FI funds to be pruned by 37%

Despite a Rs 800 crore assistance to co-operatives, the government is going to reduce its funding to financial institutions by over 37 per cent to Rs 3,516.54 crore during 2004-05, compared to Rs 5,750.75 crore this fiscal.

The Rs 800 crore as incentive assistance to state and co-operative institutions to strengthen their set up would be routed through the National Bank for Agricultural and Rural Development (Nabard).

A large chunk of the decrease in allocation to FIs in 2004-05 is due to lower assistance to the Specified Undertaking of the Unit Trust of India which would receive Rs 1,200 crore compared to Rs 6,500 crore (Rs 3,000 crore net of securities issued by it).

The amount would go towards meeting the shortfall in the assured return schemes maturing next year as also the contingent liability on account of the 6.75 per cent US 64 bonds.

The undertaking would also face liabilities on account of the 6.6 per cent assured return bonds proposed to be offered to the investors of the seven schemes that are being foreclosed.

In the next fiscal, Industrial Development Bank of India (IDBI) and IFCI Ltd have been allocated Rs 574 crore and Rs 226 crore respectively.

During the current fiscal, the IDBI received an assistance of Rs 747 crore while IFCI got Rs 1,573 crore toward reducing their interest liabilities. The government has, however, provided Rs 143 crore to IIBI Ltd during 2004-05 as interest subsidy.

It would also provide Rs 214 crore to Exim Bank of which Rs 200 crore is earmarked for augmenting its capital base as proposed by the commerce ministry.

The Centre has, however, not made provisions for agricultural, SME and infrastructure and manufacturing funds of over Rs 110,000 crore during the next fiscal.

Last month, Finance Minister Jaswant Singh had announced the setting up of an agri fund of Rs 50,000 crore, an infra and manufacturing fund of another Rs 50,000 crore and an SME Fund of Rs 10,000 crore to provide sub-prime lending rate loans. A gap of around Rs 2,000 crore was to be met through budgetary support.

Another Rs 2,000 crore that was earmarked for viability gap funding of airports, road projects and convention centres during the current fiscal has found no takers and the Centre has provided only Rs 50 crore in the revised estimates. The government provided only Rs 1,500 crore during 2004-05.

FACTSHEET

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• Rs 800 crore incentive assistance to state and co-operative institutions to be routed through the National Bank for Agricultural and Rural Development
• Large chunk of decrease in 2004-05 due to lower assistance to specified undertaking of the Unit Trust of India
• No provisions for agricultural and manufacturing funds of over Rs 110,000 crore during next fiscal
• No takers for Rs 2,000 crore earlier earmarked for viability gap funding of airports, road projects and convention centres