Orissa Seeks Bank Aid For Financial Reforms
If the deal works out, Orissa will be the first state in the country and the second state in the world, after a province in Brazil, to revamp its financial sector with active guidance and help from the World Bank.
The Bank is learned to be keen on participating in the fiscal correction drive of the Orissa government and has submitted a draft report containing suggestions as to how financial discipline can be brought about.
These suggestions broadly fall under three heads:
Rationalisation of current expenditure through subsidy and cost curtailment.
Augmentation of state revenue through tax reforms and cost recovery.
Management of debt burden by retiring high cost debts through PSU disinvestment.
The Bank has also suggested an additional option of approaching the Centre for rescheduling Union loans to alleviate the debt problem. State chief minister J B Patnaik, who held a detailed discussion with the World Bank chief James D Wolfensohn, have assured the latters commitment to push ahead the financial reforms.
Patnaik also submitted a memorandum to Wolfensohn asking for a soft loan to help the state government reduce the current debt burden. He has also submitted a copy of the memorandum to Union finance minister P Chidambaram as the Bank assistance could only be routed through the Union government. Sources say Chidambaram is likely to take up the matter with Wolfensohn during his meeting with Wolfensohn in the capital.
Patnaik said the soft loan will mainly be used to repay some of the high interest loans, which is fast leading the state to a debt trap.
Official sources say the states total debt has mounted to about Rs 9,000 crore. A World Bank team, which visited the state early this year to conduct a detailed study of the states finances on the governments request and submitted its report in September, has put the debt burden at 40 per cent of the states GDP .
Pointing out that debt-servicing and interest payout at Rs 1,350 crore per annum was accounting for 31 per cent of the states own revenue, the report feared that if the current fiscal structure and composition is allowed to continue, the debt burden would mount to 50.4 per cent.