With the Centre under pressure to reduce its market borrowings under the Fiscal Responsibility and Budget Management Act, it is scouting for external assistance for Prime Minister Manmohan Singh's Bharat Nirman programme.
The government was likely to approach the World Bank for loans to fund Bharat Nirman, which aims at improving irrigation, drinking water supply, roads, housing, electrification and telephone connectivity in rural areas, senior officials told Business Standard.
The other option proposed by the Planning Commission is to relax the provisions of the FRBM Act though the finance ministry is against the idea.
"The FRBM targets are coming up every time the question of funding any social sector programme comes up. However, even loans will raise the deficit. There is no way out for the government but to relax the target, if it wants to invest in this segment," said an official in the Planning Commission.
The programme, which had been estimated to cost Rs 1,74,000 crore (Rs 1740 billion) over the next five years, cannot be funded entirely from the Budget, officials said. The government has allocated an additional Rs 25,000 crore (Rs 250 billion) for social sector programmes during the current financial year.
As per initial estimates drawn up by the ministries concerned, an additional Rs 10,000 crore (Rs 100 billion) would be required to meet the targets set for irrigation, rural drinking water supply and rural roads. Telecom and rural housing targets could be met through the existing allocation of funds.
The Planning Commission has been asked to prepare rough cost estimates and prepare a project report for multilateral assistance.
The National Committee on rural infrastructure, headed by the Prime Minister and consisting of Finance Minister P Chidambaram, Deputy Chairman Planning Commission Montek Singh Ahluwalia, Agriculture Minister Sharad Pawar and Rural Development Minister Raghuvansh Prasad Singh, among others, will meet on 9 June to discuss the fund requirements.
