CENTRE WON’T SHARE STATES’ BURDEN ON FLAGSHIP SCHEMES

Official says some savings are expected as the Centre will make cuts wherever there is low-priority expenditure

Even as state governments cut down on their development expenditure citing lack of revenues, the Centre will not compromise on its share of expenditure for any of the flagship schemes, a top government official said.

The Union government, however, will also not take over the states’ share of centrally-sponsored schemes in case they can’t fulfil their expenditure commitments, the official said.

This comes even as the Finance Ministry has told central departments that they should be careful in releasing funds and should first check if the states have the capacity to spend the money already released, before allocating further sums.

“There will be no cut on the outlay on flagship schemes. The states have to make their own decisions. In centrally sponsored schemes they also have to share the burden of expenditure. If they don’t spend, then that portion will remain unfunded. We are not making any budget cuts on our end,” the official said.

Earlier this month, Maharashtra, which has been the worst-hit by the Covid-19 pandemic, slashed expenditure for its development schemes by nearly 70 per cent and froze all new capital expenditure. Officials from other states admit that their coffers are running dry and development expenditure on their own flagship schemes could take a hit.

In centrally-sponsored schemes, both the Centre and states have financial participation. A stipulated part of the funding is provided by the states in terms of percentage contribution. The ratio of state participation may vary from 50:50, 60:40, 70:30, or 90:10, depending on the scheme. The Centre transfers money to the states that are charged with implementing the scheme. This contrasts with central sector schemes, which are completely funded and implemented by New Delhi. PMKISAN is a central sector scheme.

Most of the major flagship programmes of the Centre are centrallysponsored and hence are shared with states. “The Centre will not be funding the states’ share of the centrally sponsored schemes. We will not be taking over the responsibility of the states. We don’t do it in good years, we can’t do it in a bad year,” said the official.

The official said some savings were expected since the Centre will be making cuts wherever there is low priority expenditure, and in non-scheme expenditure.

Expenditure Secretary TV Somanthan has written to various ministries asking them to exercise control over the expenditure while releasing money to states for central schemes, owing to dwindling tax and non-tax revenues as the economic activity remains muted because of the lockdown.

In April, the expenditure department had put restrictions in place for various ministries to limit their spending in the April-june quarter. In a normal year, ministries and departments spend 25 per cent of their full year allocation in the first quarter. For a number of ministries, that was reduced to 20 per cent or 15 per cent.

“It is not as if the Centre is completely unaffected on revenues. Every rupee fall in state goods and service tax is a rupee fall in central GST also. Although the revenue of the Centre has collapsed, we have assumed the 100 per cent of budgeted revenue for April and released the tax devolution to states, although we know we will not be anywhere close to 100 per cent,” the official said.

In light of falling revenues, the Centre had on Friday said its borrowing programme for the year would increase by nearly 54 per cent to ~12 trillion, from ~7.8 trillion estimated earlier.