State's economy alarms Finance Commission

State's economy alarms Finance Commission
PRAFULLA MARPAKWAR

MUMBAI, JAN 22: The Democratic Front Government received a shot in the arm with the Chairman of the Eleventh Finance Commission, A M Khusro, stating that the health of the State's finance needs immediate corrective measures.Endorsing the scenario of State's economy brought out by the White Paper, Khusro stated that the current high level of deficits and the increasing debt liability required to be corrected to arrest the deteriorating fiscal situation.

During his interaction with Chief Minister Vilasrao Deshmukh and his cabinet colleagues, Khusro pointed out that during the last five years, the revenue deficit has risen to an alarming level, which stood at Rs 3926 crore in the current year, while the fiscal deficit was also equally high - Rs 7462 crore as compared to Rs 1657 crore in 1991-92.

Stressing the need to take immediate corrective measures to arrest the rise in debt, Khusro said the outstanding has been estimated at Rs 52570 core as on March 31, 2000 - nearly 48 per cent higher than outstanding debt at the end of March 1998. ``Due to such a sudden growth of deficit, the total debt service liability has grown to nearly Rs 14300 crore in the current year, which is 73 per cent of own revenue receipts,'' he remarked.

Though there is stringent criticism of the State's economy, the Congress-led Front government has welcomed the observations of Khusro, since they endorsed in toto the contents of the White Paper on economy it had published during the winter session of the State Legislature. ``We were criticised by the Sena-BJP alliance for coming out with the White Paper, but an economist of the stature of Khusro has endorsed our views,'' according to a senior cabinet member.

Khusro urged the Front Government to eliminate subsidy so that the funds generated, could be utilised for better purposes. ``An important area of revenue raising is the pricing of public utilities such as power, irrigation, public transport, water supply and sanitation. There is a need to eliminate subsidy in fixing the user charges,'' he added.

Khusro also asked the Chief Minister to closely examine he state-run public sector undertakings, since more than a dozen undertakings had eroded their paid up capital as the accumulated loss in these companies had exceeded the paid up capital. ``The Government should take steps to improve the performance of the MSRTC, with accumulated loss of Rs 254 crore and MSEB so as to have at least a minimum rate of return and to eliminate subsidy from the Government to them,'' he said.

The commission also expressed concern over the rapid growth of revenue expenditure, which increased from Rs 5504 crore in 1987-88 to Rs 32209 crore in the estimates of 1999-2000. Among non-plan revenue expenditure, the fastest growing item is interest payments, which has been growing steadily and has reached a level of Rs 5082 crore, accounting for 15.78 per cent of the total revenue expenditure in 1999-2000.

Secondly, the commission pointed out that there was a steady decline in both plan and capital expenditure during the last decade. The total plan expenditure as a percentage to total expenditure has decreased from 28.5 per cent in 1987-88 to 25.6 per cent 1997-98. The State has been achieving the plan targets till 1995-9. But in the subsequent years, the actual expenditure has been below the outlay.

Khusro said, given the Chief Minister's forecast, it is seen that the deficit on revenue account alone has been estimated at Rs 60011 crore, which was in spite of estimated transfer from the Centre of Rs 31643 crore in the form of share of taxes and plan and non-plan grants. ``This is a huge figure and it will be difficult to fill in such a high level deficit unless determined efforts are made by the State to raise more resources and curtail revenue expenditure,'' he added.