To stay on the right side of the Trinamool Congress, the Centre has opened its coffers for West Bengal.
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday cleared a Rs 8,750 crore package for the state. Chief minister Mamata Banerjee had sought Rs 19,000 crore.
The package comprises a grant from the Backward Regions Grant Fund (BRGF), similar in size and structure to a package given by the Centre to Bihar a few months ago. It comes days after the Trinamool Congress, with 18 Lok Sabha MPs, shot down the Congress-led UPA’s plans to open multi-brand retail.
The Congress is relying on its second biggest Lok Sabha ally for the passage of crucial economic reform Bills in Parliament, including the Pension Funds Regulatory and Development Authority Bill.
The urgency of the matter can be gauged from the fact that the Centre itself is facing a huge fiscal deficit, running at 6.7 per cent of GDP in the first six months of the current financial year.
Soon after Banerjee took over as the West Bengal chief minister, finance minister Pranab Mukherjee announced the Centre’s intention to help Bengal restructure its debt.
Banerjee wrote to Prime Minister Manmohan Singh in July, seeking financial help to clear up the state’s financial mess, which she blamed on the earlier Left Front rule.
She had said financial constraints had become a serious impediment in the development of Jangalmahal and other backward regions of the state. In August, the Centre gave West Bengal a package amounting to Rs 21,614 crore. On that occasion, Banerjee had said the state had only received Rs 9,240 crore as additional financial assistance and the rest (out of the Rs 21,614) it deserved like any other state.
Explaining the break-up, Banerjee had said of the Rs 9,240 crore, Rs 300 crore would be spent on agriculture development, Rs 100 crore for green energy development and another Rs 94 crore for ultra-Left affected areas.
She said Rs 3,800 crore was a loan repayment amount. The Centre had also increased the state’s borrowing capacity by Rs 2,706 crore as part of the package.
After the latest largesse, other states facing debt problems, such as Punjab and Kerala, are bound to raise similar demands.
West Bengal had the highest fiscal deficit in 2010-11 among non-special category states, at 4.6 per cent of gross state domestic product (GSDP). Punjab (3.6 per cent) was ranked fifth and Kerala (3.5 per cent) was the next.
When pleading for a special financial package for West Bengal from the finance minister in July, Banerjee was asked to draw up a budget that could enable her to raise revenues internally, too, leaving the Central aid within ‘reasonable’ limits. The August package fell below her expectations. Banerjee retaliated by opting out of an official visit to Bangladesh to offer a settlement on the Teesta river waters, leaving Singh and Mukherjee red-faced.
The Trinamool position on FDI in retail was also a tactical move, as the matter has not been discussed at any level in the party.
