The UPA government's first full-fledged budget is full of promises. How real are they?
when P Chidambaram stood up to present the first full-fledged United Progressive Alliance (upa) budget on February 28, 2005, it was his second opportunity to show words were backed with resources. Interestingly, the finance minister has not only increased expenditure on various development and social sector programmes, and reduced taxes, he also has cut the fiscal deficit from 4.5 per cent to 4.3 per cent. Magic. How has this been done? Chidambaram assumes 21 per cent higher tax revenues. He's cut lending to states: there's a Rs 29,003 crore gap in plan expenditure states have to fill. This cut, in Central loans to states, is in line with recommendations the Twelfth Finance Commission (tfc), a constitutional body set up to decide allocation between Centre and states every five years, made.
The issue is: does this place an additional burden on states to raise loans from the market? Yes, and no. S tates will now have to borrow directly from the market; the pressure is on them. The burden will be particularly higher on the less creditworthy states, also usually the poorer ones. On the other hand, however, tfc also recommends an increase in the share of the Centre's revenues to be shared with states, from 29.5 per cent at present to 30.5 per cent. In 2005-06, states can expect Rs 94,959 crore. This places about Rs 3,000 crores more than last year at the disposal of the states. The Centre has also rescheduled state loans outstanding to it, as on March 31, 2005. This, too, puts additional money in the hands of a state. The combined impact of these two changes actually reduces the immediate burden on states to raise money from the market.
However, a deeper look at the development sector reveals the picture is not so rosy.
In the agricultural sector, crop husbandry, fisheries, food storage and warehousing have received the highest increases. Allocation to soil and water conservation, and agricultural financial institutions, has been decreased. Irrigation gets a raw deal. The minister had reiterated that the upa's goal was "to bring an additional one crore hectares under assured irrigation", but no allocation exist for the same.
Further, schemes announced earlier are yet to start, or no further allocations have been made. For instance, last year Rs 200 crore was allocated for water harvesting programmes in 560 drought-prone areas under the Pradhan Mantri Grameen Jal Samvardhan Yojana. Not a paisa was spent and there is no further allocation this year. This programme apart, the finance minister has increased allocations for other watershed programmes.
The other scheme, which Chidambaram called one of his "big dreams", is yet to progress. The National Programme for Renovation, Repair and Restoration of Waterbodies linked to Agriculture will receive Rs 100 crore -- the minister said in his speech -- to implement pilot projects in 16 districts in 9 states, covering 700 waterbodies and 20,000 hectares of land. But the budget document does not provide for it. Sources at the Union ministry of water resources indicate its probably because the money would be provided as additional resources. Last year, too, the minister had promised Rs 100 crore for this project. Only Rs 5 crore were spent; the pilot projects never took off.
In another programme to accelerate irrigation works, the central government provides assistance to states through the Accelerated Irrigation Benefit Programme. Chidambaram has increased allocation under this programme from Rs 2,800 to Rs 4,800 crore. But the programme has a loan and grant component. Since April 2004, more affluent states are entitled 70 per cent of the money they require through loans and 30 per cent through grants. The ratio for special category states -- poorer ones -- is 10:90. But with the centre no longer providing loans, the states would have to raise loans themselves.
The minister does provide a leg-up to promote efficiency in water used under irrigation through micro-irrigation technologies such as drip and sprinkler irrigation. The plan is to increase coverage from 1.2 million hectares (mha) to 3 mha by the end of the Tenth Plan period (2007), and 14 mha by the end of the Eleventh Plan (2012). For this, the minister has provided Rs 400 crore in 2005-2006.
In rural development, the emphasis is on employment: allocation in this sphere is up from Rs 6,408 crore to Rs 9,000 crore, mainly geared to the upa's National Common Minimum Programme commitment to provide rural employment for 100 days under its Food for Work Programme. The finance minister reiterated the government would implement the Employment Guarantee Scheme (egs) in a highly targeted manner. But the tabled Employment Bill covers families below the poverty line in only 150 backward districts: the minister has allocated Rs 5,400 crore to cover the programme's cash component. The programme also has a foodgrain component --50 lakh metric tonnes per year. Chidambaram estimated this would cost about Rs 5,600 crore, but didn't allocate any money for it. How is the government to finance this?
egs , however, appears to be living off other schemes. For example, two flagship programmes of the Ministry of Rural Development, on for five years now, witness a decline in allocation. The Sampoorna Gramin Rozgar Yojana, aimed at creating wage employment opportunities and providing food security, along with creation of community assets, will receive Rs 3,600 crore in 2005-2006, down from Rs 4,590 crore in 2004-2005. The allocation to the Swarnajayanti Gram Swarozgar Yojana, providing self-employment opportunities to rural households below the poverty line, has fallen from Rs 900 crore in 2004-2005 to Rs 862 crore.
The social services sector receives generous allocations. There is a 33 per cent increase in overall allocation, up from Rs 41, 986 crore in 2004-05 to Rs 55,882 crore. The biggest increases are in education, medical and public health, water supply and sanitation and social security and welfare. Allocation for general and technical education, for instance, has increased from Rs 9,469 crore in 2004-05 to Rs 13,929 crore (Chidambaram, however, claimed allocation for education in 2005-06 would be Rs 18,337 crore.)That for Medical and public health is up from Rs 2,174 crore in 2004-2005 to Rs 2,929 crore in 2005-2006; for water supply and sanitation, up from Rs 3,221 crore in 2004-05 to Rs 4,457 crore in 2005-06, of which rural water supply alone get Rs 3,645 crore, up from Rs 2,610 crore.
Rural water supply systems, however, require far more than what the minister has provided. Economic Survey 2004-05 estimates expenditure on operation and maintenance of water supply systems alone to be Rs 6,000 crore per year. Moreover, the minister's claim about habitations provided with drinking water does not correlate with Economic Survey estimates. While the minister claimed 31,355 rural habitations were provided drinking water during the year, figures from the 2003-2004 and 2004-2005 Economic Survey reveal the number of habitations either not covered or partially covered reduced by 6,513 habitations. An important issue here is the quality of water supplied. The finance minister emphasised "tackling water quality in 2.16 lakh habitations in Andhra Pradesh, Gujarat, Karnataka, Rajasthan, West Bengal and some other states."
The Total Sanitation Campaign has been increasing the number of districts with access to safe sanitation facilities. 452 districts have been covered so far, more than 75 per cent. But households covered so far are only 30 per cent. The minister has increased allocation from Rs 360 crore last year to Rs 630 this year to cover all districts; this emphasis -- districts, not households -- masks the fact that rural households still have no access to safe sanitation facilities.
In urban areas, 86 per cent of the urban population have access to water supply and 63 per cent have sewage and sanitation facilities. To provide water to all, and sewage and sanitation facilities to 75 per cent urbanites by 2007 -- estimates the Tenth Plan -- Rs 51,000 crore is required. Of this, Rs 2,500 crore is to come from the Centre. However, the combined allocation for urban water supply and sewerage systems has decreased from Rs 156.25 crore in 2004-2005 to Rs 96.49 crore in 2005-2006. For sanitation a meagre Rs 30 crore has been allocated.
Inputs from S V Suresh, Avilash Roul
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