Fund Allocation To States Helps Gowda Win Friends In Cong

There is at least one area where the United Front government has effected a U-turn in the previous governments policies and yet been able to win friends in the Congress Party""fiscal federalism.

The reversal of fund allocation procedure for centrally sponsored schemes has clearly displeased the Congress partys central leadership who fear this was only the beginning of a dangerous fiscal course with far reaching consequences.

Congress President Narasimha Rao had declared his partys support on the floor of the Lok Sabha on two grounds - that the Congress would support a secular government that continued Congresss policies. The UF government has already reversed the Narasimha Rao governments practice of allocating funds directly to panchayats, bypassing the state governments.

 

Under the Gowda government, funds are being sent to state governments who are free to spend on any or a combination of central schemes according to the needs of the state in seven identified social infrastructure areas.

Though there are murmurs of protest in the Congress Party, its leaders are not willing to talk against it openly for the fear of losing support of their own chief ministers.

In fact, Congress Orissa Chief Minister JB Patnaik was on the panel of four chief ministers set up by the Gowda government. The panel had proposed the change in fund allocation procedure.

The three other chief ministers on the panel were West Bengals Jyoti Basu of the CPI-M, Rajasthans Bhairon Singh Shekhawat of the BJP and Bihars Laloo Prasad of the Janata Dal.

The present government has not only changed the fund allocations procedure in favour of the state governments, it also increased the amount of central schemes by Rs 2460 crore for the current year as compared to the previous year.

Minister for planning and programme implementation, YK Alagh told Business Standard that the states have been given the flexibility of meeting their commitment of 15 per cent of the allocated fund in the form of labour.

Alagh said the fund allocation is already in progress in accordance with the new procedure. We have been able to put the new procedure in place in the record time of three weeks', he said. The file has been cleared by the finance ministry and the Prime Ministers Office.

The main reason behind the Congress governments bypassing the state governments in fund distribution was its concern that the states might divert the funds to bridge their deficit. There was a political angle as well. The Congress government at the Centre did not want the state governments, most of them opposition ruled, to take credit for the central schemes.

To this, Alagh said though the first evaluation of project implementation would be done by the state government, the second evaluation would be carried out by the Centre. The second installment of the fund would be released only after the report that the first installment was properly utilised.

The Planning Commission is drafting an approach paper on Fiscal Federalism' that is expected to include other crucial aspects of financial relations between the Centre and states.