Government to allocate funds to states based on past performance

NEW DELHI: Ready to bite the reform bullet, the government is planning to rationalise the Budget demands of states by allocating funds on the basis of their overall performance.  “The government is planning to rationalise the spending by state governments to bring better fiscal discipline among states. The allotment of budget will be purely on merit and performance by the state and not by arbitrary demands. States which have better utilised the funds will get priority,” a senior official of Niti Aayog said.
“At the same time, it will promote states to compete against each other which will ensure their healthy growth,” the official added.

The decision holds significance as the finance minister on Thursday met representatives from the state governments, who presented their views and offered a number of suggestions on various fiscal policy and budgetary measures ahead of the Budget.

Andhra Pradesh Finance Minister Yanamala Rama Krishnudu said that states are facing a Rs 1.3 lakh crore revenue shortfall on account of GST and the compensation from the central government is not enough.
According to India Ratings, Andhra Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh, Madhya Pradesh, Odisha, Punjab and Tamil Nadu would need compensation from the central government for the revenue loss, which is estimated to cost the Centre Rs 5,600 crore in FY18.

The Odisha government asked the Centre to revise the coal royalty and also for a change in the sharing pattern of the State Disaster Response Fund.O Panneerselvam, Chief Minister of Tamil Nadu, demanded that the Centre’s contribution in the Pradhan Mantri Awas Yojana be increased from Rs 1.5 lakh per beneficiary to Rs 5.4 lakh. The chief minister also noted that under the National Social Assistance Programme, the central government has been providing a pension of Rs 200 per beneficiary under the Old Age Pension Scheme and Rs 300 per widow and the differently-abled since 2011. The meeting was attended by the chief ministers of Himachal Pradesh and Puducherry, the deputy chief minister of Bihar, Delhi, Gujarat, Manipur and Tamil Nadu, 14 state finance ministers, etc.

Jaitley said the suggestions made by the states and Union territories would be “duly examined and suitably considered” while formulating the Budget proposals, keeping in consideration with the spirit of cooperative federalism.