The Hindu Business Line : Unspent funds with Govt not readily available

"Since the EG Fund is not an escrow account, it gets subsumed into the Consolidated Fund and is easy pickings for the Government. It has fallen an easy prey to the temptation."

Mumbai , March 18

FOR 30 years, the Maharashtra Government has been dipping into the pockets of the organised sector employees and surcharges on Sales Tax and Land Revenue to finance its Employment Guarantee Scheme (EGS).

And for long, the Government itself has been dipping into this corpus to fund its other populist schemes. According to sources, this is typical of a cash-starved Government with mounting debts that has not learnt to rein in its enthusiasm for profligate spending for over a decade.

By statute, the Employee Guarantee Fund meant exclusively for EGS can lend the resources but only for job generation. Such diversions have to be reimbursed within the subsequent fiscal.

According to official statistics, as much as Rs 4,516 crore of the fund to run the Employment Guarantee Scheme - much-lauded across the country and now a model for the National Employment Guarantee Programme - is unspent but "not readily available."

Another Rs 3,145 crore owed as a statutory obligation by the State has not been paid. That adds up to a tidy Rs 7,661 crore.

Under a statute approved in 1975, the Government has to match rupee for rupee the collections from Profession Tax of up to Rs 200 per month per organised sector employee plus surcharges on Sales Tax, Land Revenue, etc. The receipts by levies and unspent resources have to be kept in an EG Fund, implying it has to be readily available since it is a distress mitigation obligation.

But, as a former Finance Secretary says, "Since the EG Fund is not an escrow account, it gets subsumed into the Consolidated Fund and is easy pickings for the Government. It has fallen an easy prey to the temptation and did not even make a contribution between 2000-01 to 2002-03. Populism has driven the Finance Department to do this often."

However, statistics show that not all of the receipts get expended because in some years demand for EGS work is low. Sometimes, it is manageable with the levies alone without having to dip into the matching grant.

This unspent component makes the EG Fund a milch cow for the Finance Department which has to allocate scarce resources "on the whims of political bosses."

Despite this, job generation has not suffered, both according to sources and statistics.

Every year, between 2.81 crore and 53.52 crore of man-days of work for unskilled rural labour has been created.

On year-on-year basis, only ascending. So have the collections of revenue on this account. "The Government guarantees that EGS will not suffer for want of funds. Resources have always been found," an official said.

But the fact remains that the Rs 3,145 crore owed to the EG Fund would be made good over the next 10 years, according to a commitment made to the High Court by the State Government in response to a public interest litigation.

This underscores the precarious finances, the total public debt of the Government being in the vicinity of Rs 1,10,000 crore at the beginning of the current fiscal.

If only the funds were to be marshalled properly and deployed in a focused manner, a whole new chapter in broad-basing the programme to create more durable economic basis for job generation would be possible. Such a paradigm shift is under way where long-term projects to improve watersheds so that impact of future droughts is mitigated on a permanent basis.

Observers argue that this would pre-empt any scope for keeping funds unspent and curb the temptation to divert them.

Without such safe-staging, many percolation tanks - the mainstay of the EGS earlier - have disappeared and fair weather roads are in bad shape.

Past changes from that pattern including helping raise plantations on wastelands and sinking wells even on private farmlands.

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