A STITCH IN TIME: PROVISION AND PROMISE

Come State or Local Body elections and media reports of nonutilisation of budgeted funds spring into profuse prominence. Audit reports of hundreds and even thousands of crores lying ‘unspent’, ‘unutilised’ and even irregularly retained in panchayat, municipal and State accounts make for sensational headlines. Funds for essential requirements of infrastructure and services, roads, drainage, schools, hospitals, pensions, student scholarships, disability grants and even public safety allocations, despite specific budget provisions in each instance, go undisbursed or unutilised; hence audit’s ire. Where resources are scarce and there is a crying need for these things, how can this happen? On the other hand, when popular agitations force the pace, governments often respond with munificent extra allocations to cater to the demand. Since the legislature has obviously not budgeted fully for these, even under the ‘contingency’ provisions, where will this money come from?

The history of our modern colonial period and post-colonial arrangements in ‘public finance’ provides some useful insights. In preIndependence India, while money guzzlers like agriculture, education, public health and local self-government were made ‘Transferred’ subjects for administration by elected provincial governments, law and order, armed forces, police, currency and finance and the like were retained as ‘Reserved’ subjects for direct control by the British Governors assisted by the civil services. Simultaneously, the more promising and elastic sources of revenue, income tax, customs duties etc. remained in the ‘Reserved’ list with some lower yielding revenues and cesses being ‘Transferred’ to the elected provincial governments. The foundations of the ‘restricted resources large liabilities’ regime in State finances had been squarely laid.

Free India did see some of the earlier ‘Reserved’ subjects like law and order being placed in the ‘State List’ but the complaint of being left with woefully inadequate revenue sources to meet developmental aspirations in key ‘State List’ sectors like health, education and social welfare remained. While successive Central and State level Finance Commissions have sought to reduce this ‘gap’ for the states and local bodies respectively, the recipients of these dispensations are anything but satisfied. Basically, they see the system as being akin to schoolyard bullying; the ‘Senior’ school, (the Centre), bullies the ‘Middle’ school, (the States), who in turn lord it over local body ‘Juniors’. Thus the ‘restricted revenue large liabilities’ regime continues unabated with the ‘Big Brother’ Centre, or State, as may be, tightly regulating the flow of even the promised funds to suit its own contingencies and convenience, even as uncertain and inelastic revenues render the ‘junior’ partner’s financial position even more precarious.

Responding to the volatility and vulnerability of State finances, the RBI, (Reserve Bank of India), has long provided for a system of ways and means advances culminating in an overdraft (OD) limit facility to help states tide over their cash flow problems. The essential takeaway from all this however is that if the OD limit is breached, payments from that state’s account can be stopped, triggering a financial emergency. The hapless cashstrapped states, near overwhelmed by their perpetual income- liability gap, very often hover dangerously close to their OD limits. In such a scenario, the release of budgeted funds may have little to do with the logic of planned budgetary expenditure and all to do with the OD contingency of the day.

Of what value is a budget provision under such circumstances? Regretfully, it becomes merely an expression of pious legislative intent. The ‘Budget’, as approved by the legislature, is launched into the stormy seas of happen-chance and contingency from ‘day one’ of its tumultuous annual voyage. While text book procedures speak demurely of one mid-term ‘revised estimates’, (RE), exercise, the harsh reality is that RE adjustments continue adhoc throughout the financial year, accelerating to a near chaotic frenzy during its closing weeks. The frequent and often overwhelming natural and administrative contingencies inherent in State Government functioning, law and order and disaster relief operations to name but a few, has the Finance Department (FD) mandarins scurrying to find sources from where funds can be diverted to meet the immediate crisis. Some of this can come from carefully ‘overprovisioned’ outlays like ‘salaries’ which cater for all sanctioned posts for the full year, (never mind the 40% vacancy position), but in the end, the ‘urgent’ overpowers the ‘important’ and sometimes, even the legally imperative, like timely contribution to pension funds. It’s like a scramble to cover all parts of a corpse with a short blanket; yank it over the head and the feet are exposed and vice-versa!

While non-submission of past utilisation-certificates, (UCs), can hold up fund release, increasingly complex tendering procedures, expiating for past sins, further slows down fund use. This is also where the ‘public morals’ paradox kicks in. A departmental store manager can well decide to allow a little shoplifting rather than employ expensive security but a departmental head in public service cannot recommend such logic without being tarred ‘corrupt’! Finally, a political exigency can become the proverbial ‘last straw’ with committed projects and resources being diverted to meet compelling necessities elsewhere. With the perception of promise, not its realisation, as the driving force, often the diverted funds end up unutilised!

The airline business has been described by a veteran as one of “putting bums on seats”. Once the flight takes off, the opportunity is lost forever. With budgets also, non-utilisation is a permanent loss, in ‘opportunity’ terms. So, while you get broken potholed roads and overflowing drains and garbage in your outlying colony, the VVIP road between the airport and the city-centre gets its sixth successive tarmac upgrade using diverted funds! Faced with this dilemma of ensuring the proverbial ‘stitch in time’, or even the ‘nine’ it takes later, more and more common folk are adopting an aggressive ‘don’t philosophise, just organise’ strategy. If you become the greater problem than others competing for the same resources, then the powers that be are more likely to address your need first. Therein lies the lesson in this tale of ephemeral political promises and banal budget provisions.

THE VIEWS EXPRESSED BY THE AUTHOR ARE PERSONAL

Anirban Mukhopadhaya, Retd. IAS officer