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Govt gives in, extends flexi-funds to states

Giving in to a long-standing demand of the states, the Centre has decided to allow them flexi-fund benefits. Prasad Nichenametla reports.

delhi Updated: Oct 19, 2012 01:45 IST
Prasad Nichenametla

Giving in to a long-standing demand of the states, the Centre has decided to allow them flexi-fund benefits.

The government's proposal for a fund that allows states to use money in accordance with their local requirements comes at a time when questions are being raised with regard to its authority in a federal structure. While Orissa and Tamil Nadu perceived the National Counter Terrorism Centre as an intrusion on their function, almost all states have been opposed to central guidelines that govern fund utilisation at the local level.

But the Rs 40,000-crore rural development-specific fund, as announced by Planning Commission deputy chief Montek Singh Ahluwalia and rural development minister Jairam Ramesh on Thursday, marks a shift in spending of public money. "It is a welcome decision. The fund provides respite from the centrally formulated rules, often not matching our local needs," Aruna Sharma, additional chief secretary of the Madhya Pradesh government, said.

For example, the state wants to enhance rural roads to ensure their durability on black cotton soil. Officials say Pradhan Manti Gram Sadak Yojana rules prevent such modifications, which result in the state incurring the financial burden. "And NREGA says no to playgrounds that our rural children require," Sharma, in-charge of rural development and social justice, says.

The Rs 40, 000 Rural Development Flexi-fund (RDF) would target such local preferences. The fund is in tune with the BK Chaturvedi (plan panel member) Committee report called for rationalisation of centrally sponsored schemes and creation of flexi-funds for states.

While the Centre contributes Rs 28,000 crore, the remaining 30% is borne by the states.

The fund, to be put into operation from the next financial year, would be for four years of the 12th Plan period - in addition to regular budget allocations.

Though he took note of the demand for flexi-funds, Ahluwalia said extension or replication of the fund to other sectors would be based on the opinion of other central ministries. Also, the RDF for incentivising innovation in service delivery and sustainable rural infrastructure would be subject to a central monitoring mechanism and audit of the CAG.