Air India, the ailing public sector airline, may get Rs 5,000 crore in the next budget to get out of the red while banks will be given Rs 10,000 crore for recapitalisation as non-performing assets — mainly because of the manufacturing slowdown — have hit them hard.
On February 7, a group of ministers (GoM), headed by finance minister Pranab Mukherjee, cleared the financial restructuring plan for Air India. The GoM planned that the 21 lending banks would be paid back through a Rs 7,400-crore government-guaranteed bond issue.
Mukherjee, who faces the twin challenges of keeping the fiscal deficit under 4.5% and bringing measures to revive the economy, has raised the plan budget by Rs 80,000 crore, or 18%, from Rs 4,41,547 crore to about Rs 5,21,000 crore.
The huge fund infusion in public sector establishments is aimed at convincing foreign investors that the government wants to achieve a 7.5-8% growth rate despite the European crisis and the global slowdown.
The ministries that are key to the government’s revival plan — such as the labour ministry — are expected to get a 20% hike in their annual allocation. The increase for other ministries, mainly in the social sector, will be 5-10%.
The rural development ministry, which got about Rs 74,000 for the current fiscal, expects a Rs 1,000-crore hike. The science and technology ministry is getting a 6% increase, while human resource development may get a hike of about 10%.
One of the reasons for the allocations not rising much is the government’s decision to introduce a flexible expenditure component in schemes to allow state governments to spend according to local requirements.