The Hindu : Meet to solve States' fiscal problems soon

Online edition of India's National Newspaper
Friday, Aug 02, 2002

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Meet to solve States' fiscal problems soon

By Our Special Correspondent

NEW DELHI AUG. 1. The Union Finance Minister, Jaswant Singh, today assured the Rajya Sabha that the Government would attempt to solve the finance problems of various States by September-end.

Assuring a consensus, he said the Centre would interact with the State Finance Ministers to resolve the issue of high cost of debt and other problems. The Prime Minister would then convene a meeting of Chief Ministers, he said while replying to a short duration discussion on the deterioration of the finances of the States and their unsustainable debt burden.

He asserted that a solution would be found to the deep fiscal mess all the States were in and said that this could not be done overnight. On charges of partiality, he said the Centre would not be biased but would take an objective view of each State's financial position.

Listing the difficulties involved, he said some States were spending as much as three-fourths of their income on salaries, wages and interest payment, leaving very little for developmental work. Some streamlining would come about once value-added tax (VAT) was introduced. The chairman of the committee on VAT, Asim Dasgupta, had said that 98 per cent of the panel's work was over. Once a firm decision was taken on the implementation of VAT, the subject could be introduced at the Finance Ministers' meeting. He assured Left party members that their resentment on the limits placed by the Reserve Bank on access to finance by the States will also be discussed.

However, Mr. Singh indicated that the States would have to take some tough steps to increase their income by referring to the low tax to GDP ratio and declining capital investment `mortgaging' their future.

Opening the proceedings, the former Finance Minister, Pranab Mukherjee, made a strong case for taking firm measures to deal with the situation as the implementation of the Fifth Pay Commission's recommendations had devastated the country's finances. He advised the Centre to take a hard look at its fiscal management by curbing the tendency to borrow freely and said it had failed to match budget estimates for the past five successive years.

P. G. Narayanan (AIADMK) said that the Tamil Nadu Chief Minister, Jayalalithaa, had sought Rs. 3,500 crores as a one-time grant because the ``treasury was empty'' when she assumed office.

Recently, the State Government had sought Rs. 750 crores to provide succour to the drought-affected. The Eleventh Finance Commission had reduced the State's share in Central finances from 6.6 per cent to 5.3 per cent.

C. Ramachandraiah (TDP) said but for the ``scrapping of a Joint Secretary's post in some Ministries,'' no serious step was taken towards downsizing. Nilotpal Basu (CPI-M) referred to the concentration of powers in the Central Government to raise or allocate resources.

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