Centre to fund states for fiscal correction

With regard to Punjab which had taken a ways and means advance of Rs 900 crore from the Centre but failed to bring about reforms by way of effecting user charges as well as reforming its public sector units etc, the Government is clear that it will recover the money and not offer any further bailout package to the stateas demanded by it.

According to Finance Ministry officials, the reason for it to go ahead with the programme is that other eight states who signed similar MoUs with it along with Punjab, are performing well. The other states are: Himachal Pradesh, Rajasthan, Uttar Pradesh, Orissa, Manipur, Mizoram, Nagaland and Sikkim. The total money extended to these states including Punjab amounted to Rs 4,000 crore. The Finance Ministry and the Planning Commission have been monitoring closely the performance of all these states. MoF officials said that most of these states are on the right track and the Ministry and the Commission are advising them on how to go ahead. For instance, it was pointed out that Rajasthan has already abolished about 15,000 posts and raised agricultural tariff by 15 per cent, UP has also abolished about 5,000 posts, Himachal Pradesh is in the process of taking similar steps.

Finance Ministry is quite confident that it will be able to handle erring states by central appropriation in casethey default. Further, they state that the relationship between Centre and States is that like a mother and child so the state will need Centre time and again for aid so they can’t really dodge it on the issue.

However, the real problem which the Ministry may find in going all hog with the progamme will be paucity of funds. At present only nine states have availed of this programme. Four more are in the pipeline. To go whole hog with this programme, it will require to net in additional equal number of states, for which huge funds will be required.