Centre not to impose 5% cut in plan assistance to states

NEW DELHI, November 2: To avoid the opposition from states, the central government has decided not to impose 5 per cent cut in the plan assistance to the states and union territories and to go ahead with the amendments to give effect to the recommendations of the Tenth Finance Commission which will cost the centre Rs 5,000 crore during the current financial year.According to finance ministry sources, the proposed 5 per cent cut in plan and non-plan expenditure would be restricted to the centre only. The requisite amendments to give effect to the suggestions of the finance commission will be placed in Parliament during the winter session beginning later in the month.

Usually the normal central assistance to the states is disbursed in 12 equal installments during a financial year. The normal central assistance to the states for the current financial year was pegged at Rs 25,884 crore and Rs 838 crore for union territories. The total outlay worked out to be around Rs 26,722 crore which had to be transferred to the states and union territories.Out of the total of plan outlay of Rs 26,722 crore for the states and union territories, Rs 12009 crore would be as revenue expenditure and the rest as capital expenditure. During the current year, it was stated, funds were given to the states until October 1997 as per the schedule notwithstanding the resource crunch being faced by the central government due to poor revenue collection.

The trend of disbursement, it was pointed out, would be maintained although the central government would be facing a tough time garnering resources.The central government, it may be recalled, as a mid-year corrective measures decided to enhance taxes to mop up additional resources for meeting the increased salary bill and other post-budgetary commitments. These tax measures were imposed through an ordinance promulgated by the president and that too would have to be ratified by parliament during the winter session beginning on November 19.

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Sources further said that the centre was proposing to provide another Rs 5,000 crore to the state governments during the current year in accordance with the revenue sharing formula suggested by the tenth finance commission.To give effect to the recommendations of the finance commission, sources pointed out that the draft bill was being processed and would be placed in parliament during the coming winter session.

Subject to approval by parliament, the states and UTs would be richer by Rs 5,000 during 1997-98.

It was clarified that the additional outgo towards the states for implementing the recommendations of the finance commission report for the current year would be Rs 3000 crore. This would be in the nature of recurring additional annual expenditure. Another Rs 2000 crore would go towards the states during the current fiscal as arrears for last year.