Central government may ask states to return idle funds

NEW DELHI: Hard-pressed for funds, the Central government may ask states to surrender the funds which are unlikely to be utilised for ongoing schemes during the course of current financial year. "States can be asked to surrender funds mid-year which they think they will not be able to utilise," a finance ministry official said.

This, sources said, would help the Centre in managing its finances in a better manner, specially at a time when the financial position is tight and there is threat of global agencies downgrading India's sovereign rating to 'junk' grade.

Unutilised funds anyway lapse at the end of the fiscal, sources said, adding that the surrender of funds by them during the course of financial year would help Centre to tide over its stressed financial position.

The government's fiscal deficit is likely to exceed the budget target of 5.1% of GDP on account of rising fuel, food and fertiliser subsidy bill. Finance Ministry officials have already indicated that it would be difficult for the government to maintain fiscal deficit at the budgeted level.

P Chidambaram, soon after he assumed office in August, appointed a three-member expert panel headed by Vijay Kelkar, to suggest fiscal consolidation roadmap. Among other things, the Kelkar panel recommended hike in price of cooking gas and kerosene, besides making a case for sharp reduction in oil and fertiliser subsidy. Besides, lower rate of growth in tax revenues and poor off-take of disinvestment programme is adding to the fiscal woes of the Centre.