Expenditure controversies

Published : Nov 01, 1997 00:00 IST

The Finance Minister seems to be overwhelmed by a sense of frustration at growing evidence that his budgetary calculations are going askew. Meanwhile, the issue of ministerial complaints regarding the allocation of funds is coming to a head.


CONCERNS over the economic downturn have brought to the fore a curious ambivalence in official thinking - an urge to cut the fiscal deficit coexists uneasily with the compelling need to raise expenditure. At a recent meeting with representatives of business and industry, Prime Minister I.K. Gujral committed himself to an acceleration of spending programmes to pull the economy out of the recessionary trap into which it seems heading (see separate story). He underlined this resolve shortly afterwards at a Cabinet meeting, where Ministries that were not doing enough to meet spending targets were administered a stern reprimand.

Agriculture was one among six Ministries identified as tardy performers. Agriculture Minister Chaturanan Mishra, a political veteran from the Communist Party of India, was not present at the meeting, having earlier committed himself to participate in a Parliamentary Consultative Committee at Karnal, Haryana. On learning of what transpired at the Cabinet meeting, Mishra shot off an indignant letter to the Finance Minister, effectively reversing the onus for the sluggish progress of spending.

The figures that the Finance Ministry had relied on, said Mishra, were unrepresentative, since they were confined to the first quarter of the financial year, when Plan spending in most Ministries is just beginning to pick up momentum. Secondly, the Agriculture Ministry faced the more specific problem of having to channel most of its spending through the State governments, after obtaining detailed reports of funds utilisation for the earlier year. This posed an administrative barrier to increasing Plan spending in the early part of the year. Moreover, said Mishra, his Ministry could only sanction expenditure after it was convinced that the State government concerned could mobilise matching resources of a like quantum. The parlous financial condition of most State governments posed a severe handicap in this context, especially affecting the less prosperous States.

Mishra reminded Chidambaram that he had repeatedly urged him to address these problems and work out appropriate remedies. In addition, there were several programmes that the Agriculture Ministry had put forward, only to encounter the obstructive or at best indifferent attitude of Finance. Illustrative cases were a crop insurance scheme that had been sanctioned by the Cabinet during H.D. Deve Gowda's prime ministerial tenure but later vetoed by the Finance Ministry; a proposal to set up a chain of agricultural extension stations in districts that did not have access to them; a programme for market intervention to support the potato harvest; and a proposal for irrigation back-up in dryland farming areas.

Mishra was not inclined to allow the dispute to simmer for long in inter-ministerial seclusion. His irritation compounded by persistent reports in the press, Mishra wrote on October 17 to the Prime Minister, pointing to the inconsistencies between the assessment that was being foisted on him and the actual record. Foodgrain production had increased and procurement was in excess of the previous year's achievement despite the farm sector's misgivings about the prices offered. The dairy and fisheries industries too had showed substantial improvements in performance.

With most Chief Ministers being in broad approval of the performance of the Agriculture Ministry, Mishra confessed himself at a loss to appreciate the basis of the Prime Minister's assessment. Upset at the persistent media reports of prime ministerial displeasure, Mishra concluded with a request that he be relieved of his ministerial responsibilities. He would then ask his party to nominate somebody "more capable" to take up the job.

The Agriculture Minister was mollified by a telephonic intervention from Gujral, then on a tour of Punjab. The Prime Minister reportedly went to great lengths to reassure his colleague that he was in fact one of the best Ministers in the Cabinet. His sense of grievance assuaged, Mishra withdrew his resignation, but reaffirmed his expectation that the Finance Ministry would adopt a more thoughtful attitude towards the schemes he had proposed.

BY all accounts, the Finance Minister seems to have been overwhelmed by a sense of frustration at the growing evidence that his budgetary calculations are going askew. Madhu Dandavate, Deputy Chairman of the Planning Commission, was a partisan of Chaturanan Mishra's cause in the recent exchanges. The process of disbursement was such that it was the norm to have only about 16 per cent funds utilisation in the first quarter of the year, said Dandavate. It was unreasonable to expect a uniform level of funds utilisation in all sectors in the early part of the financial year, since every Ministry had its own distinct constraints.

Dandavate has a further grievance. After the Union Cabinet approved a 5 per cent cut in Plan expenditure for the year to accommodate the additional burden of the Central Government's wage bill, he felt that the revised spending priorities should have been fixed by the Planning Commission. But the Finance Ministry went ahead with decreeing an across-the-board cut, affecting all sectors equally. Dandavate saw this as highly irregular, particularly since it could disproportionately affect the social welfare sectors where the U.F. Government had taken on a commitment of additional expenditure.

The tensions with Mishra and Dandavate are of a pattern with various other fronts of growing inter-ministerial friction. Railway Minister Ram Vilas Paswan has for long been arguing for a heightened level of budgetary support for his sector. He feels that a higher ranking in budgetary priorities is merited on objective considerations of the centrality of the Railways' to economic performance. Confronted now with the additional obligations of the new wage deal in the Central Government, Paswan has had to resort to rather desperate expedients, like deferring certain categories of retirement benefits in order to effect a temporary saving.

Raghuvansh Prasad Singh, Minister of State for Food and Consumer Affairs, is another Minister who finds himself at continual odds with the expenditure priorities at Finance. He is particularly irked over the road blocks that the Finance Ministry has put in the way of his plans to expand the public distribution system of foodgrain. The reluctance to take on a higher burden of subsidies for foodgrain supply is a case of miscued priorities, says Raghuvansh Prasad, though his pleas have not made any material impact on the obduracy of the Finance Ministry.

Mishra's resignation may have been registered as a major perturbation in the story of the U.F. Government's rough passage, if it had not been overwhelmed shortly afterwards by the events in Uttar Pradesh. But even if the factional hostilities unleashed by Uttar Pradesh subside, in itself an unlikely eventuality, the resolution of basic dissonances on policy questions will remain an equally serious challenge for the U.F.

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