Banerjee spurns Rs17,900 cr financial assistance from Centre

September 5, 2012   ·   0 Comments

KOLKATA

West Bengal chief minister Mamata Banerjee has spurned central financial assistance to the tune of Rs. 17,900 crore for various infrastructure projects to step up pressure on the Union government to agree to the state’s demand for a moratorium on compulsory payments on its outstanding loans.

The state indebtedness exceeds Rs. 2 trillion and it currently pays around Rs. 25,000 crore a year on repayment of principal and interest. Banerjee’s demand for a three-year waiver on interest payment was not fulfilled by erstwhile finance minister Pranab Mukherjee. She continues to lobby the Union government for a moratorium.

Alongside, West Bengal is negotiating with the Asian Development Bank (ADB) for a 15-year loan of $200 million (around Rs. 1,118 crore today) to pursue development projects. It expects the loan to bear interest of 0.8-1%.

The terms of ADB’s proposed $200 million loan is still under discussion, according to an official at its Delhi office, who did not want to be identified. It could come with stringent conditions aimed at forcing the state to agree to a road map for fiscal consolidation, he said.

 June Gacutan, a spokesperson for ADB, declined to comment.

To be sure, the state would not have had to repay theRs. 17,900 crore that the Centre had offered to it for various development projects—these were to be grants. It included Rs. 6,000 crore offered for the development of backward regions under what is known as backward region grant fund (BRGF).

Key finance department officials said the state does not wish to receive any more “tied funds” such as those given under BRGF because it does not want the Centre to decide what developments it would pursue. These people did not want to be named.

The proposed loan from ADB, on the other hand, would not have any strings attached to it. “Of course, we can only use it to build infrastructure, and not for routine non-plan expenditure,” said one of them.

This isn’t the first time ADB is lending in the state—it had previously lent to the Kolkata Municipal Corporation on condition that it would shore up its revenue by imposing several new taxes.

The state’s other key reason for refusing “tied funding” is its inability to implement projects with central funding, according to the finance department officials cited above.

In 2011, the Centre committed to provide the state around Rs. 8,750 crore under BRGF, they said. Of this, the state received the first instalment of Rs. 2,000 crore in February this year, but the finance department has not been able to disburse most of it—around Rs. 1,400 crore—because the projects are delayed.

The state has to pay annual interest of 5% on such funds held back by the finance department, they said. Accepting more targeted funds from the Centre would have resulted in additional burden on the state exchequer.

The state’s public works department (PWD) is currently building five bridges and 92 roads covering over 1,800km, according to its chief engineer (roads) B. Konar.

“We are yet to complete these projects for which we have received financial assistance under BRGF,” he said. “Accepting more funds would have forced the state to build more roads and bridges, which we may not immediately need.”

A key official in the state’s health department also said the projects undertaken with central funds have not been completed and hence there was no question of accepting more money for similar projects. The official declined to be identified.

However, Firhad Hakim, the state’s minister for urban development and municipal affairs, said he wasn’t aware of the chief minister’s refusal to accept central assistance for development projects.

“My department recently received clearances for projects worth Rs. 300 crore to be implemented under JNNURM (Jawaharlal Nehru National Urban Renewal Mission),” Hakim said.

The state’s finance minister Amit Mitra wasn’t available for comment.

Rural development minister Subrata Mukherjee refused to comment. Had the central assistance been accepted, his department would have been tasked with spending most of the funds.

By Web Editor

Tags: assistance, Centre, department, development, Rs, state