States & #39; Gross Fiscal Deficit May Drop

The Reserve Bank of India (RBI) expects the finances of state governments to improve this fiscal on the back of various initiatives taken.

"The combined gross fiscal deficit of the states is expected to decline to 3.8 per cent of the gross domestic product from 4.3 per cent in the revised estimates for 2000-01," the apex bank said in its annual report for 2000-01.

The state governments' initiatives include the setting up of a consolidated sinking fund (CSF) for retiring public debt, forming an expenditure review or reforms committee to enforce Budget discipline and improve expenditure management, and the establishment of a guarantee redemption fund (GRF) to take care of contingent liabilities.

States such as Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Haryana, Maharashtra, Mizoram, Nagaland and west Bengal have taken initiatives to set up CSFs.

Goa has proposed to form a GRF, while Assam has already imposed a ceiling on governments' guarantees against loans and other form of debt-servicing sought by public sector units.

Punjab has established a public expenditure reforms commission and public sector disinvestment panel. Himachal Pradesh plans to rationalise posts and voluntary retirement scheme for state government employees.

State governments have focused on better mobilisation of resources through the reduction and simplification of taxes. They have already agreed to introduce an uniform sales tax.

State governments have also taken initiatives to meet the needs of the potentially productive sectors -- social and economic infrastructure. The states have set up infrastructure development funds (IDFs) which will be used to provide necessary counterpart resources to attract private investment.

Steps have also been taken to restructure the public sector. A few states have signed memorandum of understandings with the central government for power sector reforms and improve the financial viability of their electricity boards.

Many states are in the process of setting up state electricity regulatory commissions for tariff rationalisation.