Bhopal: Stuck in a self-proclaimed cash crunch since coming to power in Madhya Pradesh in 2018, the Kamal Nath government has roped in Montek Singh Ahluwalia, a former close aide of ex-Prime Minister Manmohan Singh, to tide over the financial difficulties.
Ahluwalia, the former deputy chairperson of the Planning Commission, on Tuesday addressed a workshop organised by the state finance department on 'Alternative Finance for Projects' at the Minto Hall here. The gathering comprised ministers and top state officials.
In the changing scenario in view of the rising financial needs and fiscal limitation of states, rewriting the Fiscal Responsibility and Budget Management Act should be considered, said Ahluwalia, who is the author of 'Backstage: The Story Behind India's High Growth Years'.
There is a need to enact a law for public-private partnerships to overcome the budget constraints for socially important economic infrastructure projects, he said.
Ahluwalia said designing projects, making budget provisions for them and completing them within the available resources is a common practice across the world. The fact is that governments have limited financial resources for ambitious projects; they have many tasks, responsibilities, priorities and social obligations apart from economic infrastructure projects, he added.
As a result, the speed of projects slows down and starts lagging, he said, adding there is a need to think beyond the conventional approach of relying on budgetary resources. In such a situation, states look towards the private sector for assistance.
The private sector is fearful of risks and threats while governments are bound by the welfare principles beyond loss and profit, he added.
Since both have their limitations, there is a need for a law to work in cooperation between the two, he said.
He said that instead of managing finances for large economic infrastructural projects, the system of providing guarantee by the state should also be considered.
The governments should assume the role of a friend in managing the financial risks for the projects.
For instance, in order to deal with the ill effects of climate change, infrastructure projects of economic importance should be given a guarantee, he opined. These may include irrigation and water conservation projects, he added.
Ahluwalia said that considering the density of forest resources, MP can raise budget resources on its basis. This process can also be adopted for sector-specific dedicated infrastructure projects.
In his address, Chief Minister Kamal Nath said a larger budget is required to fulfill the aspirations of the youth of India -- this requires banks, states and private sectors to innovate and change themselves. Nath claimed that this year's Union Budget curtailed the budgetary provisions of the state by around Rs 14,000 crore.