The Planning Commission and the finance ministry are locked in an intense discussion over the budgetary support to the central plan for the coming fiscal with the former sticking to its demand for a substantial increase but the finance ministry citing fiscal constraints and suggesting a lower increase.

In a meeting with finance minister Pranab Mukherjee on Saturday, Planning Commission deputy chairman Montek Singh Ahluwalia pointed out hat it was difficult for it to significantly climb down from the substantial hike in the budgetary support that it had demanded as it was important to continue the ongoing programmes, including social sector schemes, a government official has said.

The meeting will be followed by secretary-level meetings to bridge the differences. Planning Commission secretary Sudha Pillai will meet expenditure secretary Sushma Nath on Monday to discuss the nitti-gritties of the allocations that are required to be made, the official, who requested not to be named, told ET.

The Planning Commission had asked for a hike of 18% in the budgetary allocation to the central plan. The finance ministry, however, wants to part with much less in order to keep a check on the fiscal deficit estimated at a 16-year high in the current fiscal.

There could be a final meeting between Mr Mukherjee and Mr Ahluwalia after the World Economic Forum meeting scheduled in Davos, Switzerland, later this month, the official said. While the finance ministry sanctions a particular amount of funds for the central plan, called gross budgetary support or GBS, the responsibility of distributing it judiciously amongst ministries, departments and state governments rests with the Planning Commission.

Although ministries and departments asked for an 82% increase in budgetary support amounting to over Rs 4 lakh crore, the Planning Commission has asked for an 18% hike or a GBS of Rs 3.73 lakh crore.

The finance ministry, however, is not likely to go beyond a 15% increase amounting to Rs 3.25 lakh crore.
Apart citing fiscal constraints, the finance ministry has also pointed out that a number of ministries and departments had not performed well in the previous fiscal and did not deserve a higher allocation.

Ministries, including chemicals and pharmaceutical , home affairs and power, have been asked to rework their expenses and settle for negligible hikes or cuts (in some cases) in their plan allocations.

The UPA governments flagship urban infrastructure development scheme JNNURM, specially the arm dealing with small and medium towns, and the countrys national carrier Air India have also drawn criticism from the finance ministry for under-utilisation of Central funds