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'Revenue deficit not a matter of worry'

Q&A: Sunil Tatkare, FM, Maharashtra

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Sanjay Jog Mumbai
Last Updated : Jan 20 2013 | 12:41 AM IST

Maharashtra, reeling under a debt burden of Rs 1,85,801 crore, has been buoyed by an increase in tax revenues due to an uptick in the economy. State Finance Minister Sunil Tatkare believes the debt burden is sustainable and the state will better the national GDP figure in the next two years. In an interview with Sanjay Jog, Tatkare discusses his government’s strategy.

What is the current state of the debt burden?
The debt burden is sustainable as the borrowing is within the norms prescribed by the central government. There are no off-budget borrowings. All market borrowings are through the Reserve Bank of India and according to the permissions given by the Union finance ministry. For 2009-10 financial year, the central government allowed the state to borrow within the limit of 4 per cent of gross state domestic product (GSDP).

Our government borrrowed only 3.33 per cent. The debt burden should be compared to GSDP and not talked about in absolute numbers. The proportion of the total debt burden as compared to GSDP is 23.29 per cent by the end of 2009-10. This is well within the central government’s norms. All our debt and interest repayments are on schedule and the state government has not resorted to any overdraft facility during the last three years. This shows that the state’s debt burden is sustainable.

After three years of revenue surplus, the state is expected to have a revenue deficit of Rs 7,654 crore. What is your reaction?
The state government accepted most of the recommendations of the Sixth Pay Commission and thus the outgo on account of salary and pension increased substantially. The additional monthly burden on account of salary alone is Rs 700 crore. Since the revenue does not go up in that proportion, it results in a revenue deficit of the order. This cycle is repeated every 10 years as a result of the implementation of the recommendations of pay commissions.

It is normally seen that during the first three-four years (of implementing the pay commission recommendations), the state government experiences a revenue deficit. This also depends on the economic environment in the country. Hence, the revenue deficit is not a matter of worry. However, we have to ensure that further expenditure remains in check and revenue collections maintain their upward trend. This can be ensured by proper recovery and updating user charges.

You did not impose any fresh taxes. How will you manage the show?
During the last two years, there was an economic slowdown throughout the world. Maharashtra was not hit that badly but still its revenue resources came under pressure. The situation is improving and GDP growth in India will in all likelihood cross 8.5 per cent. Maharashtra is likely to even better this figure in the next two years.

With this, the revenue will continue to be buoyant. In our case, VAT (value-added tax) as well as receipts from the transport department showed a healthy trend this year, and this should help us meet our revenue targets without hurting the common man. The favourable recommendations of the 13th Finance Commission to which I dwelt with in my budget speech will also add to our resources. These factors will help us control the revenue deficit in the years to come. I am confident that Maharashtra will be able to fulfill all norms prescribed by the Central government.

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How did the government table the budget proposals without receiving any clearance for the annual plan from the Planning Commission?
The 13th Finance Commission recommendations were tabled before Parliament on February 25, 2010. The Finance Commission allotted substantial funds to the state government. Unless the Planning Commission studied the revised norms, it was probably not possible for it to fix dates for discussions with the state government. We have finalised the plan size at our level, based on our available resources, and the discussions with the Planning Commission are likely to take place in the second fortnight of April.

How is the government going to strengthen fiscal prudence?
Our objective is to keep wasteful expenditure in check, to ensure buoyancy in tax revenues by maintaining a taxpayer-friendly atmosphere, and to attract investors by ensuring an investor-friendly policy and quick clearances.

What are the major proposals for upgrading infrastructure in Maharashtra?
I dwelt with various infrastructure segments in my budget. For example, Rs 7,000 crore have been allotted to the water resources department. This will ensure early completion of pending irrigation projects and bring more land under irrigation, ensuring prosperity in the countryside. Similarly, through the Public Works Department and the build-operate-transfer route, a large network of state highways and important roads will be put in place. This will ensure faster transport of goods and passengers.

We have already aimed for a load shedding-free state by 2012, and substantial investments are being planned with 20 per cent equity participation by the state in various projects of generation, distribution and transmission companies. Huge investments are being made through the Mumbai Metropolitan Region Development Authority and the Maharashtra State Road Development Corporation in Mumbai as well as by City & Industrial Development Corporation in Navi Mumbai.

The state government is also contributing its mite towards the Mumbai Urban Transport Project I and II to ensure faster and more comfortable journey on Mumbai’s suburban local sector. The flyover on the eastern corridor in Mumbai will further ease traffic congestion in the north-south corridor.

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First Published: Mar 28 2010 | 12:36 AM IST

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