NCAER ridicules CMP

NEW DELHI: A leading economic think tank on Wednesday termed the UPA government''s Common Minimum Programme as a "plenitude of promises" saying mere implementation of the 100 days employment scheme and additional allocations for health and education will cost nearly Rs 60,000 crore.

While additional resources will be needed for the CMP schemes including over Rs 30,000 crore for providing 100 days of employment to one person of each poor household, revenue receipts will be hit due to slowing down of the disinvestment programme, the National Council of Applied Economic Research (NCAER) said here.

"Last year revenue from disinvestment was Rs 16,048 crore. It will not be anywhere near this year and the Finance Minister will have to find ways of making good the shortfall", the NCAER said in its latest monthly analysis.

It said the only place where the CMP talks about increasing revenue is putting a cess on Central taxes to fund education and that was also not expected to fetch more than about Rs 5,000 crore.

"At a wage rate of Rs 60 and 100 per day in rural and urban areas respectively, the wage cost of employment guarantee scheme (EGS) for providing 100 days of work to one person from each poor household is around Rs 34,224 crore," it said.

The NCAER further said that assuming the material cost for the EGS is the same as the labour cost, the entire scheme will cost Rs 68,448 crore of which the Centre''s burden will be Rs 51,337 crore.

The budgeted expenditure in employment schemes in 2002-03 was only Rs 10,707 crore.

The NCAER analysis pointed out that the budgeted expenditure on health and education in 2002-03 was 4.5 per cent and this according to the CMP has to be increased to 8-9 per cent over the next five years.

This would amount to an increase of 0.7 per cent to 0.9 per cent of the GDP annually and works out to be Rs 19,000 crore to Rs 25,000 crore in 2004-05.

Since education and health are state subjects, extra expenditure for the Centre could be in the range of Rs 4,278 crore to Rs 5,550 crore, it said.

To finance such ambitious initiatives, the NCAER feels the solution will have to consist of a combination of expenditure control and revenue increases.

For instance, it said, at present provident funds offers an interest rate of 9.5 per cent annually and the investment by them are generally in government securities which offer nearly 2.0 to 2.5 per cent less return than the interest paid.

The NCAER is of the view that if the interest rate on PF in brought in line with the market rate, the government will have to bail out the provident funds as it did to UTI.

However, there is a difficulty in reducing the PF rates as the trade unions are already objecting to it.

It also called for better targetting of subsidies for substantially reducing expenditure though "this calls for a very thorough" delivery mechanism and that is nowhere in sight".

On the revenue side it favoured implementation of VAT and widening the service tax net and said this tax revenue from the transport sector alone could yield Rs 15,000 crore.