Govt to plea before Finance Commission

Orissa government proposes to plead before the 12th Finance Commission for writing off a part of the Central government loan to ease out state's interest payment burden.

The interest payment liability has reached unmanageable proportions with the payout being Rs 2885.55 crore in 2002-03 which constituted 75 per cent of the state's own revenue and 35 per cent of the state's total revenue.

According to a memorandum being prepared by the state government for submission to the 12th Finance Commission, because of limited resource base the state is required to take up developmental work by resorting to borrowing on a larger scale from year to year.

The total debt outstanding as on March 31, 2003 is Rs 27733.99 crore which constituted 63.07 per cent of the gross state domestic product and 338.72 per cent of the total revenue including state's own tax and non-tax revenue, share in central taxes and grants-in-aid.

The total debt servicing liability of Rs 3550.52 crore (interest Rs 2885.55 crore plus principal Rs 664.97 crore) constituted 81 per cent of the gross loan of Rs 4399.78 crore incurred during 2002-03 and 43 per cent of the state's total revenue receipt of Rs 8187.81 crore.

In 2001-02, the total loan received from the government of India was Rs 1851.43 crore but the state government had to pay Rs 2123.63 crore (principal Rs 837.09 crore plus interest Rs 12 86.54 crore) and there was reverse flow to government of India by Rs 272.20 crore.

In 2002-03, the total loan received from the Centre was Rs 2383.75 crore (excluding one time medium term loan of Rs 692.00 crore) and the state government had to pay back Rs 1754.79 crore (principal Rs 456.85 crore plus interest Rs 1297.94 crore) leaving the balance Rs 628.96 crore for development work.

The state government has to face frequent ways and means problem. Out of 365 days, the state government was on ways and means position for 169 days and in overdraft for 189 days, totalling to 358 days during 2002-03. During 2001-02, it was 364 out of 365 days.

Sources in the state finance department said Orissa's fervent plea for debt write off may not cut ice with the Finance Commission as the latter is not in favour of such leniency fearing it will give wrong signal to those who are making reckless borrowing.

"Writing off debt will give a message that there is no rewarded for fiscal discipline and resource efforts", they added.