RBI norms for state finances soon

It was also decided after a detailed discussion of the proposed Government Securities Act, that the apex bank would make available the rationale behind the proposal to enable the state legislatures to accord their consent to the act, the RBI said in a statement. This would enable parliament to enact the legislation which would serve to improve the government securitiesmarket.

The proposed act envisages facilitating electronic trading and depository facility apart from simplification of procedures. Such an act would require the consent of the state governments and passage by the parliament, the statement said.

Incidentally, Kelkar while observing that the Indian government had already adopted special data dissemination standards of the International Monetary Fund (IMF) on government finances, announced that the centre would follow the same practice on the external sector.

Meanwhile, the state finance secretaries present at the meeting noted the contents of a technical paper presented by an internal working group on Financial parameters for assessing the Financial health of the states. They agreed on the formation of a committee which would give an advisory report on the appropriate parameters. The other action points which arose out of the discussion were:

In his welcome address, RBI governor Bimal Jalan insisted on the necessity of bringing about more transparency in the presentation of accounts of the state and central governments.

Jalan said a lot of initiatives had already been taken by the RBI towards fiscal reforms in state finances such as revising the limits of ways and means advances, introducing a new overdraft scheme, placing of statutory limits on government guarantees, enabling them to borrow directly from the market and finalisation of the scheme of consolidated sinking fund for the state governments.

Kelkar,stressing on the need for reforms in state finances, said international rating agencies had started closely examining state finances while rating any country for investment. With regard to the MoUs which a few state governments have entered into with the central government, Sarma said the MoUs had identified milestones in terms of time limits within which these reform measures could be carried. The whole programme was, however, participatory in nature, he added.

While the states define the reform agenda, the central government provides technical advice where needed and the monitoring is carried out by a participatory system in which the finance commissioner of the state and the officials of the Finance Ministry together with representatives of the Planning Commission and the National Institute of Public Finances and Planning, monitor and review the implementation of the MoUs. The MoUs include reforms in areas such as revenue augmentation measures, including user charges for electricity andirrigation.

Sarma observed that some of the models (on reforms) presented by some states had thrown up interesting ideas which could be adopted by the other states. The meeting also took stock of the action taken on the basis of previous such conferences. The legislative action by some states following the recommendations of such conferences were appreciated. It was suggested that such inter-state conferences should be formalised and held regularly.