The States want the Centre to relax norms regarding using money accumulated in funds such as Consolidated Sinking Fund (CSF) and the Building and Other Construction Workers’ Welfare Cess Fund (BoCWWCF).

According to an RBI Bulletin, the CSF has over ₹1.25 lakh crore as on December 31, 2019. Similarly, according to a Parliamentary question, all the States and Union Territories together collected nearly ₹31,000 crore under BoCWWCF till March 31, 2019.

States are looking for all possible means to collect resources as their revenue sources have been drying up and there is no possibility of much improvement in the situation at least in the first six months (April-September) of the current fiscal. West Bengal Finance Minister Amit Mitra has been repeatedly writing to the Union Finance Minister Nirmala Sitharaman to allow the use of accumulated interest on the Consolidated Sinking Fund. Deputy Chief Minister and Finance Minister of Bihar, Sushil Modi, advocated use of not just the Consolidated Sinking Fund but also urged to change the norm for use of BoCWWCF.

The Building and Other Construction Workers (Regulation of Employment and Conditions of Services) Act, 1996 prescribes use of cess collected only for the welfare of building and other construction workers. Here the big issue is that number of registered workers is much less as compared to the actually employed, putting large chunk of money unutilised. “We feel that law could be amended to allow use of fund not just for building and construction workers but other workers,” Modi said while adding that daily wage workers across all the activities have been affected and need support.

‘Stop-gap arrangement’

DK Pant, Chief Economist with India Ratings and Research, said CSF is mainly for amortisation of debt. This is one of the buffers available to State governments for servicing their liabilities. It is a fund through which some financial discipline is being insured. However, “at the time when States’ revenues are choked because of very low level of economic activities, this can be a stop-gap arrangement till the time economic activities are backed to normal,” he said.

CSF was set up in 1999-2000 by the RBI to meet redemption of market loans of the States. Initially, 11 States — Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Goa, Maharashtra, Meghalaya, Mizoram, Tripura, Uttaranchal and West Bengal — set up sinking funds. Later, the 12th Finance Commission (2005-10) recommended that all States should have sinking funds for amortisation of all loans, including loans from banks, liabilities on account of NSSF (National Small Saving Fund), etc. The fund should be maintained outside the consolidated fund of the States and the public account and should not be used for any other purpose, except for redemption of loans.

As per the scheme, State governments could contribute 1-3 per cent of the outstanding market loans each year to the Fund. The Fund is administered by the Central Accounts Section of RBI Nagpur.

As on December 31, barring Uttar Pradesh, Madhya Pradesh, Rajashthan, Jharkhand, Himachal Pradesh and Jammu & Kashmir (now a UT), all States have CSF. Maharashtra led the list with corpus of ₹37,252 crore in CSF, followed by Gujarat with ₹13,004 crore, Odisha with ₹12,759 crore, West Bengal with ₹10,503 crore and Bihar with ₹7,524 crore.

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