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Speech  of Shri Om Prakash Chautala, Chief Minister, Haryana
49th N.D.C. Meeting
, 1st September 2001, Vigyan Bhavan, New Delhi.


Hon'ble Prime Minister Shri Vajpayee Ji, respected Deputy Chairman, Planning Commission Shri K.C. Pant Ji, Esteemed Central Ministers, Governors/Lt. Governors, fellow Chief Ministers and other distinguished participants !

I feel privileged for the opportunity to speak in this session of the National Development Council. Today's deliberations are going to be crucial for the development of the country as we are about to launch upon our first five-year plan of the new millenium after having gone through nearly fifty years of plan development in the last century. I would, therefore, call upon all the participants to evolve an approach that will consolidate our achievements so far and address specifically to areas where we have lagged behind.

2. Our country has a vast potential of growth. But the rate of growth we have been experiencing so far has been quite low compared to other nations which had embarked on the path of development almost around the time we did. In the last 5-year plan, we had identified development of economic infrastructure as the key area for catalyzing overall growth. Accordingly, resource allocation by the Centre as well as the States reflected a priority towards core infrastructure. However, one can not say that the infrastructure development targets that we envisaged have been fully attained. Let alone being at par with developed nations, we are yet to provide basic infrastructure of the standard provided in many Asian countries. The answer to this lies in the overall resource limitation and the competing demands from nonproductive expenditures.

3. I find that the draft approach to the Tenth Five-Year Plan has a marked emphasis on attaining quantified targets in social development indicators. There is no denying the fact that our social development indicators need to be improved for sustaining long-term development. However, in view of the present tow benchmarks, these targets require a very substantial resource allocation. This also means a shift of resources from economic infrastructure. However, it would not do to take up either economic infrastructure or social development, because we have to take up the two together. As the resource position limits allocations on all fronts, I urge greater deliberation on the modalities of funding these competing priorities. We must assign more meaningful role to private capita! for development of economic infrastructure while Governments take on the social development programmes. The statutory framework and political consensus for the role of the private sector must be evolved in this regard.

4. At the moment, we stand at a critical juncture. Liberalized trade regime in post-WTO era requires our agricultural and industrial products to be competitive in the world market. For some years now, Government policies and programmes have been trying to make our industrial production competitive in the world market. But nothing concrete has been done on the agriculture front to align our agriculture production to global marketability. In this context, I welcome the suggestion made in the Approach Paper for the increased infusion of capital in the agriculture sector. I would also call for a more deliberate and forceful plan of action for crop diversification and enhanced agriculture productivity. We in Haryana share the legacy of Chaudhary Devi Lal who had throughout his life championed the cause of farmers and sought to provide policy initiatives that provided farmers a non-discriminatory environment, and we work to carry his vision forward.

5. I would also strongly plead for a better and more judicious utilization of ail available National Water Resources and for inter-basis transfer of river waters from surplus States to the deficit ones. Water conservation in all possible ways should become a part of our national policy. On our part, I am happy to inform the House that we have set up a 'Water Conservation Mission’ in which 19 Departments of the State Government have been involved to launch a collective Action Plan for Water Management in the State.

6. The approach paper rightly emphasizes the need for greater dispersal of purchasing power, which alone can help sustain steady growth. As an over-whelming majority of people in India are engaged in agriculture and related activities, a more competitive and productive agriculture sector can usher in better returns to this majority. Our policies and programmes must revolve around developing a robust and supportive infrastructure for agriculture. Therefore, our priorities should be to put in place an equitable credit structure, re-oriented agricultural extension network, post-harvest marketing and pricing mechanism as well as incentives for agro processing and value addition. The minimum support prices for various crops, including crops other than paddy and wheat; should be announced well in advance on a 5 year period basis so that it encourages diversification of crops in a desired manner.

7. Rural unemployment is becoming a cause of concern as the rank of rural unemployed is registering a steady increase. There is need to focus on this area by encouraging entrepreneurship in smalt industry as well as service sector to take root in rural areas, in this context, I welcome the initiative of the Prime Minister in announcing a programme with a large outlay of Rs 10,000 crore for providing employment opportunities to the poorest of the rural poor. However, I would like to point out that some States and regions face difficulties in implementing the rural development programmes sponsored by the Central Government as these programmes, by and large, carry rigid conditionalities that do not allow variations in implementation in view of local conditions. I will suggest that centrally sponsored rural development programmes should be allowed to be tailored by States to suit their local situations.

8. Decentralized Procurement of foodgrains has been advocated as an option in the Approach Paper and it has been suggested that the surplus States should make their own arrangement for disposing of their surplus produce to the needy States. I find it hard to accept this suggestion of decentralized foodgrains procurement by States. This has the potential of creating unhealthy competition among surplus States. The State agencies may not be in a position to coordinate deficit assessment and regulate import/export of surplus foodgrains. Ideally speaking, a Central agency would be better placed to ensure macro-management of supplies from surplus to deficit regions. The Central Government should not shy away from its responsibilities to reform the functioning of FCI. The FCI must make itself more efficient and should discharge its functions without unduly burdening the Central Government. As long as adequate crop diversification is not attained, the present system of procurement of foodgrains has to continue. I, therefore, urge that the FCI should be made to take immediate steps to create sufficient warehousing capacities in the surplus States on modern lines with latest techniques and accelerate foodgrain movement from these areas. It should also fund setting up of warehouses by State agencies.

9. It has been rightly pointed out in the Approach Paper that the 10th Plan should be drawn up as a reform plan rather than a resource Plan. The potentials created in various sectors during the last decade or so as a result of large public investments have not been fully utilized due to various reasons. These unutilized capacities must be made to deliver during the 10th Plan period. We must make our public sector units perform and keep all options including privatization, open to achieve this end.

10. In the Approach Paper, emphasis has been laid on improving the financial health of the State Electricity Boards and also improving their efficiency through positive policy decisions. Haryana has already taken most of the steps proposed in the Approach Paper and our SEB has been unbundled. Regarding privatization of distribution function, I feel a rigidly uniform model may not suit the requirement of all the States and each State has to work out its own strategy. As the experience of privatization of distribution has been rather mixed, Haryana is considering various options to decide the modalities for disinvestment of distribution functions.

11. The problem of the large outstanding dues of SEBs has been referred to in the Approach Paper. The issue has been addressed to by the scheme formulated on the basis of Dr. Ahluwalia Committee. I would like to draw the attention of this august House towards an unfair aspect of the functioning of the Central Power Supply Undertakings (CPSUs). These CPSUs were established to meet the power requirement of the country by creating generation assets. They were set up to help and to serve the States and not to earn huge profits. The tariff presently being charged by the CPSUs is much higher than the actual cost and, in the process, the SEBs have been burdened with extra costs. The tariff applied by the CPSUs should not be worked out in the same manner as the IPPs (independent Power Producers). As State Governments have so far been burdened with irrational costs, I would request the Government of India that surcharge asked for by CPSUs on delayed payment should be fully waived off.

12. As for the criterion for allocation of funds under the Rural Poverty Alleviation Programme, we agree with the report of the N.D.C. sub-committee to continue with the present criterion. However, I would suggest that at the time of revision of this criteria on the basis of the latest estimates of poverty, at least 20 per cent of the total funds available under the programmes should be set apart as an incentive fund to be devolved on the basis of the performance of States in reducing rural poverty.

13. I agree with the view of the Planning Commission that the number of the centrally sponsored schemes should be curtailed. But this should not lead to a reduction in the total quantum of financial assistance to the States by way of CSS. The Central Ministries should preferably have a bouquet of schemes from which the States can choose according to their own priorities. The States would then be free to devise their own guidelines suitable to local conditions for implementing such schemes. The Government of India should prepare a special CSS to fight the problem of degraded lands and soils which some States are facing at present.

14. Sir, I would now like to draw your attention to the revised Gadgil Formula for Central Plan Assistance to the States, which is in operation since 1991. There is need to restructure this formula. The weightage given to the income criteria deserves to be reduced to the minimum so that efforts of the better performing States are duly recognised and they do not get penalised. We have no objection to the continuance of the performance criteria but it should also reflect performance in social indicators like provision of safe drinking water, electricity, rural road network and social security measures.

15. I welcome the move for inclusion of Uttaranchal in the list of special category States for plan assistance. I hope that this State will embark on the path of development in a vigorous manner. The composition of assistance to non-special category States in the form of 70% as loan and 30% as grant also needs to be changed as it has resulted in large scale indebtedness of the States to the Centre. The burden of interest and loan repayment on the States has become unbearable and it now eats away a major portion of States' resources. It is already in the notice of the Central Government that the revenue expenditure component of the Plan in almost ail the States has increased to over 50%. I would, therefore, propose that Central Plan Assistance to non-special category States should be provided in the ratio of 50:50 as loan and as grant. This will contain the debt burden of the States and would also release more resources for planned development.

16. An allied issue is that of devolution of resources to the States under the Finance Commission dispensations. Over the years, these devolutions are becoming increasingly unfavourable to the better performing States. The Award of the 11th Finance Commission has worsened the situation. Haryana's share in total tax devolution to the States has decreased from 1.238% under the 10th Finance Commission Award to 0.944% under the Eleventh Finance Commission Award resulting in a denial of over Rs1100 crore during 2000-05. We request the Government of India to compensate the State through some special assistance. We are of the view that the Finance Commission's dispensations should be such that they reward the better performing States rather than penalize them.

17. The States borrow from the Centre and other financial institutions like NABARD, LIC, HUDCO etc. mainly for creating and improving their economic and social infrastructure such as power, roads, irrigation and water supply works etc. These projects have a long gestation period and some of these have no significant financial returns. The interest rates being charged by these financial institutions are very high and the States are being treated like commercial enterprises. The States are co-partners with the Government of India in the development and welfare of the nation and, therefore, the rates of interest charged should be of a moderate order. Presently, interest rates on NABARD loans are 10.5 percent while HUDCO charges 13.5% on its loans. Surprisingly, the Government of India itself charges 12% rate of interest on all ways and means advances and other loans. This interest regime has today become quite unjustified and needs to be rationalized. I call for a special fund for infrastructure development, with the minimum possible interest rate and a 20 years payback period with 5 year's moratorium.

18. Small Savings loan is an important source of funding of State plan and large scale efforts are made by the States in mobilising small savings deposits. We need larger resources from this source to finance our infrastructure projects. We appreciate the decision of the Central Government whereby the share of the States has been increased from 75% to 80% and the lending rate reduced from 13.5% to 12.5% with effect from 15th January, 2000. Still our long standing demand of converting all small savings loans into loans in perpetuity has not been accepted so far. We urge that these loans be treated as loans in perpetuity and only interest thereon should be required to be paid.

19. On our part, we recognize the need for better fiscal management. Haryana Government has initiated certain long-term fiscal consolidation measures for containing expenditure, augmenting revenues and restructuring and disinvestment of the PSUs etc. We are also in favour of recovering the user charges wherever possible and have already taken some steps in that direction. The State Government has also decided to create a State Economic Renewal Fund for this purpose. The State Government will contribute a certain percentage of its current revenues to this Fund and use it for financing new initiatives for fiscal correction, administrative restructuring and for supplementing infrastructure development efforts. I would request the Government of India to make a one time contribution of Rs 200 crore to this Fund.

20. I would also like to avail of this opportunity here to remind the Central Government that Haryana had suffered a financial loss of about Rs 2650 crore on account of terrorist activities in the Northern region. No compensation has been given to Haryana, while Punjab has been adequately compensated. Haryana incurred an additional expenditure of Rs 650 crore to strengthen the public security measures to contain the fallout of terrorism. We also suffered revenue loss of over Rs 2000 crore due to diversion of trade from Haryana and disruption of transport services. Consequently, we had to resort to larger borrowings from the Central Government as well as other financial institutions. As on 31 st March, 2000, Central Government loans of Rs 5767.15 crore were outstanding against Haryana. The repayment liability of these loans is estimated to be about Rs 1399 crore during the period 2000-05. f would request the Central Government to reschedule these loans and to defer the repayment liability upto 31st March, 2005 so that we get some leeway to restore our pace of development especially in the key areas of social and economic infrastructure.

21. The target date for introducing VAT in the country is 1st April, 2002, which is too close considering the need to put in place additional infrastructure and a modernized tax collection system. An extensive programme will also be needed to educate the dealers. All this would put considerable strain on the resources of the States. Further, it is apprehended that the introduction of VAT in place of the present system of sales tax may result in revenue loss to the State in the first year i.e. 2002-2003, which will be the transition year The proposed scheme of compensation fund envisaged to help the States should, therefore, be put into operation before April, 2002. I feel that the compensatory measures like taxation of services and levy of excise duty on some more items may not be very helpful as there is a limited scope for such levies in Haryana, as the major share of the State's Domestic Product comes from agriculture. Receipts from manufacturing sector are also bound to come down with the proposed gradual reduction in the Central Sales Tax and also given the fact that the manufacturing sector is yet to recover from the opening up of the economy.

I would, therefore, request the Centre to provide adequate financial assistance to the State for taking advance steps for introduction of VAT. We welcome the suggestion of setting up a Compensation Fund to support the States on introduction of VAT.

22. I have been told that about Rs 285 crore are collected annually from Haryana's consumers as fuel cess by the Government of India. Out of this amount, the existing formula of distribution of diesel cess allocated a meagre amount only about Rs 80 crore to Haryana during 2001 -2002. I request you, Sir, that this devolution to the State should be made more equitable on the basis of actual realisation of cess from each State. Here I want to mention that though Haryana has largely achieved rural connectivity through a network of roads but the maintenance of these roads requires huge expenditure as most of these roads are in a very bad shape.

23. During the last decade or so, the traffic intensity on the national highways running through the State has increased manifold resulting in serious traffic bottlenecks. I would request the Government of India to take up the following projects urgently for easing traffic situation on these highways :

  1. Fly-over at Badarpur on Delhi-Faridabad Road (National Highway No. 2)
  2. Elevated highway at Panipat (National Highway -1)
  3. 8-laning of Delhi-Gurgaon stretch and Mehrauli - Gurgaon Road (National Highway - 8).
  4. 4-laning of Delhi-Bahadurgarh Road (National Highway-10)

In spite of plans, no effective steps have been taken for counter balancing Delhi as the hub of economic activity. All the traffic on these highways goes to the national capital and the Central Government, therefore, has to take steps to reduce congestion on these highways while they pass through Haryana.

24. The NCR Planning Board has prepared a fiscal plan for the development of National Capital Region. Under this plan, the concerned Central Ministries i.e. Ministries of Railways, Surface Transport, Communication etc. were asked to prepare their subcomponent plans for the National Capital Region for the development of core infrastructure. Except the Ministry of Telecommunication, no other Ministry has prepared/implemented any sub-component plan for this region. I would request the Government of India to direct the concerned Ministries to make suitable provisions for their projects in the National Capital Region in the form of a sub-component plan.

25. The high crime rate in Delhi has its fallout in the neighbouring districts of Haryana in the National Capital Region. In order to tackle this problem, the State has to raise its level of policing in these areas. While Delhi has one policeman for a population of 250, Haryana has one policeman for every 700 persons. The State requires huge funds for strengthening/ modernizing its police force in these areas for tackling the menace. ! request the Government of India to provide special assistance to the State for this purpose. This will help in containing crime in Delhi as well.

Hon'ble Prime Minister, Sir, the objective of achieving "growth with equity and social justice" as expounded in the Approach Paper is very laudable and I support in principle all the initiatives suggested therein for fighting poverty and unemployment and for improving the quality of life for our poor people. It is necessary that the formulation and implementation of the schemes for the 10th Plan should be done in such a way that the benefits reach all sections of the society especially the vulnerable sections. Haryana has always been in the fore-front in ensuring welfare of all sections of society like farmers, labourers and the rural and the urban poor. We would like to keep up our efforts in years to come. With these words, I broadly endorse the recommendations contained in the Approach Paper for the 10th Five Year Plan. I thank you for giving me this opportunity to share my views with this august gathering.

Jai Hind!