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CHENNAI, May 10

The Assembly passed the Tamil Nadu Fiscal Responsibility Bill 2003 today, which makes it the responsibility of the State Government to ensure fiscal stability and sustainability.

The Bill, a commitment made by the Government in its budget proposal for 2003-04, aims for fiscal stability while increasing social and physical infrastructure and human development. This it hopes to achieve through generating revenue surplus, bringing down fiscal deficit, and prudent debt management by limiting borrowings, debts and deficits. The Government will set itself a multi-year rolling target for prescribed fiscal indicators. These include reaching a balance between revenue receipts and revenue expenditure and using capital receipts for generating assets.

By March 2007, the Government will reduce the ratio of revenue deficit to total revenue receipt to less than 5 per cent, reduce the ratio of fiscal deficit to estimated Gross State Domestic Product to a maximum of 2.5 per cent and cap outstanding risk weighted guarantees to 100 per cent of the total revenue receipts in the preceding year or at 10 per cent of the Gross State Domestic Product.

The Finance Minister, Mr C. Ponnaiyan, had mentioned in the budget speech that against the backdrop of the deteriorating fiscal situation and absence of fiscal reforms external funding agencies like the World Bank had moved away from Tamil Nadu.

However, with the initiatives by the State Government to restore fiscal well being, the World Bank has evinced interest in supporting development programmes. The State Government was looking to an economic restructuring loan with Rs 1,000 crore in the first tranche.

As a part of the restructure, the State Government is also looking at exiting manufacturing activities including the State-run and co-operative enterprises (like sugar and spinning mills) either through disinvestment along the lines of the Centre's disinvestment policy or by winding up enterprises that are beyond fiscal redemption.

In line with the fiscal reforms envisaged, the Assembly also passed legislations amending the Tamil Nadu Co-operative Societies Act, 1983. The amendments empowers the authorities concerned to take action including transferring the society's assets and liabilities to other registered co-operative societies or a company or a firm or a body. The objective is to clear the societies' dues to the banks and to recover the Government money invested in the societies.

However, the session came to a conclusion today with the Assembly adjourning sine die without the introduction of the legislation for shifting to a value-added tax regime.

The Finance Minister had said that the Government would enact the legislation that would see the State shifting over to a value-added tax regime. However, with the lack of consensus on all State Governments shifting over to the VAT regime and issues relating compensation for revenue loss, the legislation, the draft of which was made public recently, is still pending.

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