Govt likely to prune states' infra allocation

The Centre is likely to prune the allocation promised to the states under the ongoing five-year plan to develop infrastructure meant exclusively for exports.

The move is likely in the coming Budget document, due to the huge fiscal deficit. This could mean a big setback for industrial parks and special economic zones.

The 11th Plan (2007-12) envisaged total infrastructure investment of Rs 20,56,150 crore, to be shared between the Centre, states and private sector in the ratio of 37.2, 32.6 and 30.1 per cent, respectively.

The states had been allocated Rs 600 crore each year for the development of infrastructure for augmenting merchandise exports. So far, only Rs 1,000 crore has only been disbursed in the two and a half years the Plan has beein in operation. Getting the remaining amount could become a “serious challenge”, as the government struggles to bring the fiscal deficit down, sources in the ministry of commerce and industry told Business Standard.

“We need to ensure that we get the money through the entire period because the states are now showing interest to create infrastructure for the promotion of exports. Their enthusiasm will go down and it is mostly the government-owned SEZs that will suffer,” said a senior commerce ministry official.

The government is aiming at reducing the fiscal deficit to 3 per cent of gross domestic product (GDP). It is expected to reach a whopping 6.8 per cent of GDP due to the various stimulus measures announced in 2009-10 following the global economic downturn.

The centre is actively reviewing the allocations made to the infrastructure sector and expenditure made in several community services schemes, according to ministry officials.

Earlier, while releasing the economic outlook for 2009-10, the Prime Minister’s Economic Advisory Council’s (EAC) chairman C Rangarajan said there was limited fiscal space for the stimulus package.