Can he revive Maharashtra?

JAYANT PATIL, at 38, is the youngest finance minister of Maharashtra.An engineer from VJTI, he was studying in the US when his father's death brought him back home. A brief tenure as chairman of the largest cooperative sugar unit in the state followed, when Sharad Pawar inducted him into the cabinet. Now Mr. Patil is trying to improve the state's finances.He tells Business Editor MEHRABOON JAMSHEDJI IRANI his plans.

The Democratic Front government in Maharashtra has been in charge for nearly three years and the state coffers continue to be in a precarious condition. Any specific plans to improve the state of affairs?
At the outset, let me state that this is my third budget. Right at the time when we assumed power in October 1999, we presented a White Paper explaining the financial condition of the state. We had highlighted the need for the government to withdraw from non-core sectors and in this context had mooted a proposal to set up a Board with statutory powers for financial and managerial restructuring of PSEs. The board has now been constituted. It will not only have the authority to make binding orders on the future of PSEs referred to it by the government, but also supervise implementation of these orders.

Secondly, to facilitate a quick transition to a more competitive environment, we have decided to provide for a process for quick liquidation of those co-operative units which are clearly uncompetitive. To ensure that this process does not get bogged down in procedural delays, the powers of liquidation will vest in an independent three-man board which will take all quasi judicial and commercial decisions, from declaration of cooperative units as unviable to their final closure and asset distribution. The board will also be empowered to restructure units, including divestment, merger, amalgamation.

The state government has also made it clear to curb expenditure, especially on salaries and overhead. To set an example and as a gesture of sacrifice, the salaries of all ministers which were earlier reduced by 10 per cent, will be further reduced by another 10 per cent from April 1, 2002, bringing the total cut to 20 per cent. Travelling and daily allowances of ministers have also been restricted to a maximum of 10 days in a month.

The problem of increasing debt due to increasing borrowings has also engaged our attention. This problem has been compounded by the increasing and direct impact of government guarantees on the understanding that the loans raised against these guarantees will be serviced from the budget. Fresh guarantees will be available to PSUs only as a credit enhancement measure for loans and issues which are otherwise viable on the basis of revenue streams and user charges.

The unsatisfactory condition of the Maharashtra State Electricity Board (MSEB) has aggravated the financial problems of the state government. We are taking necessary steps to improve the situation.

Also, the government has fallen into a habit of giving guarantees to all large-sized projects. The previous government has prepared huge liabilities. We have now to repay these liabilities. People are invoking guarantees. Henceforth, it will not be possible for the state government to extend financial support to new commercial units in the cooperative sector. Further, we will discourage proliferation and instead advise prospective new entrants in the cooperative sector (especially in the sugar and spinning mill sectors) to take over one of the ailing units rather than set up new units in the state. This is necessary because of the excess capacity in these sectors which threatens the viability of existing units. Lot of invoking of guarantees are on the way. So, we will first repay wherever guarantees have been invoked and then try and revitalise such units. Also, we will liquidate those units which are not doing well.

You mentioned that the MSEB is a big drain for the state's finances. What specific steps are being taken to improve its functioning?
The Maharashtra State Electricity Board (MSEB) is facing crisis of deficit. In 2001, MSEB incurred a loss of Rs. 2,481 crore and the loss for the current year is likely to be around Rs. 1,500 crore. We are constantly trying to reduce leakages and losses in the system.

Recognising the urgency, we have initiated the process of comprehensive reforms in MSEB with clearly defined milestone. Responses will be invited to suggestions relating to unbundling, privatisation of distribution and rationalising of tariff. The government's own views in respect of these suggestions will be published in a White Paper by June 2002. While doing this, we would like to start a debate in the State so that all can contribute and come out with their suggestions. It is necessary to stress that the consultation process will include exhaustive discussions with workers' union. Given the close linkage between the future of MSEB and its employees, it is expected that the workers' unions will take a constructive approach to reforms in MSEB.

However, I wish to state that MSEB cannot be compared with the state electricity boards (SEBs) of other states. MSEB has its own inherent strengths. Therefore, we can definitely improve its state, provided we are able to curb the line losses which are today at 39 per cent. It is very important that this major drain to our economy is plugged at the earliest.

In the meanwhile, certain measures recommended by the Godbole Committee for improving the operational efficiency of MSEB will be implemented immediately. These include complete meterization of unmetered connections within the next three years, replacement of defective meters with improved quality meters, amendment to the act to provide for severe punishment to those indulging in anti-abetting power thefts and other such malpractices.

The State Budget has no concrete plans for Mumbai despite the fact that 60 per cent of taxes in the state are paid by the city. Your comments.

Every state budget cannot contain goodies. At the moment, we are focussed on improving the state of the economy. You will notice that the budget is short on promises.

How costly has the Enron liability proved to be to the State Exchequer?
The state has lost around Rs. 1,300 crore on the Enron issue. While we purchased Rs. 1,700 crore worth of electricity, we sold it at Rs. 400 crore.

What is the status of the investments made in the irrigation sector projects which have not been completed because of shortage of funds.
One of the important factors contributing to the adverse fiscal position of the state has been the large investments made in the irrigation sector projects which cannot be completed as the capital required is just not available. These incomplete projects are, therefore, not yielding any returns. Increasingly, the government will hive off incomplete works for completion to those who are willing to take over the completion of such projects on BOT/BOO basis.

You have announced a cut in salaries of state ministers from April. How much will the state save out of this?
This year's budget is emphasising on curbing expenditure. By announcing a cut in salaries of ministers, we are setting an example by starting from our end. Frankly, the amount saved because of this measure is not very significant.

The teaching-fraternity is the most easy target for the government. Whenever there is a crunch, teachers of aided-schools are not paid for months together. At present, the situation is the same.
One needs to appreciate the fact that the financial condition of the state has been under a lot of strain. Well, salaries are being paid, though some delays have taken place. Last year, the state managed to raise Rs. 31,000 crore revenue against the targetted Rs. 33,000 crore, leading to a shortfall of over Rs. 2,000 crore on this front. Under such constraints, delays become inevitable.

Is it true that the World Bank has refused to give loans to the state government?
There is no truth in this. In fact, the World Bank is quite happy with the steps taken by the state government. With reforms expected to continue, we are confident of enjoying the patronage and support of the World Bank.