States set to get only Rs 1,400 cr more funds

States have been apportioned a mere Rs 1,400 crore as fungible resources within the Rs 10,000 crore additional gross budgetary support (GBS) made available to them by the Finance Minister P Chidambaram in the Budget.

While Chidambaram had announced the additional allocation, this is how the numbers actually add up. Of the Rs 10,000 crore, a lumpsum of Rs 6,000 crore has been earmarked for new and restructured schemes of the central ministries and departments to achieve the objectives of the common minimum programme.

This amount will be used to increase allocation to infrastructure development and social sectors particularly education, family welfare, health and in physical infrastructure, especially in power and roads.

The remaining amount of Rs 4,000 crore will be used for the new and restructured schemes for assistance related to the state plans, enhancement of normal central assistance and increased provision under the Rashtriya Sam Vikas Yojana.

Of this amount, Rs 2,000 crore is the grant that is already tied up. This means the Planning Commission has established a strict one-to-one connection of the funds with specific schemes.

This leaves the state governments with only Rs 2,000 crore as resources, which they can switch between Plans and schemes. But even within this, as per the formula worked out by the Planning Commission, Rs 600 crore has been set aside for the special category states in backward areas.

These are north-eastern states, Jammu and Kashmir and the three newly-created states of Uttranchal, Chattisgarh and Jharkand. This leaves a balance of only Rs 1,400 crore for the remaining states to scramble for funds.

With the northeast states facing floods and the north western states facing the increased possibility of a drought, there is bound to be increased pressure on the Planning Commission for additional funds to the states.

The Planning Commission was not in favour of granting "ad hoc" financial packages to states and said it should be based on a "formula" to improve their fiscal health.

"I shall, to the best of my capacity, oppose ad hoc packages to states. It should be based on a formula as presented by the finance commission," Plan panel member Abijit Sen said at a post-Budget meeting in Assocham today.

The Budget has made special provisions for Bihar, Jammu and Kashmir and north-eastern states.