State may seek fresh loan from World Bank

The Maharashtra government is set to workout a fresh proposal seeking a structural adjustment loan (SAL) from the World Bank (WB), after a proposal for such a facility submitted to the Union government in 2001 failed to pass the muster.

Reacting to reports that Union finance minister P Chidambarm declined to forward the SAL proposal to the World Bank, chief minister Vilasrao Deshmukh said: "The state government has not received any official response from the Union finance ministry on this yet."

He was reacting to a missive sent to Shiv Sena member of parliament Mohan Rawle where Chidambaram reportedly stated that the state government has failed to reign in its revenue deficit in the 2001-2004 period and hence its SAL proposal could not be forwarded to the World Bank.

A senior secretariat official told Business Standard: "Chidambaram is believed to have stated that the state government has failed (between 2000 to 2005) to reign in the revenue deficit while declining to forward the state's SAL proposal to the World Bank. In any case we are reworking the figures based on available facts in contemporary times. The state had approached the then National Democratic Alliance (NDA)-led government for the SAL in the wake of its worsening financial situation in 2001."

The official said while this outdated SAL proposal contained estimations of revenue generation anticipated by the state government after the SAL was released to it by the World Bank, the proposal failed to materialise causing a further stress upon the state's finances.

"Even the Planning Commission has directed Maharashtra to submit its SAL proposal to the Union government for forwarding to the World Bank, precisely in order to improve its financial situation. States that are fiscally constrained in particular seek the SAL that allows them adequate liquidity and flexibility to retire high-cost debt with cheaper loans. During the NDA regime at the Centre, Andhra Pradesh managed to get two tranches of SAL assistance from the World Bank, while Maharashtra was denied to raise cheap resources through the Bank's financing option," the official said.

A fresh SAL proposal containing details of current financial statistics of the state and its estimation of revenue generation over the next few years will have to be reworked and submitted to the Union government to be forwarded to the World Bank, he added.