Let Centre help prepay of high cost loans : HDK

New Delhi, Dec 9 (UNI) To improve the fiscal health of Karnataka, Chief Minister H D Kumaraswamy today sought Centre's intervention on a two-pronged strategy to tailing prepaying high cost borrowings by the state and easier access to market borrowings.

In his speech at the National Development Council, the Chief Minister said the state government had borrowed loans ranging 13 to 18 per cent of interest from Financial Institutions like HUDCO and LIC. They were not willing for the state's prepaying of these loans.

The Finance Ministry should look into the request and resolve the pending fiscal issues affecting the health of Karnataka.

He referred to advice of the Planning Commission asking the states to go in for market borrowings instead of Central loans. At the same time the Finance Ministry had asked the states to resort to market borrowings only after the exhaustion of National Small Savings Funds. "This is highly disadvantageous to the States", Mr Kumaraswamy said. The NSSF borrowing will work out to the state shelling 75 to 100 crores by way of higher interest of 2.5 per cent a year, he said.

He said the fiscal correction in the state for the last few years had brought stability of finances in Karnataka resulting in improving its debt stock. The loss on account of implementation of Value Added Tax was to get stabilised in the next two years.

Unfortunately the state was unable to utilise the market advantage of reduced interest rates as the NSSF scheme, all net small savings collected in territorial jurisdiction of state are given back to the state as loan. While interest rates have dipped on other instruments, the NSSF continue to be nine per cent on investments attracting higher investments. Steps were taken to curb investment in small savings programmes. But high return provided by GOI on NSS is forcing the states to accept beyond what was budgetted, he said.

Turning to mining, he said Karnataka was producing 40 million tonnes of irone ore per annum but was getting only Rs 80 crore as royalty. The state had repeatedly proposed that the royalty should be fixed on advalorem basis linked to market value of the ore. The state was planning to bring an Act to raise resources for creation of infrastructure and for improving environment in mining areas.

There should be restrictions on export of valuable minerals in raw form. A clear and unambiguous policy should be in place to encourage value addition within the state. Auction of mining areas should be considered only in cases where none was coming forward for value addition or economically viable technology was not readily available in the country. The public sector companies depending on minerals including those engaged in production of energy should be provided with mining leases for their captive use, he said.

Stating that a nine per cent growth was not possible without commensurate increase in supply of energy, Mr Kumaraswamy said the Karnataka Power Corporation Limited was currently adding 1,250 MW of thermal power and planning to take up coal based thermal power plants with an aggregate capacity of 4000 mw. However the plans were facing uncertainty over the availabilityof good quality domestic coal. He also drew attention to the problem concerning 1,400 mw gas based power plant because none of the firms were willing to quote firm price for LNG in view of uncertainty in international markets. The Krishna Godavari basin gas should be made available to Karnataka which did not have coal or lignite reserves.

The CM also detailed the progress achieved in the field of urban infrastructure, agriculture, rural development, industries, Information Technology, education, health, Housing and social welfare.

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