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LATEST NEWS UPDATES | Govt hurries to find funds for Mamata-Siddharth

Govt hurries to find funds for Mamata-Siddharth

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published Published on May 6, 2012   modified Modified on May 6, 2012

Faced with stark hint from Trinamool boss Mamata Banerjee that she might act independently of UPA in the presidential poll if her demand for financial relief for West Bengal was not conceded in a "few days", the Centre has scrambled to find ways to organize assistance for debt-stricken state.

Officials handling the task now say they can rush relief to Bengal without having to seek a clearance from the Finance Commission. This is a significant shuffle from the earlier stand that the Centre was constrained by the requirement to refer the issue to the Commission that deals with government finances. "There is no such requirement," said a senior functionary in the finance ministry conversant with the subject.

The official pointed out that the impression that an endorsement from the Finance Commission was a pre-requisite stemmed from the precedent, where the Centre consulted the body for providing help to Punjab in the 1990s on the ground of the depredation wrought by Khalistan insurgency.

But while the finding can help Congress appease Banerjee's demand for a fresh Bengal package, it has left the ministry worrying about the cascading impact of the political gesture. To begin with, assistance to Bengal because of "debt stress" has to be extended to Kerala and Punjab as well that are almost equally distressed. Kerala CM Oomen Chandy has already made a formal demand, and the concession to Bengal can give fillip to similar stridency from these two states.

Worse, it can encourage Uttar Pradesh and Bihar, both with anemic fisc, to knock at the Centre's door for aid. Bihar has been clamouring for "special state" status since Jharkhand was carved out of it a decade ago. UP's exchequer is severely strained, and CM Akhilesh Singh Yadav can hope to push through populist promises with a little help from the Centre.

In fact, the 13th Finance Commission had pointed out that along with Rajasthan and Bengal, these two states were the only ones with debt levels of more than 40% of their gross state domestic product (GSDP). While the report was presented in 2009, none of the non-special category states budgeted for debt levels in excess of 40% in 2011-12.

UP's argument may be even stronger given that it was among the five states, including Goa, Bengal, Kerala and Punjab, with fiscal deficit of over 3% of GSDP.

Significantly, Congress views SP as a potential ally, while all indications suggest that Bihar CM Nitish Kumar is steadily drifting away from the BJP-led NDA.

Political management will be at the cost of worsening fiscal condition. UPA's appetite for tough measures may diminish as the 2014 parliamentary contest approaches, and because its managers may see sops as the best way to shore up the depleted political capital. The task of fiscal consolidation - being hammered at home and abroad - may have to wait indefinitely.

The Times of India, 6 May, 2012, http://timesofindia.indiatimes.com/india/Govt-hurries-to-find-funds-for-Mamata/articleshow/13014932.cms


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