A cut in the the Plan size of government departments and re-prioritisation of projects have become imperative to weather the grave fiscal crisis triggered by the flood in the second successive year.
Local-self government institutions may be exempted from such a formal expenditure cut, but austerity measures would be in place soon to mop up resources to meet the swelling demand for rehabilitation and rebuilding.
Since a majority of the local bodies had already worked out the details of the projects proposed to be implemented in the current financial year and their execution are progressing, altering the projects may not be feasible.
Official sources told The Hindu that the State government would have to reset the priorities of the projects scheduled for various departments and defer the implementation of those that have either not been launched or did not have much exigency at present.
Impediments in funds transfer from the Centre, dip in tax collection within the State and the troubles thrown up by the alleged tardy implementation of the Goods and Services Tax have all added to the woes of the State. The flood in two successive years has only compounded its concerns and the sole option ahead is a Plan cut.
According to State Planning Board member K.N. Harilal, the government will soon have to take a call on the issue. Department Plans will have to be either phased out or slashed to meet the growing needs, especially in the wake of the flood.
“The Plan of local bodies may go untouched. It constitutes only 35% of the total allocation, but the resource squeeze may upset the payment of bills from the treasury and this is only a fallout of the poor flow of funds to the State exchequer. A decision on the quantum to be slashed and re-prioritisation may be taken up soon,” he said.
Tampering with the Centrally-sponsored schemes too may not augur well for the State. A decision to slash the matching grant of the State for such schemes may further complicate things for the future.
“The government will have to fervently pursue the demand for raising the annual borrowing limit with the Centre. Now Karnataka has demanded a solid assistance from the Centre and if it agrees, Kerala too has a case to seek for more,” Mr. Harilal said.
Still, a cut in Plan size was a foregone conclusion and a decision may be made soon, sources said.
