States will get a fifth more of central funds

INTERIM BUDGET & THE STATES/DEVOLUTION

The total resources transferred to state and UT governments, is slated to go up by 9 per cent from Rs 113160 crore (RE) in the current fiscal to Rs 123704 crore in the next. The BE for 2003-04 was Rs 108822 crore.

The central devolution of taxes to states will be Rs 78,591.41 crore in 2004-05, up by a steep 19.5 per cent from the revised estimate for the current fiscal.

The RE of Rs 65,784 is also 3.2 per cent higher than the budget estimate of Rs 63757.67 crore. The trend reversal which started in 2003-04 is therefore continuing, with states getting a rising quantum via devolution of central taxes and duties.

The centre gives 29.5 per cent of the total tax revenue to states as per the formula laid down by the Eleventh Finance Commission.

However, reflecting the inability of states to reform their financial position as per the yardstick laid down by the medium term fiscal reform programme (MTFRP), Rs 2,778 crore has been held back by the centre from the additional grants and loans that states (excluding UTs) would have received.

In 2003-04, the centre released only Rs 14,904.17 crore as non plan grants to states as against Rs 17,682.02 crore. The budgeted amount for non plan grants to state governments in the next fiscal is Rs 19,088.71 crore.

Net resource transfer to state and UT governments in 2003-04 was Rs 80,078 crore, 37 per cent less than the BE of Rs 1,26,623 crore.

The low figure for the current year, was however on account of the receipts of Rs 46,602 crore to the centre under the State Debt Swap Scheme.

The government has budgeted Rs 1,47,811 crore for net resource transfers to state and UT governments.

The centre has also allocated Rs 53,704 crore as direct assistance to state plans in 2004-05, up 10.4 per cent from the revised estimates (RE) of Rs 48,660 in 2003-04.

The RE for state plan outlay, is however lower than the Rs 48,822 crore which the government had budget for at the beginning of the year.

Despite failure to spend the budgeted amount in the current fiscal, the government has kept budget allocation intact in 2004-05 for programmes like the Accelerated Irrigation Benefit Scheme, Prime Minister's Gramodaya Yojana, Accelerated Power Development Programme, rural electrification and initiative for strengthening urban infrastructure.

Allocations for the Rashtriya Sam Vikas Yojana, previously the Development Reform Facility have been budgeted at Rs 3230 crore, as against a RE of Rs 1,000 crore in 2003-04. The government had budgeted an amount of Rs 1,450 crore under the scheme in the current fiscal.

The government has budget for Rs 7,000 crore additional central assistance (ACA) for externally aided projects (EAP) in state plans as against the RE of Rs 8,500 crore in 2003-04.

The government had budgeted for only Rs 6,278 crore under this head in the current fiscal. Expenditure on such projects is initially incurred by states and thereafter reimbursed by the government of India.

State wise allocation of ACA for EAP in state plans show that states ruled by the BJP and allies rule the roost.

Andhra Pradesh continues to be the top grosser of EAP, accounting for Rs 1906 crore of ACA for EAP in 2002-03, while Gujarat was second with Rs 941 crore.

Karnataka, however slipped from second position in 2001-02 to eighth with only Rs 464 crore coming in under this head in 2002-03.

The government has also budgeted for Rs 7000 crore as investments from the national small savings fund in state government securities in 2004-05. In the current fiscal, it has budgeted for Rs 60,000 crore as against Rs 64,500 crore in the revised estimates.