Planning Commission Deputy Chairman Montek Singh Ahluwalia on Saturday pitched for a cut in subsidies and higher revenue generation to facilitate increased funding of priority areas such as education, health, infrastructure and skill development during the 12th Plan (2012-17).

Listing out the priorities and challenges before the nation for the five-year period, in his address at the meeting of the National Development Council (NDC), Mr. Ahluwalia pointed out that apart from reducing the gap between revenue and expenditure, there was a need to increase the gross budgetary support for overall development.

Mr. Ahluwalia stressed that higher resources could be mobilised for the priority areas “only if the Centre can raise the ratio of tax revenues to GDP [gross domestic product] and cut untargeted subsidies...” and in this regard, the States also need to play their part. “The States, too, must reduce fiscal deficit since the debt position has become very difficult in many States. The Centre's ability to provide resources is limited... the States have to aim at much better revenue performance and exercise progressive control over subsidies,” he said.

The Plan panel deputy chief said the power situation in the country was “deeply distressing” as distribution losses stood pegged at about Rs. 70,000 crore. Funded by the banking system, these losses could not be treated as indefinite “evergreen” loans, he said.

Water management

Dubbing water management another priority area, Mr. Ahluwalia said that with demand for water outstripping supply, it was leading to serious shortages and “unsustainable” withdrawal of groundwater.

“There are steps we can take on the supply side to increase the amount of water that is effectively available, and this should be a priority both for resource allocation and implementation in the 12th Plan,” he said while noting that the real solution would be in increased efficiency of water use as the scope for increasing supply is limited.

With the 12th Plan Approach calling for a comprehensive re-look at the policy on water, including changes in laws and empowering regulatory authorities, Mr. Ahluwalia said: “Water use in agriculture can be cut to half with known technology... Water availability can be improved by treating sewage water before it enters our fresh water system… Future assistance under Accelerated Irrigation Benefit Programme should be linked to moves which ensure more rational use of water.”

Harping on the need for improving implementation of Plan schemes, Mr. Ahluwalia said: “One of the problems that is frequently mentioned is the proliferation of Centrally-sponsored schemes and the need for streamlining them and giving greater flexibility in implementation. Strengthening capacity at the local level is often a critical constraint. We would be happy to implement these recommendations if they find favour generally.”

Wooing investment

Mr. Ahluwalia also urged the States to create an economic environment that would support the efforts of farmers and entrepreneurs. “How attractive the business and investment environment is in a State will determine much of the outcome in terms of the flow of investment to the State and the growth of both output and employment,” he said.

Alongside, asking States to take steps to mobilise their own resources, the Plan panel deputy chief pointed out in this regard that early implementation of the proposed Goods and Services Tax would contribute in a major way by raising more revenue for the Centre as well as States. Besides, it would also create a single market in the country by removing distortions in the existing indirect tax regime.

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