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ADB loan: Kerala team leaves for Manila

By Roy Mathew

THIRUVANANTHAPURAM NOV. 14. An official team led by the Kerala Chief Secretary, N. Chandrasekharan Nair, left for Manila today for negotiations on the first tranche of loan from the Asian Development Bank (ADB) to the State.

The Chief Secretary is accompanied by the Principal Secretary (Finance), Sudha Pillai, and the Secretary for Modernising Government Programme (MGP), K.M. Abraham.

They will return on November 20, and the bank would be taking a decision on the loan by December.

The State is expecting a loan of about Rs. 1,800 crores as the first instalment for reforms and modernisation of Government services and restructuring of public sector units.

The Netherlands Government would be giving grants, which are being clubbed with the ADB loan, for social security measures including poverty alleviation and improvement of health infrastructure.

The loan and the grants would be routed through the Central Government as Additional Plan Assistance. The loan portion, which would be 70 per cent of the Assistance, will carry an interest of 11.5 per cent.

The Cabinet had earlier approved the reforms policy on the lines suggested by the ADB and the Central Government. Steps are being taken for privatisation of loss making public sector units and withdrawal of Government from commercial operations.

Though the Chief Minister, A.K. Antony, had promised that loan negotiations with the ADB would be transparent, the Government is yet to release all the details of the reforms policy being agreed to. It has issued orders on the MGP giving the target dates for various measures proposed. The details are yet to be approved by the Government, according to Mr. Antony. The MGP envisages transparency only at a marginal level.

It proposes to achieve fiscal sustainability by limiting expenditure and subsidies, legislation to cap Government guarantees and reduction of debt servicing costs to three per cent of the Gross State Domestic Product.

The MGP also proposes passing of full budget before March 31, early budget implementation with mid year review, limiting of supplementary demands for grants to two in a year, a Liability Management System and enactment of Public Finance Management Bill.

It suggests, among other things, introduction of user charges on identified services, study of the scope for levy of health and education cess, starting of pay clinics, legislation on rainwater harvesting, redeployment of protected teachers and contract appointment of teachers and doctors.

On the labour front, several measures are proposed for removal of labour market rigidities, including legislation for labour reforms.

Other proposals include establishment of Kerala Civil Service, revision of service rules and merit-based promotions.

These and policy frame work for better service delivery, result-based performance oriented public service and integrated planning policy formulation are proposed to be implemented only by 2006-2007.

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