Centre has cleared packages for devolution of plan and non-plan funds for the three new states of Chhatisgarh, Uttaranchal and Jharkhand even as the contentious issue of division of financial and physical assets and liabilities between these and parent states is hanging fire.
Union Cabinet, which met here yesterday, is believed to have approved a formula for devolution of non-plan funds as per the recommendations of the eleventh Finance Commission while the Planning Commission has approved a formula for sharing of plan funds and central assistance, sources said.
However, the issue of division of financial assets and liabilities (loans and interest payments), to be jointly decided by the Reserve Bank of India, Comptroller and Auditor-General and finance ministry would not be resolved by the due date for formation of Chhatisgarh on November 1.
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When contacted, expenditure secretary C M Vasudev said that the new states would get their share of revenue from the divisible pool of central taxes. as per the weightage recommended by the eleventh Finance Commission.
While Chhatisgarh carved out of Madhya Pradesh will come into being today, Jharkhand, redrawn from Bihar and Uttranchal from Uttar Pradesh will come into existence on November 15 and November 9 respectively.
Going by the formulae, where maximum weightage is given to per capita income and population, states of Jharkhand and Uttaranchal would stand to lose both in terms of flow of plan and non-plan funds but Chhatisgarh would gain the most, sources added. The revenue from the divisible pool will be shared by the new states on the basis of area and population. per capita income, infrastructure and fiscal performance.
As per the formula, Uttaranchal will get 3.5 per cent of the allocation provided to Uttar Pradesh by the 11th Finance Commission, Jharkand 20 per cent of the allocation to Bihar and Chhatisgarh 27 per cent of total share of Madhya Pradesh.
The interest burden of the states will be shared on the basis of the population. Accordingly in the case of Uttaranchal, five per cent of the Rs 7,000 crore interest burden on Rs 60,000 crore borrowing will be borne by the new hill state.
Likewise Jharkhand which gets 30 per cent of the population of Bihar will share equal percentage of the interest burden of Bihar and a similar formula will be applicable in case of Chhatisgarh which is carved out of Madhya Pradesh.
Vasudev said the RBI has already opened a separate account for Chhatisgarh to which revenue from divisible pool would start flowing from today. To begin with all the three states will start with zero borrowing in their respective RBI accounts.