Plan panel mulls package to reduce states146; debts

The Planning Commission is devising a comprehensive package for bringing states out of the debt trap.In a meeting with Twelfth Finance Commi...

The Planning Commission is devising a comprehensive package for bringing states out of the debt trap.

In a meeting with Twelfth Finance Commission chairman C. Rangarajan, Planning Commission Deputy Chairman K.C. Pant discussed various options of reducing the debt burden of states which includes waiver of part of the outstanding loans, reworking the loan-grant ratio as prescribed in the Gadgil-Mukherjee formula for budgetary support to states and raising the ceiling on market borrowings.

The total outstanding debt of states till March 31 is Rs 8,00,000 crore. Of this, the amount owed to the Centre is Rs 3,00,000 crore. Small savings account for Rs 1,33,000 crore, providend fund and others account for Rs 1,33,000 crore and loans from banks another Rs 2,12,000 crore.

The amount owed by states to the Centre in the form of interest repayment is Rs 31,500 crore. The gross fiscal deficit of states as percentage of Plan expenditure rose sharply between the Eighth 1992-97 and the Ninth Plan 1997-2002. Punjab8217;s GFD as a percentage of plan expenditure increased from 113.1 to 153.1 while that of West Bengal and UP increased from 96.6 and 94 respectively to 148.1 and 121.6.

According to sources, the Commission was contemplating changing the loan-grant ratio in the Gadgil-Mukherjee formula for giving budgetary support to states from the present 70:30 to 30:30.

Rangarajan said the report of the Twelfth Finance Commisison will be delayed by a few months due to the elections. He said that only 16 states could be visited till now and it would take an additional two-three months to complete the process. Pant said the Finance Commission was concerned about the growing debt burden of states and was likely to address the problem.