Centre's fiscal problem shows in release of funds to states

Amounts issued for development schemes a fraction of year's Budget allocation

The central government’s austerity and expenditure tightening drives have slowed the release of budgetary allocation to states for various development schemes, including irrigation and development of infrastructure in backward regions.

Finance ministry data on release of money under different schemes till August 31 in the current financial year clearly show a substantial lag. For instance, the total amount released in the first five months of 2012-13 for the Accelerated Irrigation Benefit Programme (AIBP) and other water resource schemes has been only Rs 622 crore, as against the year’s Budget allocation of Rs 14,242 crore.

The primary objective of AIBP is to accelerate the implementation of large and multi-purpose projects in the sector. These are especially irrigation and flood management projects, beyond the resource capabilities of states and at an advanced stage of completion. The Scheme also covers surface water minor irrigation projects in special category states. Between 2007-08 and 2011-12, the central government released a total of Rs 38,821 crore to states for these irrigation-related schemes.

The money released this year till August 31 for the Backward Regions Grant Fund (BRGF) was Rs 1,135 crore against the Budget allocation of Rs 6,990 crore. BRGF covers 272 backward districts in 27 states and also has a state component, including special plans for Bihar and West Bengal, besides the Kalahandi-Bolangir-Koraput districts of Odisha and the Bundelkhand package.

In the case of Special Plan Assistance (SPA), provided to special category states for funding of projects identified by states not covered by any central scheme, no fund was released till August 31 this year. The Budget has allocated Rs 6,005 crore for SPA. The special category states are the seven in the northeast, Sikkim, Himachal Pradesh, Jammu and Kashmir and Uttarakhand.

Similarly, the Centre released only Rs 1,782 crore under Special Central Assistance (SCA) up to August 31 in the current year as, against the Budget allocation of Rs 9,571 crore. The SCA grant is given to special category states to meet unmet developmental needs.

For the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), the amount released till August-end was Rs 866 crore as against the Budget allocation of Rs 5,900 crore. The funds released during the same period for the JNNURM component on infrastructure development in small and medium towns was Rs 786 crore, when the Budget allocation is Rs 2,100 crore.

This slow release is in the backdrop of burgeoning fiscal deficit pressure, on account of subsidies and sluggish performance on revenue collection.

The finance ministry is looking at major savings through further tightening in the release of funds in the remaining months of the financial year, so that the fiscal deficit slippage could be kept at the minimum from the Budget target of 5.1 per cent of GDP.