis we have therefore focused on the major municipal

corporations of Bhopal, Indore and Jabalpur.

Table 23 presents the data for three municipal corporations. It shows poor level of service delivery coupled with low

operating ratio. Operating ratio shows the ratio of recurring expenditure incurred to the revenues earned by the ULB.

An average of 3.23 for the operating ratio suggests that the revenue from water tariff may have to be increased more

than three times just to cover the operating costs of water supply schemes.

Table 23: Key Indicators (Water Supply) for Bhopal, Indore and Jabalpur12

Key Indicators Bhopal Indore Jabalpur

Water Coverage (%) 83.4 77.3 75.2

Water Availability (hours) 1.5 0.75 4

Consumption/Capita (l/c/d) 72 87 139

Production/Population (m3/d/c) 0.182 0.108 0.222

12

2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank





Key Indicators Bhopal Indore Jabalpur

Connections Metered (%) 0 0.1 0

Operating Ratio 2.82 5.33 1.68

Staff/1,000 Connections (ratio) 20.7 18.7 0.4

Source: 2007 Benchmarking and Data Book of Water Utilities in India, Asian Development Bank

7.1.4.2 Sanitation

PHED is responsible for maintaining the sewage treatment plants. Table 24 shows the Non Plan Revenue Expenditure

(NPRE) on sewerage services by GoMP.

Table 24: NPRE on Sewerage in MP

Year 2005-06 2006-07 2007-08

NPRE on Sewerage Services 9.69 11.7 11.8

Source: Finance & Accounts, GoMP. All figures in Rs. crore

7.1.5 Revenue Collection Mechanism In the urban areas, as per the devolution policy of the state government, water supply collection mechanism is at the

ULB level. Table 25 and Table 26 shows the water charges imposed by Bhopal and Indore. Jabalpur has a flat rate per

connection.

Table 25: Water Supply Charges, Bhopal Municipal Corporation

Size Domestic Commercial* Industrial

1/2" 60 500 600

3/4" 400 1,000 1,000

1” 600 1,500 1,500

Tariff for metered domestic connection is Rs 3.50/m3

Source: Bhopal Municipal Corporation Annual Report, 2009

Table 26: Water Supply Charges, Indore Municipal Corporation

Size Domestic Commercial Industrial

1/2" 150 300 600

3/4" 250 600 1,200

1” 500 1,400 2,400

1-1/2” 1,000 2,400 5,000

2” 2,000 5,000 10,000

3” 4,000 10,000 20,000

4” 8,000 20,000 35,000

6” 14,000 38,000 76,000

Bulk rates 11.00/m3 14.00/m3 24.00/m3

Tariff for metered connections – Rs. /m3 (Bulk rates)


There is no metering in Bhopal while metering has been initiated in Indore. A comparison across the three ULBs is

given in Table 27. Bhopal has the lowest rate applicable across the cities.





Table 27: Average Tariff across ULBs (Bhopal, Indore and Jabalpur)

Indicator/ City Bhopal Indore Jabalpur

Average Tariff (Rs/m3) 0.6 2.79 1.5

New Connection Fee (Rs) 1,500 2,500 1,984

Staff/1,000 Connections (ratio) 20.7 18.7 0.4

In rural areas, water charges are levied by PRIs under the Nal Jal scheme. Typically, the PRIs charge Rs. 25-50 per

connection.

For sanitation, no separate charges are levied and a “Composite Charge” is levied by the ULBs comprising sanitation

and other charges. The composite charge is typically linked to the “Property Tax”. Property tax is usually based on the

area and probable commercial value. However, there is no fixed system to revise the property tax periodically.

Case Studies for Good Practices in Water Supply and Sanitation

Chennai Sewage Treatment

The Chennai Metropolitan Water Supply and Sewerage Board have made a significant advance in use of service

contracts for PPP in O&M of water supply and sewerage systems in the city. Out of the 119 city sewerage pumping

stations, 70 have been given to private contractors for operation and maintenance. The system is working very well

which has resulted in an increase in the contract period from one to three years. The Board has also given service

contracts for O&M of two sewage treatment plants for a period of three years.

Water Supply model (KUWASIP)

Government of Karnataka (GoK) is implementing a project called “Karnataka Urban Water Sector Improvement Project”

(KUWASIP) with assistance from the World Bank. This is a project for reforms in water and sanitation sector and

service improvements in water sector. For further details, including the tariffs for this project see Section 9.5.3.





7.2 Issues and Recommendations13

Area Issues Identified Recommendations Estimate of annual

Increase in NTR

(Rs. crore)

Increase in Water Tariff

ULBs in Madhya Pradesh have very low recovery rate compared

to other similar districts across the country. The water tariff

charged is much below average.

High operating ratio (Recurring expenditure/ revenue from water

tariff)

Poor service delivery and lack of resources to improve the same

Section 9.5.1 shows comparative status of cities across India in

terms water supply. Section 9.5.3 shows the rate structure for a

PPP water supply model in North Karnataka.

Municipal Corporations need to recover at least their operation

and maintenance cost from revenues.

The revenue collected will be much needed by the ULBs in

improving their service delivery and productivity which is

significantly below the national average as can be seen in

sections 9.5.1 and 9.5.2

It is also recommended that this rate be indexed to inflation so

that the rate gets revised automatically on an annual basis

Explore Retail Price Index(RPI)-X method of indexation of water

tariff

The steps behind such a methodology are as follows:

Arriving at relevant set of indices and the appropriate weights for

these indices, i.e., to arrive at the RPI formula

Specifying different levels of standards and their bearing on the

end-user tariffs

Arriving at suitable values for the X-factor, that symbolizes the

efficiency gains based on increased productivity, technological

changes, quality standards, enhancements to the security of

supply and changes in economies of scale or scope, enhanced

service levels etc.

Rs. 5 crore

Metering of Water Supply

The concept of metering for water supply has not been

introduced in any of the ULBs. Indore Municipal Corporation has

installed some meters especially for bulk consumers. However,

Water, is going to be a scarce commodity and water supply

should be metered on the principle of fairness and conservation.

(See Section 9.5.2)

Metering will allow the ULBs to levy progressive charges on

consumers.

Meters to be installed for industries and bulk users

Sewage While the user charges of sewage treatment are collected at the Sewage treatment plant maintenance activity be handed over to ~ Rs. 3 crore

13

The recommendations made in this report are already under different stages of implementation as mentioned by the concerned

departmental officials during the presentation on the report.





Area Issues Identified Recommendations Estimate of annual

Increase in NTR

(Rs. crore)

treatment Maintenance

ULB level, the maintenance is done by PHED. This model

hinders many of the reforms that are taking place in sanitation

sector in Madhya Pradesh and across India.

the ULBs

This will allow the ULBs to adopt the PPP approach, induct a

private player and at the same time levy user charge for this

purpose based on the actual cost of O&M. Also, with the given

high number of staff in many ULBs such as Indore and Bhopal,

there may be cost savings in

of savings (30% of 11 crore). See section 7.1.4.2.





8 Cooperatives

Cooperatives all over the world have become an effective and potential instrument of economic development. The

Cooperative Movement that Madhya Pradesh has witnessed over the decades has contributed to substantial growth in

diverse areas of economy. There is not a single major sphere of economic activity which has not been touched by

Cooperatives. Cooperatives are also envisaged as an instrument for implementing many important policies like

agricultural credit, urban credit, market intervention, price support for agricultural commodities through Cooperative

Wholesale stores, Public Distribution System (PDS) etc.

There are six Apex level (State wide) Cooperative institutions

• Madhya Pradesh Rajya Sahkari Bank

• Madhya Pradesh Rajya Sahkari Krishi aur Grameen Vikas Bank

• Madhya Pradesh Rajya Sahkari Awaas Sangh

• Madhya Pradesh Rajya Sahkari Vipanan Sangh

• Madhya Pradesh Rajya Sahkari Upabhokta Sangh

• Priyadarshini Swa-Suwidha Kendra

These institutions are functioning with their area of operation extending over the entire state.

The District Central Cooperative Banks, District Cooperative Unions, Cooperative Printing Presses, Cooperative whole

sale stores are functioning with area of operation of the respective district. Urban Cooperative Banks are functioning

with area of operation confined to respective urban areas. The area of operation of Co-operative Marketing societies

are the respective districts/ blocks. Primary Cooperative Agriculture and Rural Development Banks are functioning with

area of operation at block /district level. The Primary Agricultural Cooperative Banks and Primary Cooperative stores

are functioning at Primary level covering villages. Primary Cooperative stores are functioning in Villages and its urban

centres covering the area of operation specified in their byelaws.

8.1 As-Is Analysis

8.1.1 Stakeholder Analysis Department of cooperation is the agency responsible and its main activities are as a regulatory and supervisory body of

institutions related to development.

The main obligations of the department are the registration, inspection, supervision, audit and liquidation of cooperative

societies. The department also guides the societies on various technical and financial matters.

The Department of Cooperation through almost 39,139 (2008-09) cooperative societies undertakes various activities

relating to procuring manure, seeds and other inputs for farmers, urban credit systems, PDS (Public Distribution

System) and obtaining essential consumer goods and so on. The societies involved in these activities range from urban

consumer cooperatives, housing cooperatives, fish/dairy forest produce, weaving, mineral works, etc.

Short term and long term credit are provided for farmers through M.P State Cooperative Bank along with 38 district

central cooperative banks and 4,530 primary agricultural credit cooperative societies.

Development work in housing, processing units and farm based industries is undertaken by cooperative societies. 28

lakh credit cards have been provided to the farmer community.





In the M.P Cooperatives Act of 1960, 33% participation of women in primary cooperative societies is mandatory. Latest

data indicates that while in a few cases this norm is easily met, in most cases the percentage falls well short of the

required measure. Of the total 39,139 registered cooperative societies only 6,898 are women cooperative societies,

that is, only 17.6%. Efforts are underway to improve women‟s participation in the cooperatives.

To solve the housing problem more than 3,000 housing cooperatives exist in the state.

Table 28: Stakeholder Analysis- Cooperatives Sector

Stakeholder Responsibility Source of Revenue for the State

Department of Cooperation

Registration, inspection, supervision, audit and liquidation of cooperative societies.

Audit and other fees

Cooperative Societies

Instrument for implementing many important policies like agricultural credit, urban credit, market intervention, price support for agricultural commodities through Cooperative wholesale stores, PDS etc.

No significant revenue

8.1.2 Sources and Composition of Revenue

As is evident from Figure 12 the trend is that of

increasing revenue and the growth in NTR from

cooperatives in recent years has been quite rapid.

The single largest component of revenues from

cooperatives is the audit fees that the department

collects (see Table 29). Though even this

component has shown high growth in recent years,

the department expects this component to go down

as now the cooperative societies have the option of

allowing a chartered accountant to audit them

instead of the department.

Table 29: Composition of Revenue - Cooperatives

Category 2005-06 2006-07 2007-08

Co-operation 142,316 185,399 292,850

Audit Fees 120,542 152,965 252,509

Services and Service Fees

Other Receipts 21,784 32,438 40,341

Deduct-Refunds - 10 - 4

Source: Finance & Accounts, Government of Madhya Pradesh. All figures are in Rs. thousand.

8.1.3 Sources of Revenue – Audit Fees and Other Minor Sources As of now the department has only one source of revenue. According to the M.P Cooperatives Act every society was to

get audited atleast once in every year by the person authorised by the Registrar and pay the prescribed audit fee

providing for some exemptions which are listed below:

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Revenue 14.45 15.61 17.92 14.23 18.54 29.29

0.005.00

10.0015.0020.0025.0030.0035.00

Ru

pe

es

cro

re

Figure 12: Revenue Collection Trend- Cooperatives





• A Central Society or an Apex Society or an Urban Co-operative Bank may get the accounts audited by a

Chartered Accountant approved by the Registrar

• A Co-operative Bank may get the accounts audited by a Chartered Accountant approved by the National

Bank, and the audit fees shall be paid by the Bank as may be determined by them

• Primary Agriculture Credit Co-operative Societies, too shall have option to get the accounts audited by the

Chartered Accountant or the Registrar

The department has a separate audit wing in each district through which it conducts the audits. Every year all the

societies in the districts are therefore divided among the auditors. The audit wing audits, levies and recovers the

charges from the cooperative societies.

One other source (very nominal) through which the department earns revenue is through the receipt of a fee by the

registrar in order to conduct an inquiry into the specific matters raised in an application relating to the constitution

working and financial condition of the society. Thus, when societies want an inquiry conducted they have to pay a fee.

According to the Act, the fee has to be sufficient to meet the costs of inquiry. No formal fee structure is laid down in the

Act. A similar provision for fees is there in case the registrar is called upon to assist in dispute resolution.

8.1.4 Procedure for Conducting Audit The person authorized by the Registrar to audit the accounts of a society has to submit an audit note to the Registrar

on the accounts examined by him and on the balance sheet and profit and loss accounts.

Every society the accounts of which are audited has to pay a charge for the audit to the state government for each year

in accordance with the scale laid down in the schedule depending on the class of society to which it belongs.

8.1.5 Levy of Audit Fees The basis for levy of audit fees applied depends on the class (and the type) of societies. The base is either the total

sales or the total turnover. For example, the basis for charging audit fees for Consumer (Electricity) Societies, Farming,

Housing, Marketing, Multipurpose and general societies is the total turnover.

Depending on the size of the annual business of a particular cooperative society, it has to pay a different fee depending

on the slab it falls under. Each slab has a certain average (Mid-value). If the annual turnover/sales fall below this

average the rate per lakh for that slab is applicable as audit fees, while if the turnover/sales are above that average

value, the maximum fee for that slab is paid.

As is evident from the table below the rate per lakh also decreases as the annual business value increases.

Table 30: Calculation Chart for Value of Audit fees

S.No Annual Business

Average Business

Rates for 0-100 lakh S.No Rates for 1 - 100 crore

Rate/lakh Min. Max. Rate/lakh Min. Max.

1 0-1 0.5 150 - 75 20 125 - -

2 1-2 1.5 150 150 225 21 125 12,500 18,750

3 2-3 2.5 150 300 375 22 100 20,000 25,000

4 3-4 3.5 150 450 525 23 100 30,000 35,000

5 4-5 4.5 150 600 675 24 100 40,000 45,000

6 5-6 5.5 150 750 825 25 100 50,000 55,000

7 6-7 6.5 150 900 975 26 100 60,000 65,,000

8 7-8 7.5 150 1,050 1,125 27 100 70,000 75,000

9 8-9 8.5 150 1,200 1,275 28 100 80,000 85,000

10 9-10 9.5 150 1,350 1,425 29 100 90,000 95,000

11 10-20 15 150 1,500 2,250 30 100 1,00,000 1,50,000





S.No Annual Business

Average Business

Rates for 0-100 lakh S.No Rates for 1 - 100 crore

Rate/lakh Min. Max. Rate/lakh Min. Max.

12 20-30 25 125 2,500 3,125 31 75 1,50,000 1,87,500

13 30-40 35 125 3,750 4,,375 32 75 2,25,000 2,62,500

14 40-50 45 125 5,000 5,625 33 75 3,00,000 3,37,500

15 50-60 55 125 6,250 6,875 34 75 3,75,000 4,12,500

16 60-70 65 125 7,500 8,125 35 75 4,50,000 4,87,500

17 70-80 75 125 8,750 9,375 36 75 5,25,000 5,62,500

18 80-90 85 125 10,000 10,625 37 75 6,00,000 6,37,500

19 90-100 95 125 11,250 11,875 38 75 6,75,000 7,12,500

Source: The Madhya Pradesh Co-operative Societies Rules, 1962

Processing units, local, regional, divisional and district level branches or sales centre‟s are treated as separate

branches and are subject to a separate fee structure.

The Vaidyanathan Committee Recommendations

The Government of India (GoI) appointed a Task Force under the Chairmanship of Prof. A. Vaidyanathan in 2004 to

analyse the problems faced by the CCS (Cooperative Credit Structure) institutions and to suggest an implementable

action plan for their revival. The finalized Report of Task Force was submitted to the GoI in February 2005.

Government of India had accepted the recommendation of task force. The report submitted by the task force was also

thoroughly examined by the Government of M.P. in the context of benefits of ST CCS (Short- Term Cooperative Credit

Structure) of M.P. and after examining the report, the GoMP had accepted the recommendations of the task force and

executed an MoU (Memorandum of Understanding) with GoI and NABARD (National Bank for Agricultural and Rural

Development) in November 2006.

The Revival Package also focuses on introducing legal and institutional reforms, which will enable the cooperatives to

function as autonomous member centric and member driven institutions. These reforms will enable wider access to

financial resources and investment opportunities, remove geographical restrictions in operations as well as mandated

affiliations to federal structures, and provide administrative autonomy to co-operatives at all levels. The terms for the

revival of PACS (Primary Agricultural Credit Societies) in the MoU included a condition that the PACS and other

cooperative societies could get their accounts audited by Chartered Accountants as a further move to improve their

autonomy.


Figure 13 reveals that Maharashtra is a success

story. The revenues from audit are almost

comparable in size across states. Most of the

differences come from other revenue sources.

While in some states this other categories is a

significant share of the total (50% or greater), in

Madhya Pradesh, this component is barely 13% of

the total revenue from Cooperatives.

Another success story is that of Andhra Pradesh

where Rs. 34 crore (out of the Rs. 39 crore) is

from “Others” and about Rs. 5 crore are revenues

from audit fees. For further details on sources of

Maharashtra (06/7)

A.P Kerala Karnat

aka M.P

Rajasthan

T.N

Revenues 64.45 39.1 36.5 33.14 29.28 27 17.01

010203040506070

Ru

pe

es

cro

res

Figure 13: Revenue from Cooperatives, Various states (2007-8)





revenue in other states see section 9.6.1. As is evident from Figure 14 Madhya Pradesh is fairly well placed when it

comes to recovery rates.


No major source of revenue augmentation has been identified within the cooperative sector. If we look at the

current rates specified for an audit conducted by the department, we find that these rates are comparable to the

market rates.

The table to determine audit fees, as given in the M.P Cooperative Societies Rules, should be simplified.

A functional review of the department is warranted owing to the societies now having an option to get audited

by qualified accountants.

Figure 14: Recovery Rates in Cooperatives, Various States

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

1993-94

2000-01

2007-08





9 Appendices

9.1 Appendix I - Mining

9.1.1 Estimate of Revenue Increase from Auction Reforms

Table 31: Revenue Estimates – Auction Reforms

Revenue Estimates- Auction Reforms

Present Revenue from Royalty (In Rs. crore) 99.12

Reduction due to Inactive mines 10%

Net Revenue (90% of Present Royalty) 89.21

Increase in the Receipts due to actual physical assessment of mines capacity 20%

Total Estimated Revenue (In Rs. crore) 107.05

Net increase in Revenue (In Rs. crore) 7.93

9.1.2 Estimate of Revenue Increase from Inflation Indexing

The royalty rates for minor minerals should be indexed so as to increase by a nominal percent annually. Assuming an

increase of 3-4% of inflation, an annual increase of about Rs 3 crore is envisaged

Table 32: Revenue Estimates- Inflation Indexing

Revenue Estimates – Inflation Indexing

Revenue Generated (In Rs crore) 99.12

Increase in Revenue 3%

Increase due to inflation indexing (In Rs crore) 2.97

9.1.3 Estimates of Revenue Increase from SMC Reforms

Table 33: Revenue Estimates – SMC Reforms

Revenue Estimates – SMC Reforms

Present Royalty Rate for Sand (in Rs./ Metric Tonne) 95

State's Government Share (in Rs./ Metric Tonne) 66

One time Increase in Rates 10%

Revenue Generated (In Rs. crore) 27

Increase in Revenue (In Rs. crore) 2.7

State's Government Share14

(In Rs. crore) 2.02

14

Assuming the Governments share also increases on a pro rata basis





9.1.4 Estimating Lost Revenues through the Consumption Method Sand is one of the more important minor mineral in Madhya Pradesh, in terms of production, production value and

especially in terms of revenue generated through royalties. It is because of this importance that an estimation of

collection efficiency in sand revenues becomes necessary. Sand extraction is susceptible to widespread leakage and

an attempt has been made to estimate the difference between potential revenue collections and the actual collection.

Methodology:

The actual revenues from sand in the state are based on the reported production figures. It has been attempted to

estimate the actual sand production from possible consumption of sand in the state. The lost revenues from estimated

actual production of sand (that goes unreported) is the difference in royalty that would have accrued from the potential

sand production and the actual reported figures.

Generally, the cement to sand ratio for various construction activities is in a standard proportion. These proportions

have been used to estimate the consumption of sand from the cement consumption figures. The consumption of sand

in the state has been estimated by using cement consumption data for Madhya Pradesh from 2003-04 to 2007-08. Two

scenarios have been developed taking two values for the sand-cement mix ratio.

Since sand is available in abundance in many parts of Madhya Pradesh, the state is largely self-sufficient in this

respect, an assumption has been made that there is no import of sand in the state.

Results:

As expected, the estimated consumption figures of sand using the above method are significantly higher than the

official production figures. This is even more significant after realizing that it is much more likely that some of the sand

extracted or produced in M.P might actually be exported, whereas the possibility of importing sand for consumption

purposes is unlikely for the state. Thus our estimation of the difference between the official production figures and the

actual consumption may be actually still understating the gap. The details of the calculations and the gaps under the

two scenarios are presented below.

Scenario 1: Conservative Scenario

In the conservative scenario (see Table 34) we assume that for every 1 part of cement 3 units of sand or used, on

average in the whole state.

Table 34: Potential Loss of Revenue from Sand- Conservative Scenario

# Item 2004-05 2005-06 2006-07 2007-08

1 Cement Consumption (M.T) 6,287,000 6,368,000 6,509,000 7,483,000

2 Sand Consumption (M.T)15

18,861,000 19,104,000 19,527,000 22,449,000

3 Sand Production (M.T) 11,445,194 14,855,774 16,651,179 18,379,415

4 Production as a proportion of Consumption (%)

60.68

77.76

85.27

81.87

5 Actual Sand royalties (Rs. Crore) 25.92 24.36 50.21 55.80

6 Potential Sand Royalties (Rs. Crore)16

42.72 31.33 58.89 68.15

7 Potential loss in revenue (Rs. crore) 16.80 6.96 8.67 12.35

15

Assumption cement and sand are used in a 1:3 ratio 16

Calculated as: [Row #6 = (Row #5/Row #4)*100]





In the conservative scenario, the realized sand royalties are about 60-85% of the potential. In the year 2007-08 the

potential revenue loss was around Rs. 12 crore.

Scenario 2: Aggressive Scenario

The aggressive scenario assumes that cement and sand are used in a ratio of1:4 (state-wide). The potential loss of

revenues as per the moderate scenario is presented in Table 35:

Table 35: Potential Loss of Revenue from Sand - Aggressive Scenario

# Item 2004-05 2005-06 2006-07 2007-08

1 Cement Consumption

(M.T)17

6,287,000 6,368,000 6,509,000 7,483,000

2 Sand Consumption (M.T)18

25,148,000 25,472,000 26,036,000 29,932,000

3 Sand Production (M.T) 11,445,194 14,855,774 16,651,179 18,379,415

4 Production as a proportion

of Consumption (%)

45.51

58.32

63.95

61.40

5 Actual Sand royalties (Rs.

crore)

25.92 24.36 50.21 55.80

6 Potential Sand Royalties

(Rs. crore)19

56.97 41.77 78.52 90.87

7 Potential loss in

Revenue(Rs. crore)

31.04 17.41 28.30 35.07

As is evident from the table, actual sand royalties have been around 45-65% of the potential in the years under

consideration. The estimated potential revenue loss is as high as Rs. 35 crore in 2007-08. It can also be observed that

the potential loss figures are higher in the years where the reported extraction is higher i.e. when demand goes up

significantly, the level of non-reported extraction also increases significantly.

17

Source Data: www.indiastat.com 18

Assumption cement and sand are used in a 1:4 ratio 19

Calculated as: [Row #6 = (Row #5/Row #4)*100]





9.2 Appendix II – Forest

9.2.1 Note on Forest Certification

Forest certification is a mechanism for forest monitoring, tracing and labelling timber, wood and pulp products and non-

timber forest products where the quality of management from environmental, social and economic perspectives is

judged against a series of agreed standards. It is a process that leads to the issuing of a certificate by an independent

party, which verifies that an area of forest is managed to a defined standard.

Forest certification refers to two separate processes viz., forest management unit certification (FMU) and chain of

custody certification (COC). Forest management certification is a process which verifies that an area of forest

/plantations from where the wood, fibre and other non-timber forest products is extracted is managed to a defined

standard. COC certification is a process of tracking forest products from the certified forest to the point of sale to

ensure that product originated from a certified forest.

For buyers of forest products, the responsible sourcing is their adoption of policies and practices that reward suppliers

using wood, fibre and other non wood forest products from well-managed forests or from recycled products and

discouraging suppliers using it from unknown, illegal or otherwise controversial sources.

For Example, IKEA, the world‟s largest furniture retailer has a long-term goal to source all wood in the IKEA range from

forests certified as responsibly managed. IKEA works actively with WWF and IKEA suppliers must provide

documentation to show where the wood comes from. IKEA conducts select audits and IKEA forestry specialists trace

the wood from the supplier back to the forest in order to check that IKEA requirements are met.

9.2.2 Estimate of Revenue Increase from e – auction and Forest Certification To arrive at rough estimates of the increase in revenues from e-auctions and forest certification we have made the

following assumptions:

1. The Department estimates for increase in revenues through e-auction were about 1-2%%. For this exercise we

have assumed that a 1.5 % increase in revenues can be expected from such a measure in Timber and

Bamboo, while the revenues from minor forest produce will remain largely unaffected.

2. A 4% increase in royalty revenues is assumed based on consultations with the forest department. As before, it

is assumed that only timber and bamboo plantations would undergo the certification process.

Table 36: Revenue Estimates: e-auction and Forest Certification

Revenue Source 2007-08 (in Rs ‘000)

Estimated increase from e-Auction

Estimated increase from Certification

Percentage In Thousands Base (20% of Rev.)

Percentage In Thousands

State Trading in Tendu Patta

2,463 0.00 0 0 0.00 0

State Trading in minor forest produce

135 0.00 0 0 0.00 0

State Trading in Timber

4,822,956 1.5 72,344 9,64,591 0.04 38,583

State Trading in Bamboo

3,62,329 1.5 5,435 72,465 0.04 2,898

State Trading in Khair

3,905 0.00 0 0 0.00 0





Revenue Source 2007-08 (in Rs ‘000)

Estimated increase from e-Auction

Estimated increase from Certification

Percentage In Thousands Base (20% of Rev.)

Percentage In Thousands

Total Increase (in Rs. crore) 7.77 4.15

9.2.3 Estimated Increase in Revenue from Development of Ecotourism

To arrive at rough estimates of increase in revenues from development of ecotourism we have assumed that 5 such

sites can be developed with each experiencing a footfall of about 2000 tourists. We also assume that the governments‟

revenue per tourist is 20% of the per capita expenditure by tourists.

Table 37: Revenue Estimate – Development of Ecotourism

Revenue Estimates – Ecotourism Development

Increase in footfalls of tourists per site 2000

Number of destinations developed 5

Per capita expenditure by tourists (in Rs.) 1000

Government‟s revenue per tourist (in Rs.) 200

Margin 20%

Total Expenditure by tourists 2000*5*1000= 1 crore

Estimated total Revenue [Govt. Share – in Rs. lakh] 20

9.2.4 Case Studies - Carbon Trading

9.2.4.1 Introduction

The CDM defined in Article 12 of the Kyoto Protocol (KP) allows industrialized countries (Annex 1 Parties) to acquire

Certified Emission Reductions (CERs) from project activities implemented in developing countries (non-Annex 1

Parties). The CERs generated by such project activities can be used by Annex 1 Parties to help meet their emissions

reduction targets under the Kyoto Protocol. CDM project activities are also to assist developing countries in achieving

sustainable development and in contributing to the ultimate objective of the UNFCCC.

Forestry activities, limited to afforestation and reforestation (AR), are eligible for the CDM. They may include

afforestation or reforestation of degraded lands, conversion of agricultural land to agro-forestry systems, and

commercial plantations, among others. AR-CDM project activities are subject to the specific modalities and procedures

of the CDM. They have the potential of improving livelihoods and the environment in impoverished rural areas of

developing countries by leveraging investments in the forestry sector that would not occur in absence of the possibility

of selling CERs.

There is wide agreement on the fact that carbon may well become the commodity with the largest trade and there can

be little doubt that it is a market that is growing very rapidly and will do so in the future as well. Since these carbon

credits can also be traded on exchanges (like the Chicago Climate Exchange/ European Climate Exchange) just like

commodities, the state can also consider entering into talks with such exchanges to sell the credits that it has gained

through its various initiatives and projects.

There are 1,593 CDM projects registered around the world and the majority involve the energy sector (59.7 per cent)

followed by waste handling and disposal (17.5 per cent) and agriculture (5.41 per cent), while the forestry sector has





only 0.15 per cent. Forestry has a huge potential to grow and experts estimate that it has the capacity to absorb 12 –

15% of global emissions from fossil fuels.

9.2.4.2 CDM Initiatives in India

China is the world leader in CDM supply with a 73% market share of transacted volume in 2007. Brazil and India, at 6%

market share each, transacted the highest volumes after China.

At present there are only two forestry projects registered in India under the CDM, one in Haryana and the other for ITC,

Bhadrachalam.

Studies20

have shown that currently Forestry has not been tapped into in a major way in India for carbon credits. Thus,

Madhya Pradesh has the opportunity to be one of the leading states in this initiative in India.

So far, India concentrated mainly on

renewable energy (biomass, wind power,

etc.) / waste heat recovery projects which

generate much less CERs

Case Study I – Initiatives by

Uttarakhand

Uttarakhand has been making efforts to

obtain validation from the UNFCCC for

carbon credits needed for carbon trading at

the international level for zero carbon

emissions and protecting environment. The

state hopes to get its carbon credit

validation on forests in the near future as

the inquiry process on the claims have

started.

The state government has already set up a

CDMC to coordinate work for earning

carbon credits from international bodies.

Case Study II – Haryana Community

Forestry Project (HCFP)21

The HCPF includes India‟s first Small Scale Afforestation Clean Development Mechanism Project. The CDM project is

part of the larger Haryana Community Forestry Project, co-funded by the European Commission. The CDM project was

implemented by Haryana Forest Department, under which nearly 370 hectares of sand-dune affected lands, belonging

to 227 farmers from eight villages, were selected. The project will help to stabilize shifting sand-dunes and wind-blown

sandy soil, substantially reducing dust storms and subsequent loss of soil. The project land at present is usually left

fallow. It supports little vegetation or natural regeneration as rain falls only once every three to four years.

In addition to the ecological benefits, the project will benefit poor farmers by creating over 11,500 carbon credits

annually for a period of 20 years. It has been estimated that the net revenue per hectare per year with these carbon

credits will be Rs. 6350 as compared to Rs. 1196 per hectare per year without.

20

“Clean Development Mechanism (CDM) And Carbon Trading In India” - Jitendra Kumar Singh 21

http://cdm.unfccc.int/UserManagement/FileStorage/DJISYMVG9RKHTCPU53X4BZA0NW8O2L

Figure 15: Sector-Wise Break-Up: Investment done in host country approved

CDM projects





9.2.4.3 Investment Requirement Estimation

9.2.4.3.1 Per Hectare Costs and Initial Equity Investments

One particular estimate of costs per hectare concludes that the average investment requirement would be between Rs.

50,000 to 100,000 per hectare with additional investment on soil moisture conservation. If we assume about 12 CDM

projects each with an average size of 5000 hectares, the total costs are estimated to be around Rs. 450 crore,

assuming the per hectare cost at Rs. 75,000 per Ha. Such projects will also require equity investments of about rupees

100 crore.

9.2.4.3.2 Transaction Costs:22

When registering a project under the CDM, the project developer needs to cover the costs accruing during the steps of

the CDM project cycle, i.e. the transaction costs. The costs for project preparation, validation and registration accrue

up-front, long before any revenues from carbon credit vending can be expected. Projects need to be sufficiently large in

order to justify the transaction costs. On other hand, there are simplified modalities and procedures for small-scale

projects that do not exceed 8,000 CERs per year and these face lower transaction costs. For the regular large-scale

projects, the most important sources of transaction costs are the following:

• Project preparation (usually by a consultancy company): The costs depend on the complexity, the scale of

the project, and on the required technologies and expertise. It also depends on the extent to which local

and international consultants are involved. Costs for project preparation may range at USD (United States

Dollars) 60,000-180,000.

• Validation (by a Designated Operation Entity-DOE): estimated at USD 15,000-25,000.

• Registration fee (by Executive Board - EB): For the first 15,000 CERs projects are charged US$0.10/CER,

for anything above 15,000 they are charged US$0.20/CER. So, a project expecting an average of 50,000

CERs per annum would pay an upfront registration fee of 15,000 x $0.10 + 35,000 x $0.20 = $8,500.

• Monitoring costs: depending on project size and sample size needed, as well as on monitoring methods

and intensity.

• On-going verification (by DOE): depending on the size and the complexity of the project USD 15-25,000 per

audit.

• Issuance fee (by the EB): In accordance to the on-time registration fee scheme, every time a project

requests issuance it has to pay an administrative share of proceeds. The issuance fee is as above US$

0.10/CER for the first 15,000 CERs, it is US$ 0.20/CER for anything above 15,000 CERs. Any upfront

registration fee already paid is deducted from the amount due at the first issuance.

• Adaptation levy (by the EB): Upon issuance, the EB retains 2% of the CERs generated to support

adaptation in countries that will be most affected by climate change.

• Taxes (by the host country): Some countries claim a share of a project‟s CERs in exchange for issuing a

Letter of Approval that is prerequisite to registration.

9.2.4.4 Procedure for Participation in CDM forestry projects23

9.2.4.4.1 Prerequisites

22

Guidebook to Markets and Commercialization of Forestry CDM projects by Till Neeff and Sabine Henders 23

This section provides only a brief description. For a more detailed description see the original source – “Guidebook to

Markets and Commercialization of Forestry CDM projects” by Till Neeff and Sabine Henders (February 2007)





In the first commitment period of the Kyoto Protocol (2008-2012), the scope of activities eligible for the CDM is limited

to afforestation and reforestation projects. Projects must demonstrate that the land within the project boundary was not

covered by forests in 1990, and that the sites are not covered by forest at project start. Countries may choose threshold

values defining a Kyoto forest from the following ranges:

• Minimum crown cover: 10-30%

• Minimum height at maturity of vegetation: 2-5 m

• Minimum area: 0.05-1 ha

9.2.4.4.2 Project Cycle in Forestry CDM

The project cycle is given in Figure 16 and the explanation of the activities involved is given below. The blue boxes

represent mandatory activities while the grey ones show the common activities that are not necessarily mandatory.

Figure 16: Project cycle of a Forestry CDM Project

Step 1- Initial Documentation

The project cycle usually initiates with the elaboration of a preliminary Project Idea Note (PIN) that summarizes a first

concept and project structure. Some host country authorities use this to issue a Letter of Endorsement (LoE) or letter of

no objection for this project concept, issuing a first confirmation to continue with the project development based on the

outlined design. From some potential credit buyers, it is possible to obtain a Letter of Intention (LoI) to purchase credits

based on the PIN.

Step 2- Project Design

The project design phase is the process of defining the concept of the project, estimating the GHG mitigation potential

of the project, undertaking the feasibility analysis, identifying the various project partners and developing a working

plan. Projects consolidate their design often only after elaboration and preliminary endorsement of a PIN. The project





design will be fixed and consolidated in the Project Design Document (PDD), which needs to be submitted to the CDM

authorities in a specified format

Step 3 – Methodology Approval

For the definition of baseline and monitoring schemes, projects can either use approved methodologies or submit new

methodologies for approval. If projects decide to submit a new baseline and monitoring methodology, the project can

only be validated based on an approved methodology. Registration of projects is therefore delayed until the

methodology has been approved by the EB.

Step 4- Emission Reduction Purchase Agreements (ERPAs)

In any phase of the project cycle, there is the option of establishing ERPAs between interested credit buyers and

project developers. In contrast to the LoI, the ERPA constitutes a legally binding contract. Even though the ERPA can

be signed at any stage of the project cycle, projects that depend on the CER revenues as seed capital for attracting

more capital will need to sign an ERPA with a buyer at an earlier stage than those that can secure sufficient

implementation capital and reach financial closure in other ways.

Step 5 - Host Country Approval

Host-country approval is an essential requirement of the CDM, it is necessary that the DOE has a Letter of Approval

(LoA) from the host country‟s DNA (Designated National Authority) before it can finish the validation of the project. The

process of host country approval can vary from country to country, due to different internal procedures and agencies

responsible for dealing with climate change issues. In general, however, it is expected that government agencies would

like to analyze the project proposal prior to releasing a LoA, the final letter needed from the host government.

Step 6 - Project Validation

The next steps in the CDM project cycle are to seek validation of the project by an accredited (with the CDM EB),

independent certification body. The PDD and any supporting information are sent to a Designated Operational Entity

(DOE) who conducts the validation of the project.

Step 7 - Registration

After successful validation, the validation report is also made publicly available and then together with the PDD they are

submitted to the CDM Executive Board in order to register the project. The registration process should be completed

after a maximum of 8 weeks, unless one of the involved Parties or at least three members of the EB request a review.

In that manner, registration of projects that come under review can be delayed by 4-5 months.

Step 8 - Monitoring

Once the registered project enters the implementation phase, real project achievements can be calculated based on

periodical monitoring. This activity can be conducted by staff directly employed by the project, or subcontracted to

external agencies specialized in forestry and carbon inventory. The monitoring needs to be carried out according to the

project‟s Monitoring Plan.

Step 9 - Verification and Certification

CDM projects will need to be independently verified by a DOE before any CERs (tCER or lCER) can be issued. To put

it simple, the verification is an audit of the monitoring and project implementation. For large-scale projects, this DOE

has to be different from the DOE that validated the project. The project verification will need to demonstrate the

following:

• The project has followed the implementation plan described in the validated PDD.





• The carbon claims of the project are based on the monitoring results and the calculation procedures used

for producing these claims (using the approved baseline and monitoring methodologies).

• The data and the procedures used for data collection follow acceptable quality standards.

• The sustainable development indicators proposed in the PDD have been monitored and meet the project‟s

targets (i.e. environmental and socio-economic impacts should be positive).

• Verification of a LULUCF CDM project can only be done every five years.

The successful output concludes in the certification of the project. This process is strictly related to verification and

consists basically only of issuing a statement indicating that the project has successfully generated a given amount

of carbon credits in accordance with the rules and regulations of the Kyoto Protocol.

Step 10 - Issuance of Credits

Based on the successful verification and certification the Executive Board will then issue the corresponding amount of

credits. The EB then has 15 days to issue the CERs (although a review of the project activities can be requested in

some cases).





9.3 Appendix III – Water Resources

9.3.1 Collection Efficiency of the WRD (in %) for 2008-09

Table 38: Chief Engineer-wise Collection Efficiency (in %) for 2008-09

Name of Chief Engineer

Balance as on 1/4/2008 From

Arrear

Current Demand Year

2008-09

Total Target 2008-09

Total Up to March 2008 (Arr + Curr)

% Recoveries Up to March

2008

CE_CB 1855.03 1064.43 2919.46 1459.6 754.66 51.70%

CE_GB 16522.792 8122.645 24645.44 2694.79 1598.578 59.32%

CE_YB 4856.43 478.42 5334.85 406.65 153.92 37.85%

CE_NT 1874.778 687.748 2562.526 631.5 544.06 86.15%

CE_OM 3749.17 1075.66 4824.83 2061.15 993.47 48.20%

CE_RAJ 788.03 356.17 1144.2 557.03 121.723 21.85%

CE_DK 1400.68 108.13 1508.81 444.68 58.81 13.23%

CE_WB 1138.611 608.7 1747.311 595.9 391.51 65.70%

CE_BAN 0 1570 1570 1525 39.41 2.58%

CE_EM 0 105 105 102.4 45 0.00%

CE_ENC 0 45 45 41.5 48.498 0.00%

CE_BODHI 0 5 5 5.8 12.28 0.00%

CE_PICU 0 0 0 0 0.214 0.00%

Total 32185.521 14226.903 46412.42 10526 4762.133 45%

Source: Water Resources Department

Table 39: Source-wise Collection Efficiency (in %) for 2008-09

Source Current Demand Recovery Amount Collection Efficiency (CE) in

%

Industries 7,760.84 2378.16 30.64

Municipal corporation 279.44 1.8 0.64

Nagar Palika 145.36 22.13 15.22

Nagar Panchayat 7.41 2.52 33.99

Gram Panchayat 0.54 0.12 22.22

PHE (D) - 4.16 -

For Farmers 3,091.10 974.84 31.54

Other Recovery 193.68 221.24 114.23

Total 114,78.37 36,04.98 31.41

All figures are in Rs. lakh

9.3.2 Estimates of Increase in Revenues from Recommendations (WRD) – Three Scenarios

Table 40: Scenarios for Estimates of Increase in Revenue

Scenarios Scenario 1 Scenario 2 Scenario 3

Recommendation 1/2 New CE Additional Revenue New CE

Additional Revenue New CE

Additional Revenue

Industries 0.33 1.82 0.36 4.15 1 53.82





Scenarios Scenario 1 Scenario 2 Scenario 3

Recommendation 1/2 New CE Additional Revenue New CE

Additional Revenue New CE

Additional Revenue

Municipal corporation

1 2.77

Nagar Palika

1 1.23

Nagar Panchayat

1 .048

Gram Panchayat

1 0.0042

For Farmers 0.4 2.61 0.55 7.25 0.6 8.79

Recommendation 3 3

4

5

Total 7.445 15.41 71.68

See Table 39 for current demand and recovery amounts. All figures are in Rs. crore.

The additional revenue calculated here is only based on the new (higher) collection efficiency out of the current

demand for the year 2008-09. In the first scenario, the collection efficiency from industries increases only by about

2.4% while that from farmers is expected to increase by 8.5%. This second scenario (moderate) is when the

assumption is made that CE from industries increases by 5.4 %, and that from farmers increases by 23.5%. The third

scenario is the „ideal‟ scenario in the sense that industries and tier-III government bodies are expected to pay the entire

amount of current demand raised in a particular year (2008-09) while collection efficiency from farmers is expected to

increase to 60%. As can be seen from examples like Gujarat, such a scenario may not be entirely unrealistic.

9.3.3 Note on Pricing of Water Resources

Irrigation water consumes the bulk of renewable fresh water resources. Water demand is increasing with rising living

standards and population growth and prospects for water diversion (extraction) are limited in some regions and

nonexistent in others. The only course of water policy left open is to increase efficiency of water use. This requires

taking account of the full cost of water and this must also be reflected in the pricing of water supply.

The Madhya Pradesh Government has tried to achieve the twin aim of conservation of water and recovery of costs

through the mechanism of modified “volumetric pricing”. This is an optimal-pricing approach that charges based on the

volume of water used by the farmer. Unlike area-based pricing24

, this approach also encourages farmers to better

control their water use. However, as can see from the analysis below, the pricing mechanism is not adequate to

recover the cost of maintenance.

Trend Projections of Revenue Receipts Based on Past Data:

Table 41 gives the data for Irrigation revenue receipts for the WRD from 2003-04 to 2007-08

Table 41: Revenue Receipts Trend – WRD (2003-04 to 2007-08)

Irrigation Source 2003-04 2004-05 2005-06 2006-07 2007-08

Major 37.80 37.92 29.56 11.22 17.24

Medium - - - 18.60 20.18

Minor 7.22 7.31 7.76 8.93 13.40

Total 45.02 45.23 37.32 38.75 50.82

Source: Finance accounts, M.P. All figures are in Rs. crore. Before 2006-7, revenues from major and medium Irrigation were clubbed under one head.

24

This approach uses the average cost pricing principle to levy a fixed charge based on the area that is supposed to be

irrigated





Based on the CAGR calculated from the above data, revenue receipts are projected for the next five years:

Table 42: Projection of Revenue Receipts – WRD (2009-10 to 2013-4)

Estimation 2009-10 2010-11 2011-12 2012-13 2013-14

Revenue Receipts 51.27 51.72 52.18 52.64 53.11

All figures are in Rs. crore

Trend projections of Maintenance Expenditure:

Table 43 gives the amount spent on maintenance expenditure since 2003-04.

Table 43: Past Expenditure Data of the WRD (2003-04 to 2007-08)

Actual 2003-04 2004-05 2005-06 2006-07 2007-08 RE

Maintenance Expenditure 52.87 58.01 73.81 73.2 77.23

Source: MTEF (Medium Term Expenditure Framework). All figures are in Rs. crore

The trend projections of maintenance expenditure have been estimated as per the MTEF, WRD 2009. The

maintenance norms have been adopted from the recommendations of twelfth finance commission and may have to be

revised upwards in the thirteenth finance commission report.

Table 44: Trend Projections of Maintenance Expenditures of the WRD (2009-10 to 2013-14)

Estimation (2009-10-2013-14) 2009-10 2010-11 2011-12 2012-13 2013-14

Trend Maintenance Expenditure 92.59 98.98 105.37 111.76 118.15

Additional Maintenance Expenditure 38.82 42.19 46.23 49.54 53.09

Total 131.41 141.17 151.60 161.30 171.24

Base Data: MTEF, WRD (2009). All figures are in Rs. crore

Ratio of maintenance expenditure to revenue receipts

As was evident from the above tables, there has been a clear past trend for the maintenance expenditures to exceed

the revenue receipts. Our projections for 2009-10 to 2013-14 can give us an idea if this trend will continue in the future

as well as the magnitude of the difference between the two. The rationale behind this exercise is to determine the

extent to which tariffs need to be revised upwards in order to eliminate this gap in the future. The table below presents

the ratio (in percentage terms) of the estimated expenditures to the estimated receipts.

Table 45: Ratio of Maintenance Expenditure to Revenue Receipts - WRD

Item 2009-10 2010-11 2011-12 2012-13 2013-14

Maintenance Expenditure 131.41 141.17 151.60 161.30 171.24

Receipts 51.27 51.72 52.18 52.64 53.11

Maintenance Expenditure as % of receipts 256% 273% 291% 306% 322%

Conclusions:

As can be seen, from Table 45, the receipts need to be improved by 190 % on average over the next five years just to

keep up with the projected maintenance expenditure requirements.

So, at the present recovery levels, rates have to be revised by about 200 % to just recover the projected maintenance

cost.





Present rates in M.P are provided in section 5.1.3. The rates in M.P are 25% of rates for Gujarat where the water rate

for industrial users is Rs. 10/cu.m. Additionally, in Gujarat this rate automatically increases by 10% each financial year.

Government of Uttar Pradesh also charges Rs. 10/cu.m for industrial units.

Thus, we see that a fairly strong case can be made for increase in rates for water resources in MP. It is to be noted that

a rate hike is not enough and for a successful system additional elements such as an appropriate mix of technology,

management, policy, and institutional arrangements are also required. These will help in:

• Facilitating transparent and efficient service delivery

• Increasing farmer‟s willingness to pay and to use limited water resources more efficiently.





9.4 Appendix IV - Education

9.4.1 Estimates of Revenue Increase from Sharing Revenues of the Secondary Education Board

Table 46: Revenue Estimates from Sharing Revenues Secondary Education Board (SEB), MP

Exam and other fee details Sec.

Education State Govt. Share

(Rs.) Applicability

Total Revenue (Rupees)

Fees paid by organization

Exam application fee 30

Examination Fee 250 50 No. of Students 3,85,73,950

Affiliation fee - new fee 12,500 1,250 No. of Schools 1,56,25,000 (One

time rise)

Renewal 2,200 1,000 No. of Schools 41,79,000

Total (Rs. crore) 4.27

Number of Students 7,71,479

Number of Schools 4,179

9.4.2 Revenue Estimates from Alternative Utilisation of the Schools/Institutions Infrastructure

Madhya Pradesh had about 3155 schools (both higher secondary and secondary) that were run by the school

education department. For an estimate of the revenue potential of this recommendation, our focus will be only on the

districts that have the major cities or towns in them, as this initiative is only possible in such locations.

The SED schools column is the sum of secondary and higher secondary schools in the district. Our assumption is that

only 15% schools of the selected districts will be located in urban/semi-urban areas and have the requisite

infrastructure to carry out such activities. The total revenues (per annum) are calculated on the basis that each school

earns 40,000 rupees each year from this source. The revenue sharing can be such that a part of the share goes to the

maintenance of such infrastructure while the remainder goes to the department. In this example, SED‟s share is

assumed as 90% of total revenue generated, while 10% share is allocated for maintenance.

Table 47: Estimate of Revenue from Alternative Utilization of School Infrastructure

District SED Schools 15% of Schools Total Revenues (Rs.) SED's Share

Gwalior 68 10 4,00,000 3,60,000

Ujjain 80 12 4,80,000 4,32,000

Indore 103 15 6,00,000 5,40,000

Bhopal 66 10 4,00,000 3,,60,000

Sagar 113 17 6,80,000 6,12,000

Jabalpur 99 15 6,00,000 5,40,000

Chhindwara 174 26 10,40,000 9,36,000

Rewa 124 19 7,60,000 6,84,000

Total 827 124 49,60,000 44,64,000

All figures are in Rupees.





9.4.3 Note on School Sponsorship Scheme Under the Rajiv Gandhi Shiksha Mission, the Madhya Pradesh government has launched a website, whereby non-

resident Indians and corporates can sponsor schools or pay for the education of a child. The website,

www.fundaschool.org, will soon have links to all the primary schools in Madhya Pradesh started under the DPEP

(District Primary Education Program) scheme and the sponsors can keep tabs on the performance of the school or the

children they have sponsored.

The idea came from several other such sites on the internet, where American schools offer schools for sponsorship to

alumni and corporate. The site will have the list of all the schools under the scheme and photographs of the children

and the school will be sent to the sponsors.

Proposed Features of the Scheme:

• School building as whole or specific buildings of the school can be named after a person of sponsor‟s

choice

• The sponsor to sign on a character certification declaring that the person is one of sound moral character

(see Table 48 for a sample format of certification below)

• The sponsored amount should be tax deductible (under section 80-G of the income tax act)

Table 48: Sample Format of Certification

Sr. No.

Particulars

1. Name :

2. Present address in full, with police station and district.

:

3. Home/ Permanent address in full with police station and district

:

4. Father‟s name:

5. Applicant „s Nationality :

6.a. Have the person whose name is to be used ever been arrested? Yes No

b. Have the person whose name is to be used ever been prosecuted? Yes No

c. Have the person whose name is to be used ever been kept under detention?

Yes No

d. Have the person whose name is to be used ever been fined by a court of law?

Yes No

e. Have the person whose name is to be used ever been convicted by a court of law?

Yes No.

f. Is any case pending against the person whose name is to be used in any court of law?

Yes No

I certify that the following information is correct and complete to the best of my knowledge and belief.

Counter signature of School Principal

Date________________ Signatory with stamp Place________________





Estimated Amount:

The contributors would be free to choose and support any interventions with the concurrence of the state government

or local body. Possible sponsorships and estimated costs are given in Table 49. These values were determined in

2007 and may need to be revised soon. Foreign nationals can pay the amounts in dollars as specified in the table.

Table 49: Rate for Sponsorship of Schools

#

Area of Contribution

Primary School (I to V)

Upper Primary School (VI to VIII)

Elementary. School (I to VIII)

Rs. US $ Rs. US $ Rs. US $

1. School Building 10,00,000 20,000 10,00,000 20,000 18,00,000 36,000

2. Campus Development 50,000 1,000 1,00,000 2,000 1,25,000 2,500

3. Furniture & Equipment 1,00,000 2,000 1,00,000 2,000 1,25,000 2,500

4. Library Cum Computer Room 2,00,000 4,000 2,00,000 4,000 3,00,000 6,000

5. Pre School Activity Room 50,000 1,000 - - 50,000 1,000

6. Science/ EVS Laboratory 50,000 1,000 50,000 1,000 1,00,000 2,000

7. Two Additional Rooms 5,00,000 10,000 5,00,000 10,000 5,00,000 10,000

8. Mid-Day Meal Cooking Facility 50,000 1,000 - - 50,000 1,000

Source: www.fundaschool.org

Expanding the Program:

Though the website is accessible, it still seems to be under construction and adopting particular schools in a district of

choice is not possible online as a result of this. The fund a district option is also unavailable online. Apart from resolving

these accessibility issues there are also significant opportunities for the dissemination of information on these schemes

through marketing and promotion of the campaign. The following steps may be considered to popularize the scheme or

at minimum to make it more visible to a larger audience:

• Through organizing talks or seminars on the scheme to explain how it works and the potential benefits of

the scheme. A mention of such an initiative in the speech of senior elected representatives (such as the

Chief Minister) can also help in popularizing it.

• Advertising the scheme (especially the link to the website) more prominently on billboards etc. in both towns

and the larger cities of the state, in order to target the larger sponsors/corporate sponsors etc

• Using local radio stations/ newspapers to make the scheme more visible





9.5 Appendix V – Water Supply and Sanitation

9.5.1 Comparative Indicators across Cities

Table 50: Water Supply Indicators- Various Cities

City Water Coverage

(%)

Water Availability

(hours)

Consumption/Capita

(l/c/d)

Staff/1,000 Connections

(ratio)

Average Tariff

(Rs./m3)

New Connection

Fee (Rs.)

Ahmadabad 74.5 2 171 2.2 1.39 100

Amritsar 75.7 11 86 4.8 9.34 950

Bangalore 92.9 4.5 74 5.2 20.55 1740

Bhopal 83.4 1.5 72 20.7 0.6 1,500

Chandigarh 100 12 147 8.6 5.04 530

Chennai 89.3 5 87 13.3 10.87 1,930

Coimbatore 76.1 3 109 4 3.66 3,000

Indore 77.3 0.75 87 18.7 2.79 2,500

Jabalpur 75.2 4 139 0.4 1.5 1,984

Jamshedpur 74.4 6 203 5.6 4.51 300

Kolkata 79 8.3 130 14.7 1.13 1,000

Nagpur 91.5 5 100 3.2 6.6 1,675

Nasik 92.6 3.5 93 3.4 4.32 1,250

Rajkot 98.1 0.3 101 1.1 5.07 1,850

Surat 77.4 2.5 nd 1.7 1.66 345

Varanasi 77.7 7 147 5.9 3.17 2,375

Vijayawada 70.5 3 158 5.7 2.18 5,500

Visakhapatnam 49.2 1 124 5.4 8.55 2,000

Average 81.2 4.3 123.3 7.4 4.91 1,584


9.5.2 Comparative Indicators across cities- water coverage and connections metered

Table 51: Water Coverage and Connections Metered - Various Cities

City Water Coverage (%) Connections Metered (%)

Ahmadabad 74.5 3

Amritsar 75.7 4

Bangalore 92.9 95.5

Bhopal 83.4 0

Chandigarh 100 79

Chennai 89.3 3.5





City Water Coverage (%) Connections Metered (%)

Coimbatore 76.1 100

Indore 77.3 0.1

Jabalpur 75.2 0

Jamshedpur 74.4 0.9

Kolkata 79 0.1

Nagpur 91.5 40

Nashik 92.6 80

Rajkot 98.1 0.4

Surat 77.4 1.9

Varanasi 77.7 0

Vijayawada 70.5 6

Visakhapatnam 49.2 1.3

Average 81.2 24.5


9.5.3 Note on KUWASIP Water Supply Model Government of Karnataka (GoK) is implementing a project called “Karnataka Urban Water Sector Improvement Project”

(KUWASIP) with assistance from the World Bank. This is a project for reforms in water and sanitation sector and

service improvements in water sector.

Key Features of the Scheme

• At the core of the project is a performance based contract with a private sector firm for rehabilitation,

operation and management of water service in small areas in Belgaum, Gulbarga and Hubli‐ Dharwad

(called Demonstration Zones).

• The role of private sector is limited to demonstration of improved service - Assets remain with ULBs and the

staff would continue on ULB rolls though working under PSP. There is no investment risk to PSP (private-

sector player) and though the PSP would develop a computerized billing and collection software system, it

has no role in tariff fixation & bill collection.

• Another key aspect of the project is that the contract is fee based.

Key Benefits

A) Better Service Delivery:

• Before implementation, periodicity of supply in Demo Zones was 2‐3 hours for 3 days a week in Belgaum,

1‐2 hours for 2 days a week Gulbarga and 2‐6 hours / 3 to 5 days per week in Hubli‐Dharwad. It is now

24X7 with minimum 6 meters pressure

• Water supply has become more reliable and there has been an improvement in water quality

• Customers are saving money as they no longer rely on pumping of water from pumps. This is one of the

reasons for improved customer satisfaction





• Improved data management of both the customer database and asset database

B) Encouraging Improvements and Innovations in Technology: • Use of smaller diameter distribution pipes has led to significant savings in capital investment

• Pressure control valves means that manual interventions are avoided

• Electro fusion & butt welding pipe joining techniques minimizes water losses etc

C) Pro Poor Approach:

• 0‐8 KL fixed as life line supply for urban poor and the revenues from this are recovered at a subsidized rate

of Rs.6/ KL

• Pro‐poor policy has encouraged slum dwellers to opt for individual house service connections and public

stand posts have been eliminated in demo zones

Status of the Scheme Being Implemented

The primary objective of the first phase has been to demonstrate feasibility of continuous pressured (24x7) water

supply in small areas of the project ULBs (“Demonstration Zones”), and a utility environment with sound commercial

system including monthly bills based on volumetric tariffs, and backed by sound O&M practice.

Five Demonstration Zones (viz., two Demonstration Zones in Belgaum and one each in Gulbarga, Hubli and Dharwad

cities) were selected and services of a Private Operator were engaged for “Rehabilitation, Operation and Management

of Water Provision” in the selected Demonstration Zones in Belgaum, Gulbarga and Hubli-Dharwad Municipal

Corporations. Implementation of works in the Demonstration Zones has been completed. Continuous pressured (24x7)

water supply has been operationalised in all the five Demonstration Zones and the Operation & Management period

has commenced from April 2008. The Demonstration Zones consist of about 25,000 house service connections and

cover a population of about 2 lakh.

Based on the success of continuous pressured (24x7) water supply in the Demonstration Zones with Private Sector

Participation, it is proposed to extend 24x7 Water Supply to cover the entire Corporation areas of Belgaum, Gulbarga,

and Hubli-Dharwad on PPP basis

The state government has approved a one-time settlement plan for pending water bills of the residents of Hubli-

Dharwad. As per the order, the Government has approved the one-time settlement plan for pending bills from

November 1, 2008 to June 30, 2009, which were in excess of Rs. 200 per month.

Tariffs for the 24/7 Schemes

The State Government has also approved a revised tariff for the demonstration zones in Hubli, Dharwad and Belgaum

where the 24 x 7 water supply scheme has been implemented (See table below).

Table 52: KUWASIP - New Revised Water Tariffs for Hubli-Dharwad and Belgaum w.e.f November 1, 2009

Hubli-Dharwad

Domestic Non-Domestic Commercial & Industrial

Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl)

0-8 6

8-25 8 0-25 16 0-25 32

25-40 12 25-40 24 25-40 48





>40 20 >40 40 >40 80

Monthly Minimum Charges - Rs. 48 Monthly Minimum Charges - Rs. 128 Monthly Minimum Charges - Rs. 256

Belgaum

Domestic Non-Domestic Commercial & Industrial

Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl) Slab (Kiloliters) Rate (Rs./Kl)

0-8 6

8-25 10 0-25 20 0-25 40

25-40 15 25-40 30 25-40 60

>40 20 >40 40 >40 80

Monthly Minimum Charges - Rs. 48 Monthly Minimum Charges - Rs. 160 Monthly Minimum Charges - Rs. 320





9.6 Appendix VI - Cooperatives

9.6.1 Case Study – Sources of Revenue for the Cooperative Department

The cooperatives department of states like Andhra Pradesh, Kerala, Maharashtra and Rajasthan earn most of their

revenues not from audit, but from „other sources‟, as per the finance accounts classification.

For the state of Maharashtra, the major receipts of the Department are audit fee, supervision charges, license fee for

issuing license to money lenders and inspection/license fee for renewal of license, etc. The supervision charges are

collected in respect of the agricultural produce purchased from the market regulated at market area.

The cooperative department of Kerala earned Rs.36.5 crore in 2007-08 of which Rs.33.5 crore was categorized in the

finance accounts as other receipts and about Rs.3 crore as audit fees. Major receipts from the Co-operative

Department are audit fee, arbitration fee, liquidation charges, fee for appeal or revision, interest/penal interest on loan,

penal interest for delay on retirement of share capital, dividend on share capital and guarantee fee, etc. Table 53

shows the revenue break-up for Kerala‟s Cooperative Department from 1997-98 to 2001-02.

Table 53: Revenue Break-up for Kerala Cooperative Department from 1997-8 to 2001-2 (Rs. crore)

Sl.

No.

Category of receipts Years

1997-98 1998-99 1999-00 2000-01 2001-02

1 Audit fees 1.06 1.20 1.46 2.27 2.12

2 Cost of Audit 7.92 9.69 14.47 13.10 10.86

3 Arbitration fees 3.34 4.20 5.20 5.53 5.24

4 Interest from Co-operative Societies 7.22 3.91 3.97 2.46 2.42

5 Liquidation charges appeal fees and other receipts 0.88 0.67 1.05 1.43 1.33

6 Grants from NCDC (National Cooperative

Development Cooperation)

1.02 3.31 1.31 1.13 1.57

Total 21.44 22.98 27.46 25.92 23.54

The other major revenue sources are interest from cooperative societies and arbitration fees. Together they made

about Rs. 7 -10 crore from 1997 to 2001. Today this component would be significantly larger.





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