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Mamata’s gain and loss
States to get more funds

Calcutta, July 10: If Mamata Banerjee goes through the budget documents Arun Jaitley tabled in Parliament today, she will feel both happy and sad.

First, the good news. For the financial year 2014-15, Jaitley has proposed a nearly three-fold increase in the central assistance for the plans of states and Union territories. The budget documents also reveal that net resources transferred to the governments in the states and the Union territories would go up by at least 40 per cent in the next financial year.

The reason why the Bengal chief minister will feel sad is easy to decipher: it will rob her of an opportunity to blame Delhi for not giving the state its due despite collecting taxes from Bengal.

“As part of recommendations for better utilisation of central funds, an attempt has been made to transfer the funds to the consolidated funds of the states instead of transferring them to various state agencies under various centrally designed schemes,” said a member of the BJP’s think tank.

A drastic cut in central plan outlays for some of the key departments — that have been running prominent centrally sponsored schemes — suggests that the Modi government is keen that the states take the responsibility of improving the living conditions of the people in line with their specific needs.

“This is part of Prime Minister Narendra Modi’s plan of co-operative federalism as this will give the states the freedom to design their own schemes depending on the condition there,” the think-tank member added.

While presenting the interim budget ahead of the general elections, P. Chidambaram had first used this methodology of funds transfer in response to the demands from the states.

Although Jaitley — who has not made any major departure from Chidambaram’s budget proposals — was silent on his decision to follow his predecessor’s funds transfer model, he articulated the government’s plans to work closely with the states.

“I want to reiterate my government’s firm commitment to strengthen the federal structure of the country and our resolve to work closely with the state governments for the larger good of the people,” the finance minister said.

The Centre transfers funds in two ways. One, transfers driven by a formula prescribed by the Finance Commission and not linked to any projects. Two, funds for various centrally designed schemes.

While championing the cause of federalism, Mamata had accused the Centre of not giving the state’s dues. Today, she posted on Facebook: “They have given zero to Bengal in this budget.”

Some economists wondered how the Bengal government would use the money transferred to the consolidated fund of the state.

“The earlier methodology was tied to schemes and released in tranches, depending on utilisation. Under the new methodology, there is always the risk of the state using the funds for some other purpose, like paying salaries,” said a Delhi-based economist.

There, however, is a flip side to Jaitley’s plan. The generous increase in funds transferred to the states will be linked to the Centre’s performance in revenue collection. “Jaitley seems to be over-ambitious on his targets on revenue generation. If the targets are not fulfilled, the funds flow will dry up and strain the Centre-state relations,” said the economist.

 
 
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