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Responsibility, not denial, is the way forward

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  15 March 2015 12:00 AM GMT

Lately there is much heartburn and wringing of hands in Dispur over the rendra Modi government’s ‘stinginess’. Chief Minister Tarun Gogoi has lamented in the Assembly that the Centre has given to Assam Rs 2,000 crore less than what the 14th Fince Commission has awarded. Assam has received Rs 3,000 crore less this fiscal than the total funds it was allocated. If the Central government continues in this manner, Assam will not move faster along the path of growth, cautions the Chief Minister. Earlier, the State Food and Civil Supplies minister zrul Islam had taken a dig at the Modi government — that it will allow the Food Security Act to be implemented in Assam only after the Assembly elections next year. The impression sought to be created by Dispur is that the Centre is tightening its purse strings due to political considerations. By this logic, once a saffron government takes over reins in Assam, the Centre will open the floodgates and money will gush into the State. So the Tarun Gogoi government is supposedly being victimised, after the generosity it received from the earlier Congress-led government at the Centre. But the hollowness of such claims lie exposed once we observe the tough economic policies that the Centre and other state governments are being forced to adopt in tune with changing times.

Take the recommendations of the14th Fince Commission, for instance. For long, the states have been demanding 50:50 sharing with the Centre of the divisible pool of Centre’s net taxes. The states have been receiving 32 per cent, which the 14th Fince Commission has now hiked to 42 per cent at one go. The Commission has pointed out that increasing the share of tax devolution for the states is formula-based, and therefore guarantees unconditiol transfer of more reources. This is expected to go a long way towards reducing political favoritism in funding and encouraging sound fiscal federalism. The Commission has also removed the distinction between general and special category states. Only for the 11 states where devolution alone cannot cover the assessed gap in resources, the Commission has provided for post-devolution revenue deficit grants. It has also recommended doing away with plan and non-plan distinction in revenue expenditure of state governments. All this means that states will not only have more money at their disposal, they will also have greater powers to decide how to spend the money. But this huge shift in funding pattern means the states will have to take greater responsibility to generate more resources and cut costs wherever possible. With the Modi government accepting the 14th Fince Commission recommendations, it is estimated that the share of states in the Centre’s net tax receipts will go up by Rs 1,78,000 crore in 2015-2016. Correspondingly, as the states’ share goes up, the Centre will have less money in its hands. This means that the Centre will have to slash funds for Centrally sponsored schemes, which is already happening.

The Central government has informed Parliament that it will reduce its contribution from 75 per cent to 24 Central schemes, while completely cutting off funds for 8 schemes. Only 31 ongoing schemes will continue to get full support from the Centre. Several states are already taking measures in anticipation of getting bigger share in Central taxes while preparing do without Central grants and other discretiory transfers. Even BJP ruled states like Maharashtra, Madhya Pradesh, Gujarat and Harya are gearing up to mobilise more funds for state-specific schemes in infrastructure and social sector while reducing market borrowings. States like Tamil du, Andhra Pradesh, West Bengal and Odisha are worried that the changed funding pattern will hamper implementation of schemes, as well as how to reduce their loan burdens. So the new economic reality has got all states worried, BJP-ruled or otherwise. The challenges ahead are daunting, but opportunities beckon — to be more fincially independent and progress faster. Amidst this jockeying among states, Assam may end up losing its special category status, with the Tarun Gogoi government voicing worries to that effect. Dispur will surely have more grounds for complaint in the coming days once the fund crunch begins to bite. But Assam is also the unfortute state where its government failed to utilize around Rs 86,000 crore in the last ten years. These funds were allocated to it as a special category state under various Central schemes and grants. The Tarun Gogoi government thus failed to make hay while the sun was shining in the form of a benevolently inclined UPA government at the Centre. It will now serve no purpose to cry over those ‘good old days’; rather, it is time for the Chief Minister to come out of this denial mode. The State government can no longer afford to fail in utilizing funds allocated, or to allow its wanton leakage. It must take responsibility and stop misleading the people, or else harsh economic reality will soon catch up with it.

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