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October 18, 2002 | 1235 IST
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Vajpayee for consensus on fiscal reform

Concerned over the deteriorating fiscal situation of the Centre and the states, Prime Minister Atal Bihari Vajpayee appealed to the chief ministers to evolve a political consensus on critical developmental and governance reforms for better fiscal discipline.

"Unless we broaden the area of political consensus, and there is agreement between the Centre and states on critical development and governance reforms, the problems that we currently face would get compounded," Vajpayee said in his opening remarks at the chief ministers conference on fiscal issues in New Delhi on Friday.

"I appeal to you (the chief ministers) to help make today's conference a major milestone in our ongoing efforts at achieving better fiscal discipline and thereby attaining higher growth rates," he said.

Noting that the fiscal health of the states has been a matter of much concern to all policy makers for some time now, Vajpayee said the fiscal deficit of the Centre and states together is unacceptably high.

"It has seriously affected our country's economic and social development," he said, adding: "It has widened the gap between people's expectations and the system's ability to fulfill them."

The state finance ministers conference last month was convened to evolve a consensus on certain core decisions that must be collectively taken to cure the fiscal health of the states.

"We are meeting today to consider those decisions and adopt them as a national consensus," Vajpayee said without spelling out the core decisions.

The chief ministers began the crucial meeting to evolve a consensus on the contentious issue of freezing dearness allowance of government employees and strategies to bring the burgeoning debt of states to sustainable levels.

The close-door conference began amidst speculation of differences on these issues among states with some favouring and others opposing the unpopular decision of freezing dearness allowance as a measure to bring stability to the precarious state finances.

Apart from the strategies for bringing debt to sustainable levels, the major issues that are likely to be thrashed out at the one-day conference include the debt swap scheme proposed during the finance ministers' conference.

Under the scheme, the states will retire high cost debt of Rs 25,000 crore (Rs 250 billion), which would be replaced by low cost borrowing from the market. The high cost debt mostly from the small savings instruments was putting a huge burden on sates as the interest rates were as high as 14 per cent.

The conference is also being attended by Finance Minister Jawant Singh and Deputy Chairman of Planning Commission K.C. Pant.

Expressing happiness over the steady convergence of views between the Centre and the states during the last few years, Vajpayee said: "We had useful conferences on power sector reforms and issues before Indian agriculture in the context of challenges and opportunities presented by WTO."

"It is in the same spirit that we are meeting today," he said hoping the conference would come up with an agreed approach to remedy them in the true spirit of cooperative federalism.

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