'Savage' fund cut by Chidambaram's babus have Jairam seething -Subodh Varma

-The Times of India

As the clock ticks towards the general elections in a few months time, a major crack appears to be opening up in the government. The mandarins of finance ministry - presumably with the sanction of finance minister P Chidambaram - have proposed huge cuts amounting to over Rs 20,000 crore in spending on popular flagship schemes like the employment guarantee scheme, the rural housing scheme, the village roads scheme and the livelihoods mission.

This has angered the rural development minister Jairam Ramesh who has called such cuts "completely unreasonable" and "savage" and "demoralizing" in a protest letter to Prime Minister Manmohan Singh.

This nasty war has been revealed in letters written by Ramesh to Chidambaram and Manmohan Singh that TOI has access to through the Pension Parishad, a coalition of organisations fighting for better old age pensions. The letters were written in November this year.

The finance ministry is motivated by one over-arching worry - to control the fiscal deficit and keep it within the set target of 4.8% of the GDP. Fiscal deficit is the difference between earnings of the government (through tax and other means) and its expenditure. It has been estimated that currently, at the halfway mark of the year, earnings are 35% of what was budgeted. So, Chidambaram is probably trying to cut expenditure to keep the difference - the deficit - down.

But at what cost? Ramesh writing to the prime minister hints darkly at the biggest danger - the political cost of cutting back on welfare schemes. He says such cuts would "send the wrong political signals". In plainspeak this means that the UPA would lose votes if it goes back on committed spending on various flagship schemes.

According to details narrated at length in Ramesh's letter, the job-guarantee scheme (MGNREGS) and the rural housing scheme (IAY) stand to lose Rs 2,000 crore each. These are two of the most popular schemes of the UPA.

Far from accepting the finance ministry's diktats, Ramesh presses for even more allocation. For the housing scheme, Ramesh argues that to meet the Planning Commission approved target of 30 lakh dwelling units for the current year, budget allocation is actually short and an increase of Rs 2,800 crore is needed. In addition, to build 3 lakh houses in cyclone Phailin, Odisha would need Rs 1,687 crore.

For the rural livelihoods scheme (NRLM), Ramesh says that the "whopping cut of 35%" is unjustified and such a move would "directly hit an estimated three crore poor women".

For the rural roads scheme (PMGSY), budget allocation of Rs 21,700 crore is sought to be cut drastically to just Rs 9,700 crore, with a permission to states to use accumulated interest worth Rs 3,050 crore. Ramesh argues that roadworks are going on in some of the most backward states and cutting funds now would "unfairly penalize poorer and more backward states".

The finance ministry appears to be cutting back on the basis of "unspent balances" of funds lying with states. Ramesh dismisses this argument by saying that midway through the year, state governments will have unspent funds and "it is not proper to assess unspent balances at this juncture".

Ramesh however, accommodates the finance ministry's "concerns" by accepting a Rs 500 crore cut in the livelihoods mission and agreeing to postpone some of the expenditure amounting to Rs 8,000 crore in the rural roads programme.

The Times of India, 14 December, 2013, http://timesofindia.indiatimes.com/india/Savage-fund-cut-by-Chidambarams-babus-have-Jairam-seething/articleshow/27320443.cms

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