States In Funds Crunch For Core Projects
The current industrial slowdown is severely crippling efforts of state governments to raise additional resources for various infrastructure projects lined up for this year. It is also having an adverse effect on the process of finalising the 1998-99 state plans by the Planning Commission.
The industrial slowdown has resulted in lower levels of recovery not just in central excise duties but also in state sales taxes which are the main source of revenue for state governments, sources said. Though the real picture will emerge after the first half of 1998-99 in September-end, the level of tax collections so far is even below the collection levels achieved in 1996-97.
But this is not stopping the state governments from seeking higher plan sizes for 1998-99 as compared to last year in order to overcome the effect of inflation and meet the new aspirations of the people following the political change of guard in several state capitals in the last general elections.
Besides, state chief ministers find it political difficult to return to their state capitals without ensuring a significant increase in plan size during their discussions with the planning body in New Delhi. Increase in plan size is as much a political issue indicating a chief minister's capability to deal with the Centre as it is an economic issue.
" True, state governments are asking for higher plan sizes compared to 1997-98. It is also not easy for the planning body to resist genuine demands for higher plan sizes. But the question is whether the states would be able to raise sufficient resources", a Planning Commission expert said.
Two issues dominate plan discussions between plan panel experts and state governments. They are the Centre's contribution to a state and the additional resources that a state promises to raise.
The Central contribution to states will go up from this year onwards because of the union government's decision to implement the recommendations of the 9th finance commission for distributing 29 per cent of the pooled central resources.
The issue of concern this year is the ability of states to raise additional
resources as compared to the level of income generated by them in 1997-98.
Though state governments insist that they are capable of raising sufficient additional resources to justify a higher plan size, the Planning Commission is not so sure about it.
Barring 4-5 states, all other states have not been able to meet their target for raising additional resources in 1997-98. In the eighth 5-year plan period which ended in 1996-97, the states had fallen below their target of raising resources by a huge margin of 27 per cent.
The states raised a total of Rs 50,204 crores against the target of raising Rs 63,913 crores in the five years ending in March,1997, a difference of Rs 13,709.
Maharashtra, Tamil Nadu, Kerala and Punjab were the only two states which crossed their target of raising resources while all other states fell below the target. Even relatively better managed states like Gujarat and Haryana slide behind the resource raising targets agreed by them for the eighth plan period.