Now states are competing with each other for better development of life, says Planning Commission Member.
B.K. Chaturvedi, Member of Planning Commission, speaks to M.K. Venu, host of Rajya Sabha TV’s State of the Economy, on special packages to backward states.
Please explain this new campaign of various states seeking special status. What is the politics and economics behind this?
Today everyone in the country wants economic development and growth. People want more hospitals, schools and better quality of life.
In the last two decades, there has been great upsurge for this. Now states are competing with each other for better development of life.
There has been a very wide diversion in per capita incomes in states like Bihar which had around one-fifth of highest per capita income in 1990s, now have around one fourth. Maharashtra and Haryana are the highest in terms of per capita income. So because of this gap people are saying that this is too much. So people are saying that they need growth and larger investments. Therefore, they want the large plan investments and the feeling is that if plan expenditure comes, then they will be able to do better to develop their infrastructure. So they want larger center planned funds. You can access central planned funds in two ways: you have normal central assistance which is in accordance with Gadgil-Mukherjee formula decided. A major chunk of resources is today flowing today to centrally sponsored schemes. Combining the two, in the 11th Plan, the total amount will be around 11 lakh crores. Of which around 7 lakh crores was of centrally sponsored schemes and then there was additional central assistance through which funds flew. It works out around 2 lakh crores per year.
The whole fight is about how much backward states will get of this 2 lakh crore per year.
The whole fight is that this is based on certain schemes like MGNREGA, Pradhanmantri Sadak Yojna, Sarv Shiksha Abhiyaan, NHRM and various schemes under which there are certain guidelines. Now for the country as a whole we have got two categories of states. There are special categories states which are the North Eastern states. There for most of these schemes they have to contribute 10% of their resources and government of India has to contribute 90% of them and thereby then they can use all these funds for their development. Unlike that, many of other states have to use other yardsticks. For example in case of Sarv Shiksha Abhiyaan they have to provide 35% so as to get 65% grant from central government or in some schemes it is 25% and 75% and in some schemes it is 50-50.
So there is fight for more grants. Their take is that we are not able to access the central resources because we do not have the counterpart funds of these local resources.
So Bihar is probably saying that we don’t have 35% to contribute so please increase the grant.
Absolutely, Bihar is saying that we don’t have 35% to contribute so please increase the grant. Therefore you please give us special status and put up in special category of states so that (a) they are also to do the same way 10-90.
In addition to this they are saying that look we have our own problems. For example, Bihar is saying that our per capita investment in the plan is very low because we do not have the resources.
In case, we have to have additional resources, additional planned investments, then you must give us more funds. So government of India gave around thousand crores per year in 11th Plan. In 12th Plan, we continued with that, in fact we increased that but now in the remaining period of 12th plan the request is that you must give us a larger share for Bihar so that they can have larger plan outlay. Larger plan outlay means larger number of roads, more drinking water facilities, better schools, better hospitals and more investments and better infrastructure so that people can come and invest there. Therefore, there request has been that you must provide us a special package.
States like West Bengal have different nature of problems. Their problem has been that they have very high level of debts. So, a large part of their resource goes in debt servicing. So West Bengal says that look we have earlier governments which have taken so much debt and we have to spend so much of money on servicing the debts. Therefore you must restructure the debt or take on board yourself so that we do not have to service the debts and spend money to that extent and thereby that will free the resources for our growth and development. So their request has been that since because we do not have resources, you give us special package.
What sort of problem does Orissa have? Is it similar to Bihar or West Bengal?
Orissa has different problem. Orissa has been sayings that it has less per capita income. Orissa has so much of mineral resources and lot of its mineral resources is being taken away by other states. We are not getting full advantage of it. And quite often what is happening that we are getting worst of it because people are taking away coal from here or they are setting power plants and we have to provide water for it, we have to provide land, they are needing back their share of resources and are saying that you must give us a larger share in these resources. We get more mineral share from those resources than what we are getting so far and thereby we will be able to improve our status.
Don’t you think Bihar has a similar case? They were cut off the resources after formation of Jharkhand and they were promised even then about compensation for those resources. Is that also somewhere written down?
It has been precisely an argument that Bihar government is using that lot of our resources have gone to Jharkhand. Therefore, we have to be adequately provided resources and compensated
Otherwise our resource base has gone very thin. Therefore they said that we should get adequate resources. This is the one of the argument they have put forward to the Central government for having a special package.
Is it not a contradiction that North East states having special status have three times the per capita income than Bihar, Orissa? Do you feel that there is the need in changing the criteria of giving special status for funding from center?
Historically, North Eastern states had a problem because these were very difficult areas, there was no infrastructure. They had very little resource base. But per capita income has improved there since then but their resource base and ability to sustain this is still very poor. In case if you want to do it as percentage of GDP or GSDP, in case of Mizoram it is around 2 or 3% their own tax revenue. Normally national average for good states is around 7-8%. Even if it is around 8% it will be inadequate because their overall volume of size of GSDP is very small that you need a certain minimum resources for building up roads, hospitals, so even if they have 7-8% in absolute terms the amount will not be adequate for building up some of these large investments required for these hospitals or power plants or huge roads. So historically these states have had problems, difficulty in investments many of them I see gradually coming up states like Sikkim. They have done well and they are gradually coming out states like Arunachal Pradesh.
Arunachal has two Hydel projects operating, so their income selling powers will 30-40% of GDP. Is it true?
Absolutely. In fact, it has been very interesting that when we were preparing the 11th Plan and we were trying to assess that how much is the final picture coming up while we were finalizing this 11th Plan and preparing our 12th Year plan document we found that rate of growth of Sikkim was 22% per annum. So we have to say that look if you have to average it among North eastern states, the whole thing varies from 7% to 22%. But this phenomenon has happened only in the 11th Plan. In the last 5 years, states have grown with higher growth rates and the same thing has happened with so called BIMARU states. In 11th Plan, on average they have grown with 12% and we have said that this is one of the highest. We did study on this and found that the average rate of growth in lowest per capita income states of the country like states of Bihar, UP, Rajasthan, Orissa, per capita income, growth in their GDP was around 8.8% in the last 5 years as against less than 8%, 7.9% in 11th plan of national average. Even if you take the highest income growing states there also I think around .96 the ratio comes to between highest per capita income growing states and lowest per capita income growing states. So they are now going fast pace.
If this kind of growth rate continues do you feel a case could be made out at a later stage that for special category to North eastern states will be withdrawn or do you think that what is given once becomes very difficult to withdraw in Indian politics?
To be honest both are true. First of all it is very difficult to withdraw but I do see that over a period of time, states like Sikkim, Arunachal Pradesh and others who have large power resources, once they are able to come and even Mizoram, Meghalaya are coming out very well. At a later stage, when their incomes become very high and they may not need that support and they will be self-sustaining, it could be considered, I could see it down the line more than 10 years down and down the line.
As you said that within 5 years states doing well with per capita income, their status can be withdrawn. What do you think really what can be done with low per capita income states? Do you think some new sort of system can be evolved where you program-wise and give them higher grants rather than give them higher grants across the board? Do you think that you can attack this problem based on critical problem like education, health, in those where you give them much higher grant component because they do not have their own local share of revenues not coming to fund?
First of all I would like to clarify that I do not say that you withdraw special category status of any North-East state because they have special problem apart from the economic growth especially from tribal areas, forest areas of special tribal status. There are schedule 5 and schedule 6 areas. I think one will have to see what happens but certainly the level of financial support required after 10 years down the line may be lesser. Coming back to these states, in the 12th Plan, we have worked out a strategy for this. One of the major plans is our backward region grant fund. We are expanding it in a huge way. More than around 75000 crores, we are thinking that this fund will be there and this will take care of both the types of problems areas which have backward areas within a state like Bundelkhand area or KBK in Bihar or other areas affected by left and extremists, districts in Andhra. Many of these areas first of all we are taking up under this backward region grant fund and we could take up gradual other areas also based on their backwardness and needs. This is being trying to identify on basis of blocs rather than a district. We have modified the Backward region grant scheme. This is being discussed by the concerned divisions of the concerned states during the course of formulation of the plan.
Can the central sponsored schemes can be delivered through this?
This is a centrally sponsored scheme. We will give funds at the district level, state level and ask them to spend money in these blocks where there development is required with the support of Panchayat and the others and they will be a part of this.
Essentially what you are saying is that MGNREGA can go to three blocs in Bihar which are in need of that program but not go to the 3 blocs adjacent which may not need them?
No, I am not saying that. But, I am saying that but I am saying that other schemes remain the same as they are. This is a separate scheme where we are taking the backward regions and saying that what are your development requirements and additional funding for them at a grass root level. So that they also come up with their infrastructure requirements.
In 1996-97, after the reforms were made, some 8000 crores were the funding for centrally sponsored schemes. Today it is 2 lakh crores. Do you have any Planning Commission audit that how funding is being used, has it been used optimally to attack real backwardness in the states which are facing special problems. Is there any audit?
Well, this is now one of the major planks of all these central sponsored schemes that you must have an evaluation and an assessment of what is being done. In addition to that we are now setting up an independent evaluation office in this Planning Commission which is to evaluate many of the schemes. There is an inbuilt evaluation mechanism. We have an independent evaluation office set up here and they will do the evaluation of many of these schemes and say that these have done well, these need reforms, changes, what are the modifications required they will come out with that but that’s at a macro level. But as of now, even now in each one of these schemes, we are trying to build up their assessments. For example, in case of MGNREGA, there is a question of social audit and which is taking place and seeing how the schemes are done. From time to time, there are assessments from here from independent evaluators who evaluate how has MGNREGA done and people say look this is done badly and this has been the problem and some places doing well. Similarly, in case of this RGBY scheme on we asked the ministry to get it independently evaluated from 3-4 sources, they have given their reports on schemes and we are trying to get evaluation done.
The budget has done very boldly announced that centrally sponsored schemes which number about 150 will now be reduced to 71. Lot of them will be rationalized. What sort of rationalized is going to happen?
The intention is that as of now there are around 150 odd centrally sponsored schemes and they are in different departments and small schemes. What we are doing basically is merging all similar schemes and having them under one umbrella so that once they get merged, then the states will have the choice. From there they can take up whatever they want and spend money on that.