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Centre sets up panel on states’ debt burden
Sarbjit Dhaliwal
Tribune News Service

Chandigarh, September 26
Bowing to the persistent demand of various states whose debt burden continues to mount, the Centre has set up a high-level committee under the chairmanship of the Union Finance Minister, Mr P. Chidambaram, to examine the issue and decide the relief to be provided.

The total debt burden of the states is around Rs 2,50,000 crore. In certain states such as Orissa, the debt burden is more than 50 per cent of the GDP of the state. Maharashtra is another state the debt burden of which is high. Punjab’s debt burden is also distressing.

The Punjab Finance Minister, Mr Surinder Singla, has been taken on this committee as a member. He is the only Finance Minister from the northern states to be included in the committee. The Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, is also its member. The other members are the Governor of the Reserve Bank of India, the Finance Ministers of Andhra Pradesh, Tamil Nadu, West Bengal and Chhattisgarh, the Secretary (Expenditure) and the Secretary (Economic Affairs), Union Ministry of Finance.

Informed sources said that almost all states had told the Prime Minister recently that even after the implementation of the recommendations of the 12th Finance Commission, the states had not got adequate debt relief. Under the recommendations, the rate of interest on certain Central Government loans was brought down to 7.5 per cent and the loan repayment period was staggered over the next 20 years.

However, as most of the states have got the maximum loan amount from the National Small Savings Fund, the Union Government continues to charge 9.5 per cent interest on the loan. Crying foul, the states had told the Prime Minister that such a high rate of interest was unjustified when various financial institutions offered loans at 7 or 7.5 per cent rate of interest. The states want that the interest rate on small savings loans should be brought down to provide relief from the debt burden.

The sources said the Prime Minister had asked Mr Chidambaram to examine the debt burden and decide the relief to be provided in the light of the submissions made by various states. The recommendations of the Central Fifth Pay Commission, which were accepted and implemented by various states, gave a crushing blow to the finances of most of these states.

Meanwhile, the Union Government has decided to send a high-level committee to Brazil, the UK and Canada to study the VAT system in these countries next month.

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