The Twelfth Finance Commission (TFC), the Survey said, has provided a firm basis for such harmonisation by linking debt relief to states with fiscal consolidation initiatives. One of the conditions for fiscal consolidation is enactment of Fiscal Responsibility and Budget Management Act type legislations by states. Five states have enacted fiscal responsibility legislations till 2003-04. Three more, the Survey said, have initiated steps for adopting the legislation.
The TFC has suggested that the practice of loan intermediation by the centre should be restricted to fiscally weak states and all other states be asked to directly approach the market for raising loans. It also wants the states to set up sinking funds in public account for amortisation of all loans and guarantee redemption funds through earmarked guarantee fees, after risk weighting guarantees.
The Survey further said that the consensus reached among the state finance ministers for the proposed introduction of state-level (VAT) was a welcome step and would lead to harmonisation of tax structures across the states. Establishment of a national common market for goods and services for the country, it added, would require carrying forward the process of coordination.