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Address by Shri Vilasrao Deshmukh, Chief Minister, Maharashtra
49th N.D.C. Meeting, 1st September 2001, Vigyan Bhavan, New Delhi.


Hon'ble Prime Minister, The Deputy Chairman of the Planning Commission, Union Ministers, Chief Ministers, Distinguished Member of the National Development Council, Dignitaries and Friends

I am very happy to participate in this important meeting of the National Development Council (NDC) to place our views on the agenda items placed before this August Assembly. The most important item for consideration is the Approach Paper to the 10th Five Year Plan. At the outset, I would like to compliment the Planning Commission for preparing a very valuable document, which takes stock of the status of the economy at the national level as well as in the various States, the shortcomings and challenges which we face at this juncture and the various options which are available to us to chart our future course of developmental efforts. This document deserves serious consideration by all of us gathered here.

2. During the 9th Five Year Plan the country has seen many ups and downs. Maharashtra also has been no exception. The momentum of growth, which was created at the beginning of the 9th Five Year Plan appears to have been lost as we approach the end of the 9th Plan. In Maharashtra a major impediment was the recurrence of drought in three out of five years of this Plan period, which affected State's economy quite adversely. The growth momentum has also been arrested by the inability of the infrastructure sector to keep pace with the requirements of speedy economic growth. It is urgently necessary that, at this point of time, we take a hard look at the impediments which are required to be tackled to smoothen the transition of the economy from a state dominated, public sector oriented system to a market-oriented, consumer friendly, open and private sector facilitating economy.

Overview of the 9th Plan performance

3. I am glad to say that the State will achieve the financial objectives set for the 9th Five Year Plan. The draft 9th Five Year Plan outlay is Rs. 45,125 crore and we are likely to achieve expenditure of nearly Rs. 49,000 crore which is 108.59 per cnet of the plan outlay. I am happy to state that in a number of sectors, we have made good progress like irrigation, electricity generation, soil and water conservation, drinking water supply, education, maternity and child health, etc. We have also fulfilled our targets for additional resource mobilisation. We, however, have noted that a large part of the plan investment has taken place from borrowings that greatly exceeded the original plan stipulations.

Our Vision

4. We have prepared a Vision for ourselves to be achieved by the year 2005 wherein we would like to set before us a target of 9 per cent growth rate in SDP per year. Maharashtra has already demonstrated its capacity to grow at more than 7 per cent and therefore achieving an additional 2 per cent growth rate is well within our capacity. The success on the population front, we recognise, has not been satisfactory in Maharashtra. We still continue to grow at more than 2 per cent per annum, which is above the national average. The reduction in the population growth needs to be accelerated.

Need for Consensus

5. Mr. Chairman, it is important that there is consensus among political parties on major economic issues particularly the core issues associated with the second phase of reforms. Fortunately, political parties of different hues are in power in different states and at the Centre. The perception regarding the need for these reforms do not vary widely. A concerted effort must be made to create consensus among the political parties, utilising the forum of NDC. Among other things, at the centre of this consensus is the need to adopt measures to improve work culture, need for simplification of rules and procedures, sale or divestment of non-strategic PSUs to release locked up public funds and for carrying out comprehensive labour reforms.

We agree with the document that the days of omnipresent government in the lives of the citizens must come to an end, mainly because of the severe financial stringency the governments are facing. Greater role has to be played by the private sector and social organisations in management of various affairs concerning the lives of the citizens. The focus of states will have to shift to the many areas of the social sector where private investment and initiative are still not forthcoming.

10th Plan Objectives

6. The 10th Plan seeks to achieve the objective of 8 per cent growth over the plan period rising from 6.7 per cent in 2002-03 to 9.2 per cent in the year 2006-07. This is surely a quantum jump and needs very serious consideration. The Planning commission document highlights various measures, which are required to be taken to achieve this growth rate. In Maharashtra, we feel, we have the potential to achieve this growth rate. We agree that large part of this growth has to come from improvements in efficiency in both public and private sectors, increased investments in the private sector and better utilisation of the existing investments. Examples of inefficient use of resources particularly in the public domain, can be found in abundance. Unless an ambitious target of growth is kept the resources for whole of the nation will not be mobilised to the extent required to lift the country to a higher growth trajectory, which is absolutely necessary to speedily reduce the level of poverty in the country.

I am happy to state that Maharashtra has made good progress in the field of literacy but serious problems remain in the field of nutrition, gender empowerment and gender gap. Wide disparities also exist in access to education and health services in different parts of the State, particularly in the tribal and hilly areas-This we propose to address as a priority issue during the 10th Plan period. Inadequacy of infrastructure for communication and access to various services still pose a serious problem in the tribal areas. We feel that during the 10th Plan period greater emphasis should be on strengthening and upgradation of existing institutions and infrastructure like roads, minor irrigation, rural electrification, health facilities and agriculture infrastructure. Mr. Chairman, we generally agree with the monitorable targets, which have been kept at the national level. We agree that as a national commitment we should strive to—

  1. reduce poverty by 5 per cent by 2007, achieve hundred per cent enrolment in primary education and retention for five years by 2003 and 2007 respectively,
  2. reduce gender gap in literacy by at least 50 per cent,
  3. supply sustained potable drinking water to all villages and,

d.      provide gainful employment to the additional labour force.

We would like to undertake an exercise keeping in view these national objectives and our performance to set our own specific targets. We agree that priority should be given to the sectors which that have high employment potential. We feel that besides the sectors identified in the Approach Paper, Information Technology should also receive special attention, since it has got high employment potential.

Financial Issues

7. Mr. Chairman, we share the concern expressed in the Approach Paper in regard to the deteriorating fiscal health of both States and the Centre. Restoring the financial health of States must receive top most priority. For this purpose, an agreed agenda may have to be prepared and implemented by all concerned. We accept the need to regulate guarantees given by the State Governments and also feel that some kind of ceiling needs to be prescribed. Enacting a Fiscal Responsibility Legislation by the states incorporating, inter alia, provision for regulating guarantees may be considered. I would take this opportunity to plead that a standing institutional mechanism should be in place to ensure Inter-State and Centre-State co-ordination on matters such as wage policy, issues pertaining to tax / tax incentives etc. The Empowered Committee of Finance Minister constituted for addressing issues related to Value Added Tax (VAT) could be converted into a Standing Committee and be authorised to deal with such issues as well. We have already taken steps to reduce the strength of government employees and made arrangements for their redeployment. We also agree, in principal, that a review of on going projects of different Departments/Ministries should be carried out and available resources in the 10th Plan should be earmarked for completing incomplete projects. Some kind of moratorium for taking up new projects may be accepted in the initial years of the 10th Plan.

Sectoral Issues

8. The Approach Paper discusses a number of major sectoral policy issues. We are in agreement with most of the suggestions made in the Approach Paper. More importantly we agree with the suggestion to amend the Essential Commodities Act to make it only emergency oriented. We agree, in principle, the need to allow freer movement, both intra-state and inter-state, of foodgrains, but feel that there is no need for a Central enactment in this respect. We also support phasing out all forms of monopoly purchase but feel that some exception in special circumstances e.g. cotton monopoly purchase or purchase of agricultural produce in tribal (ITDP) areas may be required to be continued for some more time. We support establishment of alternative channels to farmers for marketing their produce by making suitable changes in the market regulations. We fully agree that various changes are required in the rules, laws, procedures and approaches for the Forestry Sector, to bring about speedy development and conservation of forest with greater people's participation. We may review the reservation of certain products for SSI but other forms of support to the SSI sector should not only be continued but also strengthened, recognising its important place in our economy.

Minimum Agenda

9. Mr. Chairman, I would now like to give my response to the minimum agenda, which has been placed for approval of the NDC.

(a) Centrally sponsored schemes—We agree with the analysis made regarding centrally sponsored schemes. There are too many of them, which are not always serving the purpose for which they are instituted. We would, therefore, welcome a review of all centrally sponsored schemes to drastically reduce their number. The funds so released should be channelised to the states in the shape of additional grants. We also agree to the proposition to expand major programmes like Accelerated Irrigation Benefit Project (AIBP), Rural Infrastructure Development Funds (RIDF), Accelerated Power Development programme (APDP). Similar funds may be created for other infrastructure sectors like roads and bridges and social infrastructure and environment mitigation programmes. More emphasis may be given for project specific assistance as suggested. Procedure for formulation of such projects and their approval need to be simple and reasonable say of the State Governments should be permitted in the process of sanctioning of the projects and release of funds.

(b) Incentive Assistance for Reforms—it has been proposed to set up an Annual Fund at the disposal of the Planning Commission to augment the plan resources of the states. This is contingent upon the States agreeing to a programme to wipe out revenue deficit in the five years period and to improve governance. We feel that this is a welcome idea. However, the programme for reducing/wiping out revenue deficit has to be a realistic one, to be drawn up in consultation with the Planning Commission, Finance Ministry and the State Government. As regards the issues relating to governance, the programme content and the monitorable targets involved therein, will have to be worked out in detail. These programmes must be accepted as national objectives and pursued by all states. Maharashtra would accept such an approach. Formula for allocation of resources to the states from this Fund should be worked out through a process of national consensus. We understand that a similar exercise has been already taken up by the Ministry of Finance in pursuance of the recommendations of the XI Finance Commission. We have to ensure that duplication of effort is avoided.

It has been suggested in the Approach Paper that support to states will be made contingent upon an agreed programme of reforms. While many of the areas of reforms suggested are in the realm of the states, some of the reforms are linked to the reforms in the central sector. Detailed discussions on the reform programme are therefore, required to be carried out and an agreed agenda adapted by all.

(c) Core Plan and Rolling Plan—Adoption of concept of Core Plan has been already in vogue in the State, It helps to make the plan realistic and allows the implementing department/ agency to plan allocation of funds among ongoing programmes in a more rational manner with some element of certainty. Along with this is the concept of the three yeas Rolling Plan in which there will be commitment of funds for two years period and indicative commitment for the third year. This proposition is also a welcome one. Except major irrigation and power projects, most of the projects taken up must be capable of being completed within a preiod of three years. The concept of three years Rolling Plan will certainly ensure that this is achieved.

(d) Emphasis on Completion of Ongoing Projects-Moratorium on New Projects—We agree with the Approach Paper that efficient use of existing resources must be given high priority in the 10th Plan period. One of the ways to achieve this is to ensure that projects, which are partially completed or at advanced stage of completion must be quickly brought to completion so that they start yielding the desired benefits. We would go with the national consensus to put a moratorium on launching new projects other than in identified backward areas till a minimum number of such partially completed projects are brought to completion. We would also agree to the suggestion to set up a Joint Team of experts from the concerned Ministry, State Government and the Planning Commission in respect of those areas, which are either in the concurrent sector or have the benefit of centrally sponsored programmes.

(e) Privatisation/Closure of Non-strategic PSUs—The State Government is aware of the burden, which it carries, in the shape of non-viable or sick PSUs. Leaving aside those PSUs which we have created for specific welfare purposes and a few undertakings in the infrastructure sectors, many of the PSUs are no longer required to be owned by the State Government. We have already taken a decision, in principle, to divest/ privatise such non-performing, non-strategic PSUs. We have recently passed an enactment to create a Statutory Disinvestment Commission which will be entrusted with the entire process of disinvestment/privatisation of the PSUs once they are referred to it by the Government.

(f) Redeployment of Private Sector Assets—The issue of unlocking unproductive or under-productive assets in the private sector and speedy redeployment for achieving higher productivity, is a very desirable and important objective. It has got, however, certain very sensitive facets to be tackled. While on the one hand legal procedures like bankruptcy and labour laws need to be streamlined, on the other hand, are the issues of labour redundancy, social safety net and rationalisation of labour force. An integrated approach is required to be adopted, National consensus is required to be created in this regard for the whole process to be gone through in a smooth, acceptable and time-bound manner.

(g) Fiscal Targets for the State—We agree, in principle the approach indicated for fiscal corrections, which include reduction of revenue deficit of the states from 2.4 per cent to 1.5 per cent, increase in tax revenue as a percentage of GDP from 9.1 per cent to 11.48 per cent and holding non-plan expenditure in real terms, implying a nominal growth rate of 5 per cent. But the Paper does not project as to what kind of compression would be required by the state governments if they are to be adhered to if targets of revenue deficit mentioned in the approach Paper are to be achieved. The situation will differ from state to state and the final number in respect of targets for each state will have to be worked out after through discussion. It has to be realistic and not too stiff.

(h) Other points on the Minimum Agenda—The proposal to move away from subsidy linked credit schemes to schemes on the lines of Rashtriya Mahila Kosh is welcome. We have taken a decision in principle, to get into a regime of full-fledged VAT from April 2002. We hope other states will also do the same.

Uttaranchal as a Special Category State

10. We have been always supporting the national approach of according Special Category Status to certain States considering the geographic characteristics, backwardness and other strategic factors. However, taking into account the fact that Uttaranchal was earlier part of the State of Uttar Pradesh, any special dispensation in the shape of plan assistance should come from the quota of the erstwhile Uttar Pradesh and it should not lead to any adverse impact on the other non Special Category States.

Some other Important Issues

11. Mr. Chairman, I would like to seek your indulgence to invite attention to a few special issues as below :—

(i) Special assistance for Mumbai City—We have been pleading with the Government of India at various forums to look at the problems facing the Mumbai City as a national problem. This City attracts migrants from all states of the country in search of employment. As a result the population is growing very fast, much higher than the average growth of population of the country. Unfortunately, in spite of the expenditure of nearly Rs. 3,000 crore per annum by Municipal Corporation and the State Government for providing various civic amenities and infrastructure, the resources fall far short of requirements, resulting in gradual deterioration of the quality of life in the city. Collapse of urban services in Mumbai City, which is the financial hub of the country, will have serious repercussions not only on the economy of the state but also of the country as a whole. Special consideration must be given during the 10th Five Year Plan to look at such problems as national problems and to tackle them jointly with efforts of the state and the Centre. A detailed proposal requesting for an annual assistance of Rs. 1355 crores for next ten years, has already been submitted to the Planning Commission.

(ii) Mode of Financing by Central Government Corporations— Several Central Government corporations, such as NCDC, NSFDC, NMDC have been insisting on government guarantees for lending to other entities and individual beneficiaries. In particular, NCDC lends to the State Government in the name of co-operative institutions requiring the State Government to on-lend them on more adverse terms to the states. The State Government also takes the full responsibility of the repayment. This kind of risk-free lending leads to lack motivation on the part of the institutions to evaluate and appraise proposals sent to them adequately and puts State Government in a difficult position. The policy of the risk of such projects being put squarely on the State Governments needs to be reviewed. If social considerations have to be given due place, there should be arrangement whereby project risk is shared between the Central Financing Corporations, the State Government and the ultimate beneficiary institutions or individuals.

(iii) SLR based Borrowings by the State.—We feel that the present policy of allocation of SLR based borrowing (0MB) limits to the states is somewhat arbitrary. During the 9th Plan period the quota of 0MB of Maharashtra compared to several other comparable states has been quite unfavourable. We would plead that there should be a transparent policy during the 10th Five Year Plan on allocation of SLR based borrowing by the states. This could be based on the approved plan size and past preformance. Details of this methodology should be worked out in discussions with the states.

(iv) Lowering of Interest Rates—In the 8th plan period and in the beginning of the 9th plan period the interest rates on loan components of the plan assistance were raised in line with the increase in the open market interest rates. In the last two years of the 9th plan the interest rates have come down substantially. This calls for lowering of interest rates. Simultaneously, a number of negotiated loans are available from institutions like NABARD, HUDCO, LIC, etc. These loans are mostly used for financing projects in the rural infrastructure and social services sector projects. Therefore, the interest rates of such negotiated loans also need to be reduced substantially, at best, at the level of the cost of funds of these institutions.


12. In conclusion I, once again thank the Prime Minister and the Deputy Chairman of the Planning Commission for convening the NDC meeting to enable us to place our views on important national issues for framing development policies for the 10th Five Year Plan. This plan will be a watershed in the economic development of country. I would like to assure that my State will extend full support and cooperation in the implementation of the various policies and programmes, accepted as a result of the deliberations of this Council.

Jai Hind !

Jai Maharashtra.