Centre gets money-wise, asks states to fund plans

NEW DELHI : The finance ministry has proposed that Centre should take ‘hard decisions’ and restrict its responsibility of financing only the flagship programmes during the Eleventh Plan period (’07-12) while states should take on full financing of other centrally-sponsored programmes.

Sources said, if finance ministry’s proposals are accepted, states may be asked to part-fund UPA government’s flagship scheme Bharat Nirman that requires a expenditure of about Rs 2.20 lakh crore. Similarly, for other programmes like the Jawaharlal Nehru National Urban Mission, Accelerated Irrigation Benefit Programme, Backward Area Development Programme, National Rural Employment Guarantee Programme, Mid-Day Meal scheme and others, the states may be brought on board.

In its comments on the approach to be taken for the next five year plan, the ministry has said that as the state finances are significantly robust now, most programmes (centrally-sponsored schemes) should be funded by the state governments from their own resources.

While the Centre would fund only the flagship programmes, even in these cases, the states must be encouraged to raise matching resources and progressively increase their stake in the programmes, the ministry has informed the Planning Commission.

The Commission has already approved the Approach Paper to the Eleventh Five-Year Plan (2007-12) and few changes are being done now at the direction of the Prime Minister before the document is sent for Cabinet clearance. According to official sources, the finance ministry’s proposal comes in wake of the severe fund crunch anticipated by the ministry during next plan period that targets an average GDP growth of 9%.

The next Plan estimates that the gross budgetary support would have to increase by 2.5 percentage points of GDP above the Tenth Plan period to meet all funding requirements. The finance ministry has fears that the additional tax buoyancy of 1.25 % for the five-year period and an annual non-tax revenue growth of 12.5%, as estimated for the plan, may not come through. This means the Centre may have to look at other sources for mobilising resources and cutting expenditure, wherever possible.

Sources said the proposed changes may be opposed by states that would have to ratify 11th Plan document National Development Council meeting, expected in December.