Maharashtra faces tough battle for World Bank aid

Thursday, 26 December 2002, 08:00 Hrs
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MUMBAI: Poor financial management, tardy reforms and lack of political clout with the federal government may deprive Maharashtra of precious aid from the World Bank, officials fear.

Chief Minister Vilasrao Deshmukh's Democratic Front government has failed to carry out a number of reforms the World Bank had suggested, including privatisation of the Maharashtra State Electricity Board (MSEB), reduction in the number of employees and cutback on subsidies.

As a result, the state's case for funds from the Bank has weakened.

Maharashtra has been angling for assistance from the World Bank to upgrade MSEB and for other purposes.

Officials conceded the Bharatiya Janata Party (BJP)-led coalition government in New Delhi was unlikely to underwrite loans taken by the Maharashtra government led by its rival Congress party.

Maharashtra tried to obtain guarantees from the centre after Andhra Pradesh bagged a loan of 17 billion from the World Bank on the strength of central government guarantees last year. Andhra Pradesh's ruling Telugu Desam Party is an ally of the BJP.

Maharashtra is due to elect a new assembly in 2004. The BJP-Shiv Sena combine is the main opposition in this sprawling state.

The two opposition parties have mounted a major campaign across the state accusing the government of inept performance.

Earlier this year, the Maharashtra government was on the verge of exceeding its overdraft with the Reserve Bank of India (RBI), officials admitted. Though a crisis was averted, the government is still unable to pay contractors for civil works and subsidies for cotton and sugar farmers.

Maharashtra's fiscal deficit is in excess of 50 billion, finance department officials said. However, subsidies under various schemes, including provision of water, power and food to the underprivileged, is expected to exceed 59 billion by the end of the current financial year, they added.

The gradual phasing out of subsidies has resulted in a number of facilities like medical care for the poor and government-funded education to become costlier. However, stirs by farmers have forced the government to pay higher prices for agricultural produce.

The state government is blaming the recommendations of the 11th Finance Commission for the mess. The commission had recommended reducing the state's share in central funds by 56.2 billion over the next three years.

Officials said the state government's attempts to obtain a greater share of taxes mobilised by the centre from Maharashtra had failed. The centre collects taxes amounting to an estimated 90 billion annually from Maharashtra.

Source: IANS
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