Date:26/02/2005 URL: http://www.thehindubusinessline.com/2005/02/26/stories/2005022602610400.htm

Back States swapped high-cost loans of Rs 92,444 cr till Dec

Our Bureau

New Delhi , Feb. 25

STATE Governments have swapped Rs 92,444 crore out of the Rs 1,00,000 crore-odd high cost loans taken from the Centre bearing coupon of 13 per cent and above as at end-December 2004.

According to the Economic Survey, during 2004-05 alone (till December 2004), high cost debt totalling Rs 34,085 crore has been swapped through market borrowings of Rs 13,781 crore and loans against small savings of Rs 20,304 crore contracted at much lower rates.

"The process of swapping high cost debt under the scheme is complete in respect of 20 States," the survey has said.

According to the survey, the Twelfth Finance Commission (TFC) made "far-reaching recommendations" to further restructure State finances.

It mooted consolidation of all Central loans contracted till March 2004 and outstanding as on March 31, 2005, amounting to Rs 1,28,795 crore and rescheduling these for a fresh 20-year term at an interest rate of 7.5 per cent. This is, however, subject to the States concerned enacting respective fiscal responsibility legislations.

The commission also proposed introduction of a complete debt write-off scheme for States, which would be linked to reduction of their revenue deficits.

Under this scheme, repayments due from 2005-06 to 2009-10 on Central loans contracted up to March 31, 2004 will be eligible for total write-off. The Centre would also not act as an intermediary for future lending to States, except in the case of weak States, which are unable to raise funds on their own from the market.