It may be no walk in the garden for the new crop of leaders taking the reins of local bodies after this poll. The throw-ups of a sharp shortfall in the State government’s Plan resource realisation, and the fixing of unrealistic Plan sizes, are set to cascade down on devolution of funds to local bodies.
A latest Plan resource review of the Finance Department has found that the realisation rate in 2013-14 fell significantly short of the estimates. Against a target to mobilise Rs.17,000 crore, the government could mop up only Rs.15,018 crore.
The scenario repeated in 2014-15 too, but the fund devolution to local governments was based on the estimated resources.
The review warns against the government tendency to fix unrealistic Plan sizes and also hinge fund devolution rates to local bodies on the basis of such erratic assessments. This could critically impact the Plan projects of the State government as well as local bodies, and also make cash management unsustainable.
Unless the government makes a realistic assessment of Plan resources, the fiscal health of things may even deteriorate to a grave crisis of the kind that hit Kerala between 1997-98 and 2003-04.
The review reminds of the gravity of the crisis when the State’s finances witnessed an outgrowth of revenue expenditure and a simultaneous fall in revenue.
The Plan sizes fixed during the period became unsustainable due to low revenue realisation and the high expenditure. The net outcome was a huge gap in Plan resources.
The reforms initiated during 2001-06 to put the house in order and recover from the crisis were too harsh. The government was forced to enforce restrictions on payments from the treasury and this reflected in the spending of local bodies too.
The Cabinet, in the wake of a similar situation last year, had put in place a series of reforms to contain its expenses and restrict revenue expenditure. But a majority of the reforms implemented had to be diluted due to political pressure.
