Orissa for special debt relief scheme

Orissa has suggested a special debt relief scheme for the states where debt to Gross State Domestic Product (GSDP) ratio has shot up to sustainable level.

The state government has raised this issue in its memorandum to the twelfth finance commission (TFC).

Besides, chief minister Naveen Patnaik had also discussed the matter with prime minister Manmohan Singh and finance minister P. Chidambaram during his recent visit to the New Delhi.

The memorandum said that TFC should separately deal with highly indebted states, where the interest payment is more than 30 per cent of the total revenue and 50 per cent of the state's own revenue.

It said the commission should explore the possibility of writing off old debts, so that the states start with a clean slate, at least with respect to those loans where the interest rate is more than ten per cent.

Stating that Orissa is already in a debt trap, the document pointed out that state's total outstanding loan as on March 31, 2002 was Rs 24,272 crore, out of which the loan payable to the government of India was Rs 10,360 crore. The debt burden of the state is estimated to touch Rs 32,000 crore by the end of 2004-05.

The total debt constituted 61.2 per cent of the GSDP compared to an average of 30 per cent for other states. The memorandum said, the state's debt servicing liabilities during 2001-02 was Rs 3,689 crore, which constituted 52.34 per cent of the state's total revenue of Rs 7,048 crore and was 118 per cent of the state's own revenue of Rs 3139 crore.

It argued that the fiscal situation of the state is unlikely to improve without intervention of the Centre through a special financial package.

The memorandum also urged the Twelfth Finance Commission to rectify the injustice meted out to the state by the Eleventh Finance Commission (EFC).

The EFC had under-assessed the state's requirement on pension and interest payment by Rs 6,445.41 crore (interest Rs 3,544.83 crore and pension Rs 2,900.58 crore) and over-assessed miscellaneous non-plan grant during the award period by Rs 1060 crore.

The miscellaneous non-plan grant included modernization of police force, grant for civil defense and handloom subsidy. The state government had assessed such grant during the award period at Rs 99.03 crore.

The memorandum said, on account of under-assessment of expenditure liabilities on pension and interest payment and over assessment of non-plan miscellaneous grant, the state government has lost more than Rs 7,500 crore for the five year period from 2001-02 to 2004-05.

The state government has urged TFC to compensate such losses in a suitable manner.