Cut in outlay on Central schemes likely to hit state’s social sector

New Delhi,Dhaval Kulkarni: Is Modi government’s decision to devolve more money to states by accepting 14th Finance Commission recommendations and simultaneous cut in outlays for centrally-sponsored schemes proving a bane to the state’s social sector?

Cut in outlay on Central schemes likely to hit state's social sector

Senior state officials fear that the Centre’s decision may lead to the already stressed Maharashtra government being forced to fork out more on welfare schemes, which could put more strain on state’s balance sheet, which is already in the red. “And, any belt-tightening on part of the state could hamper allocations in these crucial segments,” points out a senior state official.

Schemes coming under changed funding ratios include those in areas like health, nutrition, agriculture and education like the flagship Rashtriya Krishi Vikas Yojana (RKVY), Mid-day Meal Programme, Accelerated Irrigation Benefit Programme (AIBP), Integrated Child Development Services (ICDS) and the National Health Mission (NHM).

“Maharashtra is already groaning under Rs 3.38-lakh crore loans and borrowings. The interest servicing burden amounts to another Rs 27,000 crore/year. Apart from much-needed drought relief, populist measures like waiver of toll for small vehicles at 53 toll nakas and scrapping of local body tax (LBT) and devolving the stamp duty collections in 25 municipal corporations to the civic bodies to make up for loss of revenue are expected to hit bottom lines further,” pointed out the official.

According to the recommendations of the 14th Finance Commission, the tax devolution of the states has been increased by 10 percentage points from 32% to 42%. Maharashtra’s share in devoluble central taxes has been hiked from 5.199 % to 5.521% with the grant-in-aid for rural and urban local bodies also being increased.

“The hike in the state’s share of central taxes will result in an estimated gain of around Rs 8,000 crore. However, we will have to contribute around Rs 5,500 crore for these schemes due to the changed funding pattern. This leaves us with little financial benefit despite the changed norms,” said a senior finance department official.

Another source added: “The state may have to incur an additional burden which is a matter of concern considering the financial situation… We have gained on one hand, but lost out on another.” He said the state government had no immediate plans to hike taxes to make up for the shortfall.

“There are three types of schemes now — ones that continue to enjoy full Central funding, ones where the funding pattern between the Centre and states have been changed and the ones discontinued,” the official said.

While the Centre will fully fund 34 schemes like Member of Parliament Local Area Development Scheme (MPLADS), Pradhan Mantri Gram Sadak Yojana (PMGSY) and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), 20 schemes will be implemented with a changed funding pattern, with the Centre contributing a lesser outlay towards funding.

These centrally-sponsored schemes, where states will have to shell out additional funding, include the National Rural Drinking Water Program (NRDWP), Mid-Day Meal program, RKVY and Indira Awas Yojana (IAY) and NHM. Some schemes have also been de-linked from central support.

According to the budgeted estimates for the 2014-15 financial year, Maharashtra’s tax revenues for the fiscal were to be Rs 1,38,853 crore, including Rs 1,18,640 crore from its own tax revenues and Rs 20,213 crore from its share in the central taxes. This is up from Rs 1,26,961 crore in 2013-14 (revised estimates) including Rs 1,10,374 crore from its own tax revenues and Rs 16,587 crore from central taxes.

Outlays for key schemes
The NHM, which consists of the National Rural Health Mission (NRHM) and the National Urban Health Mission (NUHM), had a Rs 561.92 crore outlay for 2014-15. The Centre had approved a project implementation plan of Rs 297.85 crore (Rs 56.23 crore for Mumbai city and Rs 241.63 crore for the rest of the state).

The RKVY, which was a flagship scheme, saw Rs 1,013.49 crore projects being sanctioned by the State-level Sanctioning Committee (SLSC), of which the Centre had okayed all these projects. Of this grants worth Rs 415 crore were received and Rs 367.38 crore were spent (up to December 2014).

Rs 1,019.02 crore and Rs 279.52 crore were received as grants in aid for large, medium and minor irrigation projects under AIBP in 2012-13 and 2013-14.

(Source: Economic Survey of Maharashtra 2014-15)