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Farm aid to hit other schemes

The state government’s Rs1,000-crore compensation package announced in the assembly on Saturday for farmers affected due to untimely rains in the state will be at the cost of other development schemes promised in the budget this year.

mumbai Updated: Dec 05, 2010 01:51 IST
Ketaki Ghoge

The state government’s Rs1,000-crore compensation package announced in the assembly on Saturday for farmers affected due to untimely rains in the state will be at the cost of other development schemes promised in the budget this year. It will also add to the revenue deficit (expenditure being more than earnings) of the budget, estimated at Rs7,654 crore.

Chief Minister Prithviraj Chavan made the announcement, tripling the figure of compensation granted for such calamities from Rs330 crore to Rs1,000 crore. But, analysts believe that the relief measure will further affect the state’s already wobbly financial health. How these funds will be raised is another question on everyone’s mind?

Some cabinet ministers had suggested raising bonds to tide over the crisis, but the finance department ruled it out. With the state balancing a huge debt, estimated to reach Rs2.10 lakh crore by next March, seeking loans has been ruled out.

Chavan instead chose the more traditional option and admitted that the there could be a cut in government’s expenditure. “The funds for the package would be raised by applying a cut to the expenditure of the government and by mobilising additional resources,’’ said Chavan, in the assembly, while announcing the package.

Since, there can be no cut on government’s wage bill, this cut will be reflected in the planned development budget of Rs34,000 crore announced this year. “There is no denying that this will add to the revenue deficit. We will absorb the burden by making a cut in some schemes,’’ said a planning official.

The official added that department’s slow utilisation of funds for schemes would also help implement the cut and transfer funds for the package.

However, Priya Khan, director of Socio Political Analysis and Research Kendra (SPARK), said, “These announcements are very poorly implemented. On paper, the government will transfer funds from one head to another. That’s all.’’

The global slowdown had affected finances in the last two years. To add to this, the sixth pay panel has added a burden of Rs12,000 crore to the wage bill for its 16.73 lakh employees every year. While the wage bill along with pension now accounts for 44.15% of the state’s expenditure, interest payments eat up another 15% of the expenditure.