The Hindu Business Line : $1-billion structural adjustment loan

TAMIL Nadu's request for a structural adjustment loan - a facility to help it clean up its balance sheet - is before the World Bank's board and a decision is expected shortly.

The State will get about $1 billion (around Rs 4,400 crore) as structural adjustment loan from the World Bank.

The assistance will be over a five-year period and the money will be released depending on the State Government meeting certain milestones that it will have to commit in its agreement with the lending agency, according to reliable sources.

The loan is to help the State transform itself from being revenue deficit to revenue surplus, thus making available funds to spend in critical areas such as healthcare and education, and also increase capital expenditure.

The loan will help in this transition and cushion the impact of the change, according to the sources.

To get the loan, the State will have to commit itself to administrative reforms - computerise and improve its accounting systems, have uniform and reliable tax policies, simplify procedures by drastically reducing the number of forms that have to be filled up by an investor and other such measures that clearly demonstrate the Government's intention to position itself as a progressive State. Several rounds of discussions have been held between Government officials and World Bank teams on various aspects of the State's finances and financial administration.

The State Government believes that accessing the World Bank assistance will have a number of spin-off benefits in terms of similar assistance packages for other areas such as healthcare and water resources consolidation. The World Bank recently approved a Rs 2,160 crore assistance for a road improvement project in the State. Tamil Nadu's revenue deficit has been increasing over the years - Rs 2,739 crore in 2001-02; Rs 4,851 crore in 2002-03; Rs 3,700 crore the next year and an estimated Rs 3,336 crore in 2004-05.

It may be recalled that the Tamil Nadu Government has outlined a medium term fiscal plan that seeks to reduce revenue deficit to below 5 per cent of total revenue receipts by 2007-08 and to make the State revenue surplus by 2008-09; bring down fiscal deficit to below 3 per cent of the Gross State Domestic Product by 2007-08; and reduce revenue deficit to below 35 per cent of fiscal deficit by 2006-07.

The fiscal plan will ensure that capital outlay will increase from Rs 1,627.54 crore in 2002-03 to Rs 5,050.14 crore in 2008-09.

With this, the capital expenditure as a percentage of total expenditure would increase from 5.96 in 2002-03 to 12.64 in 2008-09.

State may seek help on norms for public-private partnership

THE Tamil Nadu Government is likely to seek the World Bank's help to draw up guidelines on encouraging public-private partnership.

The Government plans to even ask the World Bank to advise it on whether a separate legislation is needed to facilitate public-private partnership, especially in infrastructure projects, or whether drawing up guidelines will be enough.

The Government had toyed with the idea of enacting a legislation on public-private partnership, but appears to be having a re-think on this now. The Government feels there is no need for a legislation and merely drawing up guidelines will do.

The World Bank is expected to look at successful public-partnership models in other countries, especially South Africa, which is believed to have a good track record in such projects, and also other States in India.

The World Bank will look into whether a separate legislation has delivered the expected results or whether this can be achieved by framing comprehensive policy guidelines.

Tamil Nadu too has a few examples of public-private partnership - the East Coast Road connecting Chennai to Pondicherry, where a State Government undertaking has a 50 per cent stake in the joint venture that has executed the project; and a project to supply water to the hosiery town of Tiruppur, where too the State Government has an equity stake in the company implementing the project.

According to reliable sources, the World Bank is also expected to study these projects before it comes out with its recommendations to the State Government. The bank will also look at the steps that need to be taken to ensure a smooth transition of projects from purely State-executed ones to public-private partnership ones.

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