The Hindu : States' annual plans likely to feel impact

Online edition of India's National Newspaper
Wednesday, Jan 15, 2003

National

National

States' annual plans likely to feel impact

By Alok Mukherjee

NEW DELHI JAN. 14. Hemmed in by an imminent shortfall in resource mobilisation, the Union Finance Minister, Jaswant Singh, is likely to maintain a tight-fisted approach to most of the demands from the Central Ministries and the States in his first budget to be presented by February-end. In fact, indications suggest that demands from most of the Central Ministries could be cut substantially while the States, in all probability, will have to present their next budget without any clear indication about the likely Central assistance.

The problem of financing the Central Ministries and the States' annual plans arises from the differences between the Planning Commission and the Finance Ministry on the size of the gross budgetary support (GBS) that the next general budget would commit. While the Planning Commission has sought an allocation of Rs. 1,34,060 crores, Mr. Singh has, in a written communication, made it clear that an allocation of this magnitude "is most unlikely".

There were some attempts to organise another meeting between Mr. Singh and the Deputy Chairman of the Planning Commission, K.C. Pant, but it now seems that such a meeting is unlikely. In that event, Mr. Pant is expected to seek a final nod from the Prime Minister, Atal Behari Vajpayee. He is scheduled to accompany Mr. Vajpayee to the Andaman Islands later this month and might utilise the occasion of the flight to brief the Prime Minister on the fiscal position.

Sources in the Planning Commission indicate that the delay in the finalisation of the GBS has resulted in a delay in the finalisation of the States' annual plans. These plans are normally taken up for finalisation between the States and the Commission from the middle of December and the exercise is normally completed by February so that the States are in a position to present "realistic" budgets for the next financial year. This year, the exercise has been delayed and the States would have to be vague about developmental projects they intend to take up in the next fiscal.

As for the Central Ministries, the sources said that already the demands from various quarters had totalled up to Rs. 73,000-74,000 crores, higher than Rs. 67,000 crores allocated in 2002-03. In that year, the GBS committed was Rs. 1,13,000 crores and in case this year the GBS is not increased to Rs. 1,34,060 crores, there would be little possibility of increasing the share of the Ministries.

Alternatively, if the GBS is further cut to Rs. 1,00,000 crores, as per some indications, the Central Ministries might face a cut in their allocations from what they received last year.

However, Planning Commission sources concede that it would be difficult to curtail expenditure on on-going infrastructure projects and hence their allocations might be "protected". Also, the development of national highways and rural roads is being financed through a petrol and diesel cess and this too might continue.

Consequently, the axe could then fall on sectors such as Human Resource Development (education), health and family welfare, atomic energy and even the Railways. Since most of these sectors are labour-intensive, employment generation would be a casualty.

The initiative now rests with the Prime Minister who would have to reconcile between the two difficult positions that two wings of his Government face.

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