Rs 30,000 Crore For States To Push Reforms

Finance minister Yashwant Sinha will link an additional allocation of over Rs 30,000 crore to states for undertaking specific sectoral and fiscal reforms. The move is aimed at inducing states to push through second generation reforms by adopting a carrot and stick approach.

Sinha might also put in place a social security net for unorganised workers along with an unemployment insurance scheme for them to make the amendments to the Industrial Disputes Act, cleared in principle by the Union Cabinet recently, politically acceptable to Congress and other opposition parties.

While a welfare scheme for agricultural workers has already been launched by Life Insurance Corporation, insurance companies have also this year announced a limited unemployment insurance scheme. Sinha is likely to focus on pension reforms wherein the organised workers are able to derive the benefit of social security.

Senior government officials told Business Standard that money from a Fiscal Reforms Fund with a corpus of about Rs 11,500 crore would be released only if states stick to the reforms outlined in their memorandum of understanding with the finance ministry. About a dozen states have signed MoUs with the ministry as per the Medium Term Fiscal Reforms (MTFR) guidelines issued to the states early last year.

Besides this, a Structural Adjustment Fund (SAF) with a corpus of Rs 2,500 crore is also likely to be created to help states which need urgent correction in their fiscal situation. This would again extract commitments from these states to curtailing revenue expenditure and cutting the deficits.

A Rs 500-crore urban infrastructure fund would be made available to states only if they bind themselves to lowering stamp duties, doing away with archaic land laws and streamlining building regulations. While the Centre has already made enabling changes in laws, the Fund would require the states to repeal the Urban Land Ceiling, Land Revenue and Land Reforms acts. Sources said the fund corpus would be increased to Rs 5,000 crore in phases.

To incentivise modernisation and upgradation of power plants and usher in reforms in distribution, Sinha is also set to substantially increase the Accelerated Power Development Programme (APDP) corpus to Rs 4,800 crore for 2002-03, up 220 per cent compared to Rs 1,500 crore this year.

Similarly, higher allocations of Rs 3,000 crore for the Accelerated Irrigation Benefit Programme (AIBP), Rs 5,000 crore for the education sector under Sarva Shiksha Abhiyaan (universal education), Rs 375 crore for setting up economic free zones and Rs 500 crore for Anganwadi workers would all be linked to achievement of pre-specified targets in the respective sectors.