STATE PLANS : TRENDS AND REFORMS
Balanced development 9.1 The State Sector of the Five Year Plans consists of the Plans of the States and the Union Territories, Special Area Programmes like Hill Area Development Programme (HADP), Western Ghat Development Pro- gramme (WGDP), North Eastern Council (NEC) and Border Area Development Pro- gramme (BADP) which are hundred per cent financed by Central Government and the Tribal Sub-Plans (TSP). From the beginning of planning, balanced development of all the regions of the country has been a long-term objective. Formulation of the detailed Plans and schemes of the States and development of backward areas within them is the primary responsibility of the concerned State Govern- ments.
9.2 The Planning Commission helps the States in their efforts through transfer of resources for the operational Annual Plans. Resources so transferred for the Central support which con- sists of Normal Central Assistance, Open Mar- ket Borrowing, Negotiated Loans from financial institutions and Additional Central Assistance for externally aided projects. In the rare cases of States who have faced severe financial difficulties on account of disturbed conditions, such as Punjab and Jammu & Ka- shmir, Special Plan Loans were also envis- aged. In addition to Central support, the State Governments are expected to contribute their own resources (State's Own Resources - SOR).
9.3 Since inception, the procedure for formu- lating the Annual Plans of the States and Union Territories had consisted first of requesting them to send detailed draft proposals of the following year to the Planning Commission. Parallelly, a joint exercise to estimate re- sources were being undertaken in consultation with the Finance Departments of the States. Detailed official level discussions of the pro- posals were then being organised between the Planning Commission, Ministries of Govern- ment of India and the State/U.T. Government. The recommendation of the official level dis- cussions were considered thereafter in meet- ings of the Deputy Chairman, Planning Commission with Chief Ministers of the States and the sizes Annual Plans arrived at. Fi- nally, the inter-sectoral outlays were finalised through readjustment of the official level pro- posals within overall Plan sizes so determined. The procedure suffered from the infirmity that the proposals of the State Governments and official discussions took place without any formal cognizance of the availability of re- sources. More often than not, the recommen- dations were essentially formulated in the light of needs and often in excess of resources avail- able. This caused avoidable difficulty not only in the meetings of Deputy Chairman, Planning Commission with the Chief Ministers and but also in subsequent allocation of the finally approved Plan size amongst different sec- tors/sub-sectors.
New procedure 9.4 After the Eighth Plan started, the matter was given some thought. It was felt necessary that the procedure be changed and a new one could be placed in position. This has been done commencing with the formulation of the An- nual Plan 1993-94. In the new procedure, the first step is joint assessment of resources. This is followed by meetings between the Deputy Chairman, Planning Commission and Chief Ministers of the States in which the sizes of the Annual Plans are decided. Then only are the States requested to formulate and send to the Planning Commission detailed proposals within the sizes determined. Thereafter, offi- cial level discussions are held as usual to final- ise the sector/sub sector-wise outlays. The new process has the merit of allowing ab initio preparation of a detailed Plan which can be related to resources in sight and the total agreed outlay for the Annual Plan.
Earmarking of outlays 9.5 Along with review of procedure of formu- lation of Annual Plan, an exercise to review the scheme of earmarking of outlays which has been practised since 1969, was undertaken. The system of loans and grants (of Central Assistance) tied to specific schemes and pro- jccts was replaced by a system of block loans and grants introduced in 1969. This was ac- companied by putting in place a scheme of earmarking in order to ensure adherance of States to important Plan priorities and projects. The intention was to earmark corresponding outlays within the Annual Plan and sub-
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sequently adjust the Central Assistance if there was a shortfall in the actual expenditure with reference to the outlays so earmarked. A reduc- tion in Central Assistance could be effected on a pro-rata basis if shortfall in the earmarked outlays took place. When the scheme of ear- marking was started, outlays for Agriculture & Allied Services, important major Irrigation Schemes, externally aided projects and speci- fied projects for generation and transmission of power were to be earmarked. Subsequently, Minimum Needs Programme was added to the list of earmarked schemes.
9.6 The scheme of earmarking has been con- tinued in successive Five Year Plan periods and also in the Eighth Five Year Plan. This was reviewed extensively in 1992-93. As a result of periodic additions of areas to be earmarked over the years, the extent of earmarking had significantly increased, amounting to as much as 75-80% of the outlays of the States in some cases. Since the States had no freedom to divert the earmarked outlays on their own, an ele- ment of rigidity had crept in. It was decided by the Commission to allow greater flexibility to the States by reducing the extent of earmarking and making the areas to be earmarked highly selective and State specific to some extent. Presently, the extent of earmarking is being restricted to 50% or less of the total approved outlays of the States. A statement on Statewise approved/ revised approved outlays including earmarked outlays as well as expenditure for 1992-93, 1993-94 and 1994-95 is provided at Annex - 9.1.
Central Support 9.7 In the Central support for Plans of the States, the Central Assistance - both Normal and Additional, is from the budget. The Na- tional Development Council (NDC) has laid down the manner in which the Central Assis- tance is to be distributed. According to the latest formulation, which was approved by NDC in 1991, after taking away the require- ment for Special Area Programmes, TSP and externally aid projects, 30% of the Central Assistance remaining is to be given to the Special Category States and balance 70% dis- tributed among the non Special Category States on the basis of formula which includes criteria like population, per capita income, per- formance in relation to targets and special problems.
9.8 The instruments available now with the Commission for removing regional and inter State disparities are (i) regulating the normal Central Assistance and (ii) Special Area Pro- grammes formulated to target sensitive and backward areas. The Programmes which pres- ently exist in the latter category, are designed for environmentally fragile hill areas (HADP ), security sensitive border areas (BADP), tar- getting tribal people (TSP) and remote and underdeveloped States in the north cast (NEC). It is in regulating the Central Assistance only that any general effort is being made in the State sector of the Plan to address the problem of inter-State disparity and to promote bal- anced regional development.
Disparities 9.9 Despite planning for more than four dec- ades, the inter State disparities continue to exist. The statement at Annex - 9.2 shows the State-wise income data from 1980-81. Though the figures for some States for 1993-94 are not available, it more than apparent that States like Bihar, Uttar Pradesh, Orissa, Madhya Pradesh have not only failed to make any sig- nificant improvement in their position but, per- haps, fallen behind even further after 1991-92 While these States may have been remiss in making effort to contribute their own re- sources for development, it is a matter of con- cern that the objective of balanced development has not been achieved.
9.10 In the present scenario where with eco- nomic liberalisation and dismantling of indus- trial licensing, investments tend to flow to those States having better infrastructure which may also be States relatively better placed ill terms of per capita income ( i.e. per capita Net State Domestic Product), there is a need for according a higher priority for infrastructure development with public funding, wherever undertaken, to be focussed in States with poor infrastructure. The States may also be rela- tively more economically backward.
9.11 Additional Central Assistance for exter- nally aided projects is now passed on in full to the States by the Central Government. Over the last few years, these disbursements to the States have increased considerably and they now form a significant source of Plan funding. It is seen that disbursements of external aid are flowing increasingly to a few States with as much as 62.30 % going to four States during 1992-95. By and large, the States which are able to implement externally aided projects faster and to draw the assistance, are also those States which are more developed and have the
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better infrastructure. A statement on Statewise disbursements for Externally Aided Projects during 1992-93, 1993-94 & 1994-95 ( at cur- rent prices) is provided at Annex - 9.3.
9.12 No doubt the donors have considerable influence in choosing location of projects they assist. Since, however, posing of projects of the State Governments or even of the Central Government for that matter, to donors can be modulated, there is a need to keep in mind the requirement of balanced regional development in directing external aid to the projects imple- mented in different States.
Utilisation 9.13 During 1992-95, a total amount of Rs. 81973.68 crore have been spent against Rs. 181735.00 crore envisaged in Eighth Plan for States & UTs. The degree of utilisation works out to 45.11% only against the prorata 60 %. Sectorwise analysis (Annex - 9.4 ) shows that in Communication & Rural Development sec- tors, 59.29% and 57.74% respectively, of the Eighth Plan outlay have been spent. The Social Services sector and Transport sector have util- ised about 47.29% and 50.03% of their respec- tive Eighth Plan outlays. Important sectors like Energy ( 42.77% ), Agriculture & Allied ac- tivities ( 43.75 %),Industry& Minerals( 43.8 8 %), Special Area Programmes ( 43.00 % ), Irrigation & Flood Control ( 40.81 % ) and Science Technology & Environment (37.06 % ) have performed less than the average of 45.11 % in the first three years of Eighth Five Year Plan.
9.14 The expenditure pattern of the State sec- tor shows that the priorities of the Eighth Plan, in terms of shares of different sectors, have generally been maintained during 1992-95. Whereas in case of sectors like Rural Develop- ment and Social Services, the percentages of the Plan expenditure to total expenditure dur- ing 1992-95 in real terms were 1.59 % and 1.19% higher than those envisaged in the Eighth Plan, the percentages of expenditure to total were lower for Irrigation & Flood Control and Energy Sectors by 1.62 % and 1.39 % respectively. Also 34.53 % of the total expen- diture was made on infrastructure sectors in- cluding Energy, Transport and Communication, against the desired 35.03 per cent as envisaged in the Eighth Plan. The So- cial Services Sector, however, had a share of 25.71 per cent of the total expenditure during 1992-95, which is higher than the 24.52% envisaged in the Eighth Plan.
Shortfalls 9.15 The major concern relating to State sector of the Eighth Five Year Plan is the shortfall in expenditure in relation to the Plan Outlay. At Annex - 9.5 and Annex - 9.6 are two tables indicating the originally approved Annual Plan outlays and actual expenditures State and U.T. wise for the first three years at current prices and 1991-92 prices respectively. In 1992-93 only eight States out of 25 were able to reach or exceed the approved Annual Plan. outlay for that year. For 1993-94 and 1994-95 the corresponding numbers are six and thirteen respectively. If the three years are taken to- gether, only seven states have achieved or exceeded the approved Annual Plan outlays.
9.16 The shortfalls in Annual Plans 1993-94 and 1994-95 show that the revised procedure for formulation of annual Plans where the sizes are resource related, has to be made more effective and assessment of resource particu- larly, promises of States in this regard, made carefully.
9.17 The statement at Annex - 9.7 shows the performance of the States during 1992-95 in relation to the Eighth Plan Outlay None, (if the States has spent more than 60 % of the Eighth Plan outlay. Only three States have spent nearly 60% of the Eighth Plan outlay. The average for all States is only 44.52%. Nine States are below this average and Bihar has managed to reach only 18.19% of the Eighth Plan outlay. A statement on sectorwise outlays for 1995-96 of the States and UTs is provided at Annex - 9.8.
Expert Committee on Plan Funding for UTs 9.18 Delhi and-Pondicherry which are Union Terriroties (UTs) with legislature, should have their tax efforts and Balance from Current Revenues properly reflected in the financing of their respective Annual Plans. To explore this and also to find out the possibility of providing incentives to the Union Territories for efforts towards resource mobilisation and reduction in Non-Plan Revenue Expenditure, a committee was set up under the Chairman- ship of Member, Planning Commission to ex- amine and suggest the manner in which the funding of the Plans of Union Territories could be done. After extensive discussions with the Union Territories, the committee has recom- mended that the two UTs with Legislative Assembly should have the funding of their plans as close to financing pattern of plans of
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non-special category States. Accordingly, these UTs should be provided with share in Central Taxes, non-plan grants on a normative basis and also borrowing powers from agen- cies other than Central Government. For other UTs, without Legislative Assembly, the Com- mittee has recommended that the present sys- tem of funding their plan with some marginal changes to provide incentives for resource mo- bilisation shall be continued.
Hill Area Development Programme 9.19 In order to supplement efforts of the States in mitigating problems caused by in- creasing pressure of population and the con- flicting needs of development and ecological preservation, Hill Area Development Pro- gramme ( with Western Ghat Development Programme - WGDP ) was started in the Fifth Five Year Plan. The Programme has continued in the Eighth Five Year Plan. The Programme is operated in designated hill areas of the coun- try which consist of :
a) two hill districts of Assam viz., North Kachar and Karbi Anglong
b) Eight districts of Uttar Pradesh viz., De- hradun, Pouri Garhwal, Tehri Garhwal, Chamoli, Uttar Kashi, Nainital, Almora and Pithoragarh.
c) A major part of district Darjeeling of West Bengal
d) Nilgiris district of Tamil Nadu and
e) 163 talukas of Western Ghats comprising 62 talukas in Maharashtra, 40 in Karnataka, 29 in Tamil Nadu, 29 in Kerala and three in Goa.
9.20 The Special Central Assistance which is given for hill areas is 90 %grant and 10 % loan. This is in addition to normal State Plan and is not meant to replace activities under the State's normal Plan. Hence, States receiving funds under HADP are expected to prepare sub plans for designated hill areas indicating flows from both normal State Plan and Special 'Central Assistance. This is to ensure that the schemes are properly dovetailed and integrated with State Plan schemes. The actual utilisation of Special Central Assistance under HADP and WGDP State wise in the first three years of the Eighth Five Year Plan is at Annex - 9.9.
Western Ghats Development Programme 9.21 After the Eighth Plan started, evaluation of the Western Ghats Development Pro- gramme in the different States has been taken up. This has been completed for Tamil Nadu. This evaluation brings out that the overall im- pact of the WGDP in Tamil Nadu was less than expected because of inadequate resource allo- cation, lack of coordination among the imple- menting agencies of the various sectoral schemes and lack of community participation or awareness about the Programme among the local people.
9.22 Field work of evaluation of WGDP in Maharashtra has been completed and the re- port expected shortly. Evaluation in Karnataka has been commissioned and is in progress. Other State Governments namely Goa and Kerala, are being persuaded to undertake simi- lar evaluation studies in the near future.