The Telegraph
Since 1st March, 1999
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Centre crores to help state, partly: Asim

Calcutta, Sept. 24: Finance minister Asim Dasgupta today said the Rs 878-crore mid-term loan from the Centre would only partly help the state government in battling the financial crunch and would not provide a permanent solution.

The loan, on an interest of 7 to 8 per cent, had a moratorium of three years on the principal and was the outcome of discussions at an earlier meeting of the high power committee to assess fiscal problems of states.

“We have received the funds as a special ways and means loan. At the committee’s meeting, the focal point of our discussions was that the states should get emergency loans with low interest from the Reserve Bank of India, just like it provides to the Centre. However, this is not the first time the state is getting a mid-term loan,” said Dasgupta.

Following the recommendations of the Fifth Pay Commission, the state government had to shoulder the burden of increased pay packets of its employees. “We had requested the Centre to share some of the financial burden, but this problem was not addressed,” Dasgupta said.

The RBI has sanctioned Rs 100 crore to help the government procure enough rice, wheat and sugar for supply through the public distribution system during the festival season.

Explaining the financial crisis, officials said the expenditure of the government has increased sharply on account of the revisions in pay and allowances of government employees, teachers and non-teaching staff of state-aided educational institutions, employees of local bodies and statutory authorities.

Given the inelasticity of the state government’s own tax revenues, such a sharp increase in expenditure cannot be met by the normal growth in revenue.

A section of the government feels that the drastic measures it is now undertaking should have been taken earlier. “The Left Front government had always kept an eye on the vote-bank. The government was aware of this financial mess. But they went on revising the salaries of the employees,” they said.

Citing an example of the government’s imprudence with its finances, an official said even when Accor Asia-Pacific — the French firm that earlier wanted to take over Great Eastern Hotel — was negotiating, pay packets of the hotel’s employees were hiked following the pay commission’s recommendations. “This forced the French company to back out but the government continued pay the enhanced salaries. The government should be more judicious in its fiscal management and emphasise more on revenue earnings,” an official said.

The other major reason behind the funds crunch, finance officials pointed out, is the September 2000 floods.

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