Vol. 6 · pages 141–145

126 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES “2. His Excellency in Council does not..... consider that the plan proposed..... for bringing the annual financial statement within the terms of the Indian Council’s Act, would be appropriate or possible. The passing of the Appropriation Bill in the House of Commons is a proceeding by which authority is given to carry into effect the Resolutions of the House in Committee of Supply which till the passing of the Appropriation Bill are not law. The Bill enumerates every grant that has been made during the whole session, and authorizes the several sums voted by the Committee of Supply to be issued and applied to each separate service. It also contains a provision that the various aids and supplies shall not be issued or applied to any other uses than those mentioned. “3. Such a proceeding would, His Excellency in Council considers, be out of place in India, and might have the effect of transferring from the Executive to the Legislative Council, the power of disposing of all public moneys. His Excellency, therefore does not consider that the introduction of an Appropriation Bill would be advisable.” Against this ruling the Government of Madras appealed to the Secretary of State 1 and pleaded that either the proposal of an Annual Appropriation Act be approved or “such an alteration in the Council’s Act be made as will allow the financial statement to be legally made and discussed in the Local Legislative Council.” But the Secretary of State upheld the decision of the Government of India 2 on the ground that “such mode of procedure is only applicable in a representative assembly, which has full powers of control over the Executive, and any such powers Parliament has advisedly withheld from the Legislative Council of India.” The suggestion was therefore dropped and was not given effect to till 1921. As the voice of the people did not prevail3 in the framing of the financial contracts between the Imperial and Provincial 1 Letter from the Government of Madras, Financial Department, dated September 19, 1871, to the Secretary of State and the whole of the correspondence accompanying it. 2 Legislative Despatch No. 4 to the Government of India, dated January 18, 1872. 3 In fact the point that decentralization should not be extended unless it was followed by devolution of political and financial power on the representatives of the people was not specifically raised till 1908, and that too only by the late Hon. Mr. Gokhale in his evidence before the Royal Commission on decentralization of India, q.v.

127 BUDGET BY ASSIGNMENTS Government, it is of no immediate advantage to seek for results that would have interested them to know, if they had been allowed their say in the matter. In so far then the results of the past influenced the policy of the future we have only to lay ourselves out to seek for results in which the two remaining parties to the contract were primarily interested, namely, gain to the Imperial treasury and adequacy to the Provincial Governments. Applying ourselves first to the test of adequacy to the provinces the results of the period may be gauged from the annual surpluses and deficits in the finances of each of the different provinces brought within the pale of the system of Provincial Budgets. PROVINCIAL SURPLUSES AND DEFICITS Province 1871-2 1872-3 1873-4 1874-5 1875-6 1876-7 ££ £ £ £ £ C.P. ... 20,988 —8,423 2,268 13,108 8,307 16,800 Bt. Burma ... 27,634 33,832 —9,922 —21,889 —5,471 5,100 Assam ... ... ... ... 5,159 590 9,833 Bengal ... 180,622 74,622 393,955 271,044 27,397 46,978 N.W.P. and Oudh 31,595 64,036 36,358 11,693 20,945 128,501 Punjab ... 109,828 28,008 —33,347 —117,644 —92,724 26,908 Madras ... 40,787 —19,264 —56,381 4,303 —14,210 504 Bombay ... 65,553 128,805 —64,373 9,929 —18,354 —140,718 Compiled from the annual Finance and Revenue Accounts of the Government of India for the respective years. It is evident from these figures that the surpluses outnumber the deficits in frequency and magnitude to such an extent that the deficit could have been easily met from the accumulated balances without seriously exhausting them. Care, however, must be taken in explaining the cause of this apparent prosperity of Provincial Governments. Did the province succeed in building up their balances from the savings from the assignments and receipts made over by the Imperial Government is what we have to find out. The answer to this question cannot be given in a categorical form, for the total resources and changes to which the above figures refer include more than the receipts and assignments set apart for provincial management. Besides Imperial assignments and receipts of incorporated services they include a part of what hitherto were known as Local Funds. It must be recalled that long before the separation of provincial from

128 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Imperial Finance there was created since the year 1855 a separation between the Imperial and Local Finance in British India. The Local Funds when separated were under the immediate management of the several Provincial Governments and comprised of two different classes : (a) those which by law or custom were required to be spent within the districts in which they were collected and on the specific objects for which they were collected; and (b) those collected all throughout the province and over the disposal of which the Provincial Government possessed unrestricted discretion. When the scheme of provincial Finance was inaugurated it was deemed natural to merge the second class of Local Funds into the Provincial Funds. The total addition made thereby to the provincial resources it is difficult to ascertain. But it ‘ was the opinion of Sir John Strachey, the Finance Minister of the time,1 that such addition was “ inconsiderable” and could not therefore have affected materially the financial consequences of the new system 2 . The question of estimating the gain to the Imperial treasury need not detain us very long. The indirect gain due to the economical management of the services by the Provincial Governments will come for discussion when we come to consider the influences that played a prominent part in bringing about the second state in the evolution of Provincial Finance. The direct gain made by the Imperial treasury was effected throughout the retrenchment in provincial assignments already referred to. It may be recalled that the Government of India had planned to obtain relief to the extent of one million sterling annually on the services transferred, 3 but the Government of India soon realized that all this retrenchment would necessitate some taxation by the provincial authorities. The burden had already grown since the Mutiny, and being anxious not to add to it directly by Imperial levy or indirectly through provincial levies, it decided to reduce the relief it sought by lowering the retrenchment on provincial assignments from £ 1,000,000 to £350,000, or more accurately to £ 350,801 if we deduct, as we must, the sum of £ 19,199 restored to Burma, being its quota of relief owing to the special circumstances of that province. 1 See his Minute, dated March 15, 1877, appended to the Financial Statement for 1877-8. 2 This amalgamation was, however, abandoned with effect from 1876 to enable the Government of India to ascertain the financial consequences of the new system as compared with the old.

129 BUDGET BY ASSIGNMENTS Summing up the results of the period, the Government of India, it must be said, realized full share of the benefits it had contrived to obtain by the annual relief of £330,801, though not without causing an insufficiency, however small, in the Provincial finance. But notwithstanding the burden thrown on the Provinces their position as disclosed by the results cannot by any means be called unhappy. One unwelcome feature marred the inauguration of Provincial Finance. That feature consisted in the large increase in the levy of rates and cesses for purposes of local improvement. Receipts from New Resources of Income and Cesses enhanced since 1870 1870-1 1871-2 1872-3 1973-4 1874-5 1875-6 ££££ £ £ Oudh— Ord. cesses on : Land Revenue ... 38,813 29,018 34,354 34,259 33,208 33,146 Margin Fund ... 7,363 3,461 ... ... ... ... Local rate ... ... 36,810 42,535 42,883 41,097 41,461 Total ... 46,176 69,289 76,889 77,142 74,305 74,607 Assam— Ord. cess on land: Rev. Old Fund ... 6,506 4,333 711 1,916 17,149 ... New Fund ... ... ... ... ... 15,267 16,300 Total ... 6,506 4,333 711 1,916 32,416 16,300 Bengal— Road Cess Fund: ... ... 22,917 59,039 120,128 158,516 N. W. Provinces ... 168,532 201,548 216,818 213,672 215,968 150,619 Punjab ... 58,330 214,441 216,194 208,063 211,862 193,573 Madras—Road Cess ... 212,813 234,567 377,031 368,031 371,311 369,325 Madras—Tolls Cess ... ... ... 12,144 12,234 14,860 26,531 Grand Total ... 492,357 724,178 922,704 940,333 1,040,850 980,545 *Balances recovered from Bengal on account of Road and Government Estates Improvement Fund. For the new resources of income and cesses given above, refer to Papers, etc., on the extension of the Financial Powers of the Local Governments, p. 494. This shows an increase in 1875-6 over 1870-1 of £488,188, chiefly by raising the cesses in the North-West Provinces, the Punjab and the Madras Presidency to 6 ¼ per cent. on Land Revenue in the two last mentioned, to about 5 per cent, in the North-Western Provinces (after deducting the rural police charge); by a road cess in Bengal and by granting an assignment

130 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES to Assam, at the Imperial charge, of 6¼ per cent. instead of 3 per cent. on Land Revenue pending the levy of a cess of a corresponding amount on the ryots. In the Bombay Presidency the 6 ¼ per cent. was imposed some years before and hence is not included in the above table. The only province which did not levy any additional cess was the Central Province, though a cess of 6 ¼ per cent, on the Land Revenue was in 1870 considered practicable but not opportune. Of what benefit, a cynic may say, was the institution of Provincial Finance if it did not obviate the necessity for further taxation ? If further taxation was unavoidable, why did the Imperial Government throw the onus of facing it on the Provincial Government under the garb of Provincial Budgets when it would have done that itself ? It must be said in reply that the merits of Provincial Finance are to be looked for in other directions, and it will be shown in its proper place that they justified its institution, even though a certain amount of enhanced taxation followed in its wake. It would indeed be unwise to decry against taxation in general, for no benefit can be obtained without a charge. But it would be equally unjust not to protest against the kind of taxation resorted to, for what really mattered was not the increase of taxation but the inequity of taxation. The method of taxation resorted to to make up the deficit in the Provincial Finance was an imposition of rates and cesses on the already over-burdened class of tax-payers, namely the landholders. Now the services incorporated into the Provincial Budgets, for whose support these rates and cesses were levied, though called local, were not more local in the sense of their being beneficial to the particular localities than those retained by the Imperial Government. On the other hand, the former were from the standpoint of the localities as onerous to them as the latter, and yet they were financed by rates and cesses levied from the localities as though they were directly beneficial to them, which as a matter of fact they were not. This is all the more lamentable when it is recalled that the necessity for retrenchment which caused the levy of these rates and cesses was occasioned by the abolition of the income tax. As a matter of justice we should have expected the continuance of the income tax to the relief of the State and the ratepayers. But justice was for a long time absent from the Financial Secretariat of the Government of India. A few cared for it in the abstract, but none looked upon it as an element worthy of consideration in providing for the exigencies of provincial or local finance; and as it was unrecognized, its violation by the Provincial Governments was no bar to the development of Provincial Finance. zz