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Plan panel seeks 18% hike in budgetary support, FM offers 12%
January, 27th 2011

The finance ministry has offered only a 12% increase in the budgetary support to the central plan for the coming fiscal against the Planning Commission's demand for an 18% hike.

The plan panel sought higher support, citing increased requirement for the flagship schemes, particularly MGNREGA, or Mahatma Gandhi National Rural Employment Guarantee Act .

The North Block, constrained by its compulsion to return to fiscal consolidation and additional expenditure due to higher subsidy outgo, is finding it difficult to find funds to meet the expectations of the plan panel.

"(The) finance ministry has offered a 12% increase, (and) given the near-8% inflation (it translates into) a real increase of only 4%," said a government official privy to the discussions.

Such an increase will take the total gross budgetary support, or GBS, to the central plan to about 314,000 crore, against 280,600 crore last year.

GBS is the amount sanctioned by the finance ministry for the central plan. Central, or annual plans, are essentially the five-year plans broken down into five annual installments.

The wrangling over the GBS for next fiscal is almost a repeat of last year's scenario where Planning Commission demanded an 18% increase but eventually only got only 11.4%.

However, with the 2011-12 being the terminal year of the 11th Five-Year Plan the commission wants a higher support to prevent work under some schemes from spilling over to the next plan.

Also, the commission needs extra funds to step up allocation for the flagship rural employment scheme MGNREGA, the wages of which have been linked to inflation from the new calendar year.

In the current year this will itself mean an increase in remuneration for the MGNREGA work in the range of 17% to 30%, requiring a much higher allocation than the 40,100 crore budgeted in the current year. Although, only 24,000 has been utilised so far in the current fiscal the total outgo due to increase in wages could be substantially higher and therefore provisioned for.

Delivering on the right to education and food security promise will also require a much higher allocation.

The food security act is expected to be rolled out from the next fiscal. Even a curtailed plan that was suggested by a committee set up to study the bill drafted by the UPA chairperson-led National Advisory Council involves a food subsidy outlay of 85,584 crore against the 55,578 crore budgeted in the current year.

The commission had earlier suggested implementing food security act from the 12th plan as funds will have to be diverted from existing schemes in the current plan to fund it.

Finance ministry has its own compulsions and may not be in position to step up allocation sharply. The ministry has committed to a fiscal deficit of 4.8% of the GDP in the current year and there is no one-time bonanza expected in the next financial year akin to the auction of spectrum that fetched more than 1 lakh crore in the current year. So, it would be largely relying on revenue buoyancy and proceeds from disinvestment.

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