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Financial crunch: Centre-states clash looms over cut in interest rates on small savings

Union Finance Minister Yashwant Sinha is likely to convene a meeting of the finance ministers of states in New Delhi soon to discuss reduction in interest rates on small savings and increase of states' share in central taxes.

Official sources said in Calcutta today that during the recently concluded Inter-State Council meeting, Prime Minister Atal Bihari Vajpayee had asked Sinha to convene the meeting of the state finance ministers without further delay.

West Bengal Finance Minister Asim Dasgupta said most of the state governments were likely to face financial crunch at the beginning of the next fiscal because of certain faulty policies of the Centre.

''April is going to be the cruellest month for the state governments for they have to meet the burden of pay revision effected by the Centre and followed by most of the states,'' Dr Dasgupta said.

He said though the Centre had earlier taken a decision to increase the states' share of Central taxes, it was not even in a position to release a part on ad hoc basis.

He said the states had also urged the Centre to sanction a special ways and means advance from the Reserve Bank of India with nominal interest and a moratorium on repayment.

He criticised the Centre for reduction in the interest rate on small savings and said the Union finance minister was obsessed with fiscal deficit. ''Since the states are entitled to get 75 per cent of small savings as loans, the Centre should pull it out of the Budget and make it a corpus to avoid the problems of growing fiscal deficit,'' he added.

UNI

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