Budget 2026:  Ahead Of Omar's Presentation, Calls Grow For Governance Reforms in J&K

Days before Chief Minister Omar Abdullah will present the budget in the Legislative Assembly on February 6, stakeholders from industry and trade bodies have reiterated the need for governance reforms in the key sectors of power, horticulture, and industries that form the core of Jammu and Kashmir’s economy.

With the Central government increasing the grant-in-aid by nearly Rs 2,000 crore to over Rs 43000 crore for the next financial year, the budget promises in the vital sectors of industries and horticulture will be keenly watched. The UT budget has come at a time when exports in the handicrafts sector, had taken a hit due to an increase in tariffs by the United States, even as farmers were battered by the losses in last year’s floods.

Let us break this down with a sector-wise overview.

The Crisis In Handicrafts

The handicraft and handloom sector that provides employment to around 4.22 lakh artisans in Jammu and Kashmir has, had been fighting a slump as the exports took a hit after US President Donald Trump increased tariffs on Indian products. These tariffs have been reduced to 18 per cent on Monday. Artisans and businessmen associated with the handicraft trade in Kashmir are now expecting that the trade deal between the European Union and India will allow the free trade of goods to help boost exports. At the same time, they have also asserted the need for creating the infrastructure to promote trade.

Shiek Ashiq, a prominent handicrafts exporter in Kashmir, says that there was a need to build the infrastructure, particularly warehouse facilities, to boost the exports. “We   suffered heavy losses due to an increase in taxes on the export of handicraft products by the US government. Now, the trade agreement with the European Union is a silver lining, but the infrastructure needs to be improved to benefit from the deal. The warehousing facilities need to be built in Europe so that traders can send their products to what is a new market for many,” he says. The handicrafts sector has seen a decline in exports for the past few years, and sales were earlier hit due to the COVID recession.

Power Sector Woes

The power sector has remained a perennial drain on Jammu and Kashmir’s economy due to the supply of subsidised electricity to the people and heavy transmission and distribution losses on account of   run-down infrastructure. Other than heavy transmission losses, the Jammu and Kashmir Union Territory has not been able to fully tap its power potential, with only 24-25 per cent of the 18,000 MW hydro power potential of J&K harnessed so far. In his last year’s budget speech, CM Omar Abdullah had said, "High Aggregate Technical & Commercial losses resulted in huge outstanding liabilities for power purchase, for which Rs 28,000 crore were borrowed in the last few years, raising public debt from 48% of GSDP in FY 2015-16 to 52% in 2023-24.”

While the transmission losses still remain a major issue, the power tariff collection this year from Kashmir has registered an increase of 15%. Managing Director of Kashmir Power Development Corporation Ltd Mahmood Ahmad Shah says there has been an improvement in the collection of power tariff revenue. “This year we witnessed a 15 to 16% hike in the tariff collection, which is a positive development,” he says.

Industry Expectations

The businessmen operating the small and medium industries have urged that there is a need for urgent reforms to enable them to receive timely refunds of the Goods and Services Tax and the turnover tax waiver in Jammu and Kashmir. Arun Gupta, President of Chamber of Commerce and Industry (CCI) Jammu, says that although the government has given them incentives on GST and the turnover tax, and the “refunds are meant to be returned, but delays persist.” He stresses the need for reforms to improve the taxation system and its administration, particularly the introduction of an online system to ensure timely refunds to the industry. Gupta notes that there was a need to extend the incentives under the industrial policy beyond 2026 as well. Kashmir Chamber of Commerce and Industry President Javid Tenga notes that there were several industries that have become sick. In its memorandum of budget demands to the government, the KCCI said liquidity constraints and the pandemic proved to be big dampeners. Tenga notes that the issue of manpower shortage in the industry also needs to be addressed.

Horticulture Infra Needs A Boost

Horticulture remains the mainstay of Kashmir’s economy, but the growers have faced losses due to the fruit damages on account of the lack of cold storage facilities. As per government estimates, the horticulture sector contributes about 6-7% to the GSDP and employs 35 lakh people and provides employment to over 7 lakh families. Besides the lack of cold storage facilities, growers are concerned that storage rates remain exorbitant. “We believe that there is a need to rationalise the rates of storage of fruits in the cold chain units. Apart from normal storage rates, there are several other labour charges that are levied on us.  We think that there is a need to rationalise this. Aso there is a need to improve the rural infrastructure  to boost the horticulture sector,” says Bashir Ahmad Basheer, Chairman of Kashmir Valley Fruit Growers Cum Dealers Union.