Planning cell asks Maharashtra to freeze over 80% development expenses

The state's planning department has asked the Maharashtra government to freeze more than 80 per cent of the funds it has allocated for development expenditure in the budget.

Maharashtra finance minister Jayant Patil had announced a Rs 19,000 crore plan outlay earlier this year, which has now been pruned to Rs 9,400 crore by the Union Planning Commission.

So the state government will now have to make reallocations in a more realistic manner. For some time now the finance department has been telling the state government that it is unable to fund the various expenses budgetted by it in the absence of adequate resources.

A senior secretariat source explained: "The position may be explained like this. Say the state government expects to raise Rs 100 crore in revenues in a financial year . It announces a budget that seeks to finance Rs 120 crore worth of expenditure, leaving it with a deficit of Rs 20 crore. Subsequently, during the same year, further expenditure amounting to Rs 100 crore is announced. Now while the deficit has risen to Rs 120, the government is at a liberty to pick and choose those expenditures it wants to fund and those it may conveniently ignore. Normally it is the socially relevant (employment guarantee scheme) expenditure that gets adversely affected in such situations."

The state planning department has recommended to the state government that it should seek the Union Planning Commission nod to increase the restricted plan size to an enhanced Rs 14,000 crore figure while also seeking more than 80 per cent cut in plan expenditure considering the financial situation of the state.

The state government had announced a revenue deficit of Rs 14,000 crore in its budget. For the Maharashtra govenrment, the situation is compounded by the fact that, apart from the budgetted expenditure, it has to finance several pre-poll sops of nearly Rs 3,000 crore announced by previous Congress chief minister Sushilkumar Shinde.

These include free power to agriculturists in the last three quarters of the current financial year. This will require Rs 1,200 crore in all, for which no budgetary provision has been made.

The state government had released the first installment to finance this from the Rs 700 crore it had provided for offering subsidised power to farmers while also paying the Maharashtra State Electricity Board (MSEB) for introducing power sector reforms. Now it is faced with the onerous task of funding free power for the remaining two quarters of the year.

According to well informed sources, while the state government may well clear the second instalment, it is likely to go back on its promise of free power in the last quarter (January to March 2005), citing bumper crops owing to good monsoons as its rationale.

However, the state government has also announced its intention to procure cotton from farmers at Rs 2,500 per quintal under the Cotton Monopoly Procurement Scheme (CMPS). That price is way above both the Union government dictated minimum support price of Rs 1960 per quintal as well as the market price of cotton being offered by private spinning and ginning mills.

While a spokesperson for CM Vilasrao Deshmukh said he was unaware of any scheduled meeting with state planning department officials today, enquiries with additional chief secretary (planning) D K Shankaran's office revealed that the planning department officials were in a meeting with Deshmukh.

A bumper cotton crop, expected to be in the range of 150 lakh tonne to 170 lakh tonne, this year will surely put a huge strain on the state exchequer, since farmers will prefer to sell their harvest under the state scheme in view of the falling market prices for cotton.