Panel for state package set up

NEW DELHI, MAR 20: The National Development Council (NDC) sub-committee has decided to set up an official committee under the chairmanshi...

NEW DELHI, MAR 20: The National Development Council (NDC) sub-committee has decided to set up an official committee under the chairmanship of Planning Commission secretary to work out state-specific reform package for streamlining finances in the medium-term and eliminating revenue deficit in five years.

Briefing newsmen about the meeting here on Saturday, finance secretary Vijay Kelkar said that official committee look into four options identified by the sub-panel and suggested fiscal consolidation programmes accordingly for individual states.

The options identified by the NDC sub-panel for sort out the fiscal problems of the states include advance tax devolution during 1999-2000; a special ways and means accommodation for the states; additional market borrowings; and a limited rescheduling of loan repayments by the states. By and large, he said, the members agreed that efforts should be made to eliminate revenue deficit in the five-year period.

Story continues below this ad

This decision was taken at the meeting of thesub-committee held under the chairmanship of finance minister Yashwant Sinha. The minister in his opening remarks underlined the need for improving tax efforts and reducing revenue expenditure. Among others Rajasthan chief minister and finance ministers of Tamil Nadu, Gujarat, Uttar Pradesh, Jammu and Kashmir, Assam and West Bengal attended the meeting.

In addition, Kelkar added, the government has also decided to reduce the interest rate for on-lending small savings funds to the states to 13.5 per cent from 14 per cent. Earlier, the government lowered the interest rate from 14.5 per cent to 14 per cent after it decided to reduce interest rates on small savings schemes. The new interest rate of 13.5 per cent will come into effect from April 1, 1999. Kelkar further pointed out that the official committee to be set up under the chairmanship of secretary, Planning Commission would include secretary expenditure, the finance secretary of the state concerned and other representatives of Planning Commission andfinance ministry. The committee to work out state-wise reform package and the package of immediate assistance would complete the exercise within eight weeks, said finance secretary.

He said that pending completion of the exercise, "some immediate relief by way of advance tax devolution will be provided to the states during April/May". Usually, the devolution of the proceeds of central excise and income tax start from May and June, respectively every fiscal.

Also, Kelkar added that extension of overdraft by the RBI by a specified number of days would be examined by the central bank in consultation with the state. In addition, a separate package would be worked out for special category states. The finance secretary also clarified that the nature and the scope of package, "will necessarily depend on the specific ways and means and structural problems faced by each state, addressing both immediate financial needs and medium term sustainability eliminating revenue deficits.