A senior ministry official told FE that the debt-swap scheme will involve 20 per cent of the small savings proceeds accumulating from September 1, 2002, onwards. It will also include an additional Rs 10,000 crore market borrowing by states in the fiscal.
The government had announced in the Budget this year that entire small savings proceeds will be transferred to states up from the earlier 80 per cent. However, transfer of additional 20 per cent amount to states, which is estimated at Rs 10,000 crore in the fiscal, was linked to its use for retiring high-cost debt.
In the absence of an agreement on the debt-swap mechanism, the entire process is currently hanging fire, as the Centre is not releasing the additional 20 per cent small savings proceeds to states.
The official said the Union finance ministry has now decided to transfer the entire small savings proceeds accumulated up to August this year to states, without subjecting its release to use in retiring high-cost debt.
He, however, added that only those states participating in the debt-swap scheme will get additional 20 per cent small savings proceeds accumulated from September 1, 2002.
The official said the finance ministry has already written to all the states to send their views on the issue to the ministry by January 5, 2003.
The states that have already expressed their willingness to participate in the scheme include Rajasthan, Delhi, Uttar Pradesh, Assam, Andhra Pradesh, Bihar, Gujarat, Haryana, Orissa and Himachal Pradesh.
West Bengal, Karnataka, and Goa are among those reluctant to participate in the scheme, said the official.