States Agree On Debt Swaps To Improve Finances

New Delhi, January 21: | Updated: Jan 22 2003, 05:30am hrs
Faced with severe debt burden of Rs 5,80,000 crore, all the states barring Maharashtra and West Bengal have agreed to exchange high interest bearing bonds with softer loans as offered by the Centre.

All states, except two, have so far agreed to the debt swap proposed by the Centre at the last years chief ministers conference convened to find ways to overcome the difficult fiscal situation, finance ministry officials said here on Tuesday.

Maharashtra and West Bengal have not agreed so far as they want the proposal to be improved upon further considering the magnitude of the debt.

Last year, the Centre agreed to swap debts worth Rs 25,000 crore Rs 15,000 crore on accont of small savings and the remaining for market borrowings by states. Through this mechanism the centre intends to provide a relief of at least Rs 1,000 crore to states.

Centre decided to exchange high cost debts of states with low cost securities worth Rs 1,10,000 crore during the next four years. The total outstanding of states mounted to over Rs 5,80,000 crore last fiscal with an interest outgo as high as Rs 69,000 crore. The RBI and the finance ministry had worked out the debt swap scheme.