Plan panel worried over Orissa's rising revenue gap

The 12th Finance Commission has expressed concern over "alarming" rise in Orissa's revenue and fiscal deficits and asked the state government to bring them under control.

The revenue deficit and fiscal deficit which came down to 3.6 per cent and 6.4 per cent respectively in 2002-03 are estimated to have gone up to 6.4 per cent and 11.8 per cent respectively in 2003-04, the chairman of the commission, C. Rangarajan said.

Rangarajan pointed this out during his interaction with chief minister Naveen Patnaik, cabinet ministers and senior bureaucrats here today.

The visit of the plan panel members to the state is in preparation of the commission's recommendations on devolution of funds.

Rangarajan said, the state's economy had grown at a much slower annual rate of 3.2 per cent at constant prices between 1998-2003 as against the country's economic growth rate of 5.4 per cent largely due to negative growth rate of the primary sector.

He assured that the commission will look into the special concerns, needs and the problems of the state while finalising its recommendations.

Talking to the newsmen, Rangarajan said, the chief minister had pleaded for larger devolution from the Centre, debt relief and enhanced calamity relief assistance.

On Orissa's demand for special category status, Rangarajan said, the finance commission does not make any distinction between one state and another. "We have a general formula under which poorer states receive larger allocation", he said.

Pointing out that the state government had succeeded in keeping the growth rate of revenue expenditure broadly in line with that of revenue receipts during the last five years, he said the total expenditure, nevertheless, exceeded revenue by as much as 35.5 per cent during 2002-03.

The expenditure on salary, pension and interest had remained as high as 95.1 per cent of the total revenue receipts in 2002-03, he said, adding that the measures taken by the state to contain the expenditure needed to be supplemented substantially.

The commission had advised the state government to pay attention to two inter-related areas "�expenditure compression particularly on the non-plan side and bringing down the overall debt to sustainable levels. The state could consider enacting legislation for containing the growth in debt as had been done in some other states.

In his submission before the commission, the chief minister said the fundamental disequilibrium in the state's finances could not be eliminated unless its debt problem was urgently and effectively addressed.

The build-up of the state's debt stock was primarily due to historical reasons and not due to any fiscal profligacy or any imprudent fiscal management on the government's part, he argued.

Pleading that a differential treat in case of severely indebted states like Orissa was warranted on rational economic logic and not for providing succor, he said a differential approach was well recognized even by multi-lateral institutions like World Bank and IMF which had led to highly indebted poor countries getting debt relief incentives.

Patnaik urged the commission to evolve a similar initiative to provide substantial debt relief to the heavily indebted but relatively less developed states like Orissa.

The chief minister also referred to grossly erroneous estimation of the state's committed expenditure and revenue by the 11th finance commission.

While the state's obligation for interest payment was underassessed by Rs 3,545 crore, the underestimation of pension payment liability was to the tune of 2,901 crore. Besides, the state's receipt from miscellaneous non-plan grant was pitched at Rs 1,057 crore without any substantial basis, he said.

Pointing out that the Centre had expressed its inability to provide any relief to correct this aberration, the chief minister pleaded with the commission to provide the state a supplementary grant to compensate the revenue losses it had to suffer purely on account of errors by the 11th Finance Commission.