Enhance cost recovery & restructure PSUs, RBI to states

Enhance cost recovery & restructure PSUs, RBI to states

Mumbai: The Reserve Bank of India (RBI) has asked states to impose adequate user charges on various services provided by them and restructure public sector units (PSUs) as investment in them are fetching low returns.

“Low recovery from various social and economic services has been a serious cause of concern for the state governments. While the recoveries from power and roads have shown improvement, recoveries from irrigation, education and health are more or less stagnant at the previous year’s level," the RBI said in its recent report on state finances.

Cost recovery in 2008-09 is budgeted at 1.4% for education, 4.4% for public health, 14.7% for irrigation, 25.4% for power, 7.7% for roads.

Also, the return in terms of dividend and profits from investments made by the state governments in state PSUs has been quite low due to their lacklustre performance, it said.

“For raising the level of (these) non-tax revenue of the state governments, there is a need for enhancing the cost recovery by way of levying of appropriate user charges and restructuring of the state PSUs," it added.

RBI also said improvement in the quality of delivery of services would enable the state governments to raise resources through these kinds of non-tax revenue. It said as a ratio to GDP, the states’ own non-tax revenue would be maintained at last at year’s level of 1.3%, although it will register an increase of Rs4,270 crore in absolute terms.

The growth in states’ own non-tax revenue is budgeted to accelerate to 6.8% during 2008-09 against a decline of 1.1% in the preceding year.

“The budgeted increase in non-tax revenue would mainly be contributed by increase in receipts from economic services, inter alia, industries, power and forestry and wildlife," the report said.