Addressing the first meeting of the state finance ministers here on Wednesday, Khusro explained that what he meant by financial restructuring was not mere tinkering, but something more fundamental to foster "efficient use of funds".

Pointing out that the role of the finance commission has assumed importance in wake of the resource crunch being faced by the centre as well as states, he emphasised that the need of the hour was dynamic thinking on the part of the states.

In his inaugural address, the finance commission chief also underlined the need for strengthening local body institutions by providing them more funds along with greater responsibilities.

Stating that revenue deficit was more serious a problem than the fiscal deficit, Khusro said that all efforts were needed to be taken to maintain macro economicbalance.

The states on their part unanimously demanded that the government should expedite the amendments in the constitution to give effect to the alternative funds devolution formula suggested by the 10th finance commission. The issue has been hanging fire because of the political instability.

Speaking on the issue, Andhra Pradesh finance minister P Ashok Gajapathi Raju urged the finance commission to recommend suitable increases in the states' share in income-tax and union excise duties pending constitutional amendment on 29 per cent transfers to the states.

Expressing concern over the declining trend in central transfers to states from 33.6 per cent in 1985-86 to 28 per cent in 1998-99 in net terms, Raju made a case for much higher share for states in central tax revenues.

The Andhra finance minister further pointed out that while the states have done well with regard to tax collection, the central government had fettered on this count to the detriment of the states. He further said that despitelimited revenue sources, the states' own tax-GDP ratio increased from 5.80 per cent in 1987-88 to 5.98 per cent in 1997-98, while for the centre it declined from 11.30 per cent to 9.70 per cent. Therefore, Raju argued, the responsibility for improving the revenue collections was much more on the centre.

Punjab finance minister Kanwaljit Singh in his address demanded that the states' share in central tax receipts be raised to 50 per cent. He said that the 29 per cent share was inadequate.