Meeting of the Finance Ministers
of BJP-ruled States

New Delhi - December 11, 2004

Joint Statement

A Conference of the Finance Ministers of BJP-ruled states (Gujarat, Jharkhand, Madhya Pradesh, Rajasthan, Chhattisgarh and Goa), along with Orissa, where the BJP is a coalition partner, was held in New Delhi today to discuss various issues relating to state finances. This was a follow-up on the two-day Conference of the Chief Ministers of BJP-ruled states, which was organized in September in furtherance of the Party's commitment to good governance, accelerated development and antyodaya (welfare of the poorest in society). It was inaugurated by Shri Jaswant Singh, former Union Finance Minister, and chaired by Shri Yashwant Sinha, also former Union Finance Minister and head of the 5-member Task Force on manifesto implementation.

Those who represented the states were: Shri Manohar Parrikar (Chief Minister of Goa, who also holds the finance portfolio), Shri Vajubhai Wala (Gujarat), Shri Raghavji (Madhya Pradesh), Shri Amar Agrawal (Chhattisgarh), Shri P.N. Singh (Jharkhand), Shri Veerendra Meena (MoS, Finance, Rajasthan) and Shri Manmohan Samal (Revenue Minister, Orissa).

Representatives of the CII and FICCI made presentations, followed by interaction with the participants.

The finance ministers gave an overview of the financial condition of the respective states. They noted that almost all the states, irrespective of the party or coalition in power, are facing financial difficulties. They highlighted the steps taken by them to ameliorate the financial mess inherited from the non-BJP governments. Collection of revenues has now improved. Some of the high-interest bearing central loans have been retired. Prudence is being exercised to restrict expenditure, particularly that which is unproductive in terms of economic or social benefit. They felt that substantial improvement in the fiscal health of states is possible primarily if the Centre shows responsiveness.

The following are the decisions taken at the end of the conference.

1. The ministers decided to strive to make BJP-ruled states models in fiscal management by enacting necessary legislations for fiscal responsibility and budget management. Budget would be presented on a fixed day (to be decided by each state) before the commencement of the next financial year. Action Taken Report would be submitted every year. State Economic Survey and Human Development Reports would be prepared annually.

2. The finance ministers strongly reiterated the demand made by the conference of BJP Chief Ministers that the states' share in central revenues be raised from the existing level of 29.5 percent to around 35 per cent, with an additional 5% allocated exclusively to Panchayati Raj Institutions. The finance ministers urged that the debt burden of states be lightened by granting a one-time settlement of the old high-cost loans. They also demanded that the states' share in service tax be raised to 50 per cent. States facing the problem of Left-Wing extremism should get special assistance on par with J&K and the North-East. States that have forest cover higher than the national average should get extra grants for forest conservation.

3. The ministers resolved to take further steps to augment revenue collection, mainly through enhanced efficiency in the processes of revenue collection and better compliance. In particular, it was decided to complete computerisation in all tax departments in a time-bound manner, as part of our broader commitment to E-Governance.

4. It was decided to ask the Centre to classify State loans in three categories:

a. Loans raised for meeting natural calamities should carry zero interest, with the Centre bearing the full interest burden.

b. There should be greater flexibility on the quantum of loans State Governments can raise for infrastructure development and other productive enterprises.

c. Loans for meeting day-to-day expenses of the Government should be strictly regulated and capped.

5. It was decided to review the various levies and fees prescribed in municipal and other loans with a view to abolishing all those which yield small amounts of revenue but entail inconvenience to people, such as licence fees for tongas and rickshaws, etc.

6. It was decided to abolish land revenue, which is a vestige of the past and currently fetches an inconsiderable amount to the government. At the same time, the decisions of the BJP CMs to computerise land records will be implemented with utmost urgency. That will ensure, inter-alia, that documents of tenancy can be easily obtained.

7. As a measure to enhance transparency, the ministers agreed that liquor and other excise vends will be sold by open competitive auction and will not be allotted by any subjective procedure. Procurement by government agencies above a certain amount would be by public tender.

8. Steps will be taken to manage government's assets in a business-like manner so that receipts therefrom are deployed on projects of social and economic benefit. A comprehensive audit of assets will be undertaken, by associating experts, within six months and this will be repeated periodically. The disposal of assets, whenever undertaken, will be by open and competitive bidding.

9. There was considerable discussion on improving the revenue base of municipal and panchayati raj bodies. Emphasis was laid on the potential of property tax and tax on professions. The basis of property tax should be shifted from rateable value to floor area, which would be transparent and provide ease of self-assessment. The professional tax ought to be realised in arrangement with the authorities responsible for recovery of income and service taxes.

10. There was discussion on the finances of state electricity boards and state road transport corporations, the accumulated and current losses of which constitute a major burden on the financial position of states. The ministers will ensure that full benefit is taken of the central scheme for securitisation of SEBs debts, which was introduced by the NDA government. Half-yearly targets will be established, and determined steps will be taken to achieve them, for reduction in transmission and distribution losses. Full use will also be made of the Central funds available under the Rural Electrification Scheme, Accelerated Power Development and Reforms Programme (APDRP), Accelerated Irrigation Benefit Programme (AIBP), Urban Reforms Fund (URF) and other such incentive-linked funds, as well as from the Centre's various demand-driven and performance-related schemes.

11. As regards road transportation, steps will be taken to improve the efficiency of state road corporations, especially in rural and remote areas, and public private partnership in this sector will be encouraged, where feasible.

12. The conference expressed concern over the visible slowdown, ever since the UPA government has assumed office at the Centre, in the implementation of major road construction projects such as the National Highway Development Project and the Pradhan Mantri Gram Sadak Yojana (PMGSY), which were launched by the Vajpayee government. It urged the Centre both to enhance the allocation of funds under the PMGSY and to expedite their disbursal.

13. It was decided that full support would be given for speedy and effective implementation of all policies, schemes and projects aimed at promoting agriculture, rural development, kisans' welfare, drinking water supply, bio-diesel production and poverty alleviation. Socio-economic development and empowerment of SCs, STs, OBCs and weaker sections of society will be a central objective of our economic policy. Priority will also be give to the promotion of employment-oriented enterprises. Removal of restrictions on non-agricultural use of rural lands will be quickly implemented in a manner that benefits farmers.

14. Government schemes and non-government initiatives aimed at promoting education, healthcare and other areas of human development will receive all possible support. The Centre should take full responsibility for funding Sarva Shiksha Abhiyan and the Mid-Day Meal Scheme.

15. It was decided to further step up support to Self-Help Groups in every village and urban slum in order to make SHGs into a people's movement. SHGs would be facilitated to access greater funds from the banking system. Women's SHGs would be given special assistance.

16. It was decided that BJP governments should identify viable projects for borrowing from domestic financial institutions. For this, setting up of SPVs and other policy reforms to increase viability of projects shall be undertaken. Budgetary resources shall be allocated mainly for socially necessary and commercially less viable development projects.

17. The ministers discussed measures to further improve the investment climate for private and foreign investments in their states. The emphasis will be on relaxing the regulatory framework. Setting up of Special Economic Zones and Agri Export Zones will be promoted. In this connection, they had the benefit of presentations made by CII and FICCI.

18. Vigorous steps will be taken to promote investments and public-private partnerships in irrigation, roads, electricity, housing, urban development, health and education. A nodal agency will be created for promoting public-private partnerships and for putting in place an enabling legal framework for the same. Our governments will enhance capabilities for project preparation, by enlisting involvement of experts, for seeking funds from multilateral agencies and financial institutions.

19. A critical review will be made of state PSUs. Appropriate steps will be taken to restructure PSUs to function efficiently and profitably and due autonomy will be given to them. These steps could include disinvestment or conversion into public-private partnerships. The interests of employees will be duly protected.