The Hindu Business Line : Plan panel to work out debt relief measures

Dr C. Rangarajan, Chairman, Twelfth Finance Commission (left), with Mr K. C. Pant, Deputy Chairman, Planning Commission, in the Capital on Friday. — Ramesh Sharma

New Delhi , May 7

THE Planning Commission is working out a comprehensive debt relief package to States in order to alleviate their burgeoning debt burden particularly at a time when several State Governments had exhausted their revenue receipts in meeting interest liability, wages and pensions.

The Planning Commission Deputy Chairman, Mr K.C. Pant, indicated this immediately after he held consultations with the Twelfth Finance Commission Chairman, Dr C. Rangarajan, here. He said the Finance Commission was fully seized of the debt burden problems afflicting the States.

Though Dr Rangarajan did not disclose the deliberations he had with the Plan panel, he hinted that the Report of the Finance Commission, which is to be presented to the Government by July, 2004 would be delayed due to the elections. The process of visiting States and having detailed discussions with them on the problems plaguing them had been impeded, as the States were busy preparing for the elections, he said.

Mr Pant told presspersons later that the 8.1 per cent GDP growth for the economy in 2003-04 is indicative of the possibility of hitting the average 8 per cent growth target set forth for the Tenth Plan in the remaining two years by aiming at a higher economic growth. "With the visible buoyancy in the economy, there is no room for scepticism," he added.

He said the system of quarterly review of monitoring the performance of the States had paid off as distinct improvements could be detected in their functioning.

Mr Pant also did not agree with the view that better performing States in terms of resource mobilisation and social indicators were being penalised on Central plan assistance as the existing formula was tilted in favour of ironing out regional imbalances and helping non-performing States with no disincentives. He said the existing allocation of Central Plan assistance to States is "a transparent process that in no way handicaps any States".

Officials in the Plan panel contend that the options being bandied about for reducing the overwhelming debt burden of States range from waiver of outstanding loans, restructuring the loan-grant combination, enhanced budgetary support to the States to raising the ceiling on State borrowings. Yet another option is to reduce the rate of interest on Central loans to States.

However Mr Pant hastened to clarify that in any relief package to reduce the State debt burden, the potential impact of such a package on Central finances would be carefully considered in order to keep the Central government fiscal deficit under leash.