Centre agrees to ease fiscal targets, state to be richer by Rs 300 cr

Centre is unlikely to link easing of the target towards proceeds released towards interest and debt relief, say officials.

The Narendra Modi government has acceded to a request by the Maharashtra government to ease some of the fiscal targets linked to the release of the state’s share in central transfers for 2014-15, which will help the exchequer utilise at least Rs 300 crore.

Fiscal laws such as the Fiscal Responsibility and Budget Management or the FRBM Act, which states are bound to follow, mandate that they maintain a revenue surplus, while restricting the fiscal deficit to below 3 per cent of the gross state domestic product (GSDP).

But an increase in revenue expenditure in the run-up to both Lok Sabha and Vidhan Sabha polls in Maharashtra threw the state’s budgetary targets off gear. While Maharashtra is still expected to meet the fiscal deficit target, senior officials confirmed that the state was in no position to achieve a revenue surplus.

“The revenue deficit is expected to go beyond Rs 10,000 crore despite austerity measures initiated after the Fadnavis government took over,” said a senior official. That’s not all. The increase in revenue expenditure has come at the cost of squeezing of capital expenditure, with the government imposing a cut in development spending.

The previous Congress-NCP regime in the state had first approached the centre for easing these targets and sources said the centre had recently granted this request.

The Thirteenth Finance Commission (ThFC) had finalised a total transfer of Rs 830 crore as part of the devolution of funds to Maharashtra. Following the easing of rules, a senior finance department official said a transfer of at least Rs 300 crore was now certain.
The official said the centre was unlikely to link easing of the target towards proceeds released towards interest and debt relief.

A lack of buoyancy in revenues given the economic slowdown has compounded worries for the Maharashtra CM, who has unveiled austerity measures after taking over on October 31. The government has imposed a 40 per cent cut in development spending, and has also withdrawn power and food subsidies extended by the previous regime.

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Ironically, the cut has not been made applicable to the Local Area Development (LAD) and District Planning Development Committee (DPDC) funds, where works are under-taken at the instance of legislators.

Meanwhile, the state government has sought clarification from the centre on the structure of the next budget.

With the Niti Aayog replacing the erstwhile Planning Commission, it has sought information on whether the centre’s process of finalising Plan sizes for states would be discontinued.

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