Funds crunch may hit govt schemes

The government on Wednesday said it was finding it difficult to arrange funds for the employment guarantee programme, managing subsidies and neutralising the decline in non-debt receipts.

This, the government said, was due to the Twelfth Finance Commission's recommendations on debt relief for states.

In the quarterly review for April-June 2005, tabled in Parliament, the government also pointed out the uncertainties over dividends from oil companies.

The oil companies are facing losses because they have not been able to align the retail prices of oil at home with the rising international crude oil prices. Oil marketing companies posted first-time losses of over Rs 1,200 during the first quarter due to under-recoveries from the sale of petrol, diesel, cooking gas and kerosene.

The Centre's interest receipts are expected to go down in the coming months once the loans to states are rescheduled in line with the finance commission recommendations. This is likely to put further pressure on non-tax revenue.

The finance commission award will also result in lower loan recovery receipts due to rescheduling.

While the government will continue with its focus on improving tax collection and controlling spending, the review said, the economy had shown considerable resilience in facing the situation arising out of high crude oil prices and natural calamities.

"On the whole, the fiscal consolidation process is in progress, but continued caution is needed," the 28-page document said.

"We are hopeful that though there are pressure points and we can't be off-guard, there is nothing to suggest we sound the alarm bell," Chief Economic Advisor Ashok Lahiri said.

The Centre appeared satisfied on the receipts side with an increase in the tax financing of the expenditure. About 42 per cent of the spending of Rs 93,584 crore during April-June 2005 was financed by non-debt receipts.

Though there was some sluggishness in personal income tax, partly due to misclassification as corporation tax, the government expects a pick-up in the second half.

The document said expenditure was evenly placed at the end of the first quarter. Lahiri sought to allay apprehensions on the huge funding requirement for national rural employment guarantee scheme saying this year's requirement will more or less tally with the budget provision of Rs 10,000 crore.

"We are still struggling with the estimates (on employment guarantee) but fiscal deficit target would be met," he said.

Lahiri said fiscal deficit was higher during April-June 2005 as the Centre factored in debt swap of state loans in initial months this year, which was not the case last year.

Fiscal deficit was estimated at Rs 54,517 crore in April-June 2005-06, compared with Rs 41,681 crore in the corresponding period last year. The deficit at the end of June this year was 36.1 per cent of the budgeted Rs 1,51,144 crore, compared with 30.3 per cent last year.