Structural reforms are like medical surgery. Such surgical operations have to be carried out only when they become inevitable and they always result into long term gains. Any Finance Minister would be normally reluctant to carry out such surgical operations as there is no short term gain in sight. However, as Finance Minister, I should also think of long term interests of the State. I had carried out one major structural reforms operation last year by bringing in the New Pension Scheme for the government employees. The long term effects of this scheme shall be appreciated only by the posterity.
This year, I have carried out another major structural reform which will clear off the long pending and never ending over draft liabilities of the State Government in its official account with the J&K Bank. For this purpose, measures to raise a sum of Rs 2,300 crore through the mechanism suggested by the Thirteenth Finance Commission have been already initiated.
The State Government had already signed an agreement with the Reserve Bank of India in September 1972 for its debt management. In continuation, the Government has now signed a supplementary agreement authorizing it to carry out the responsibility of our cash management as well. Under this arrangement, the J&K Bank shall continue to deal with the accounts of the J&K Government in the same manner as it has been dealing in the past, through the available net work of the government treasuries but with the added advantage of RBI supervision and expertise.
We have already raised special market borrowings of Rs 1300 crore as per recommendation of the Thirteenth Finance Commission and paid this amount to the J&K Bank. These special market borrowings shall be outside the FRBM arrangement. The Government of India shall now release a one time grant-in-aid of Rs 1000 crore, as per the second part of the recommendation of the Thirteenth Finance Commission. This amount shall also be paid by us to the J&K Bank in clearance of our overdraft liabilities.
From the next financial year, the State Government shall be entitled to directly avail of the Ways and Means Advance and over draft facilities from the Reserve Bank of India at appreciably lower rates of interest than the rates of interest applicable on our over drafts so far.
Under the new arrangement, the depositor’s money with the J&K Bank which had got jeopardized because of the perpetual government over draft shall be freed and shall become available to the J&K Bank for making advances in other profitable ventures, as also for priority sector lending to our farmers and entrepreneurs. A sum of Rs 2,300 crore pumped into the economy of the State shall generate its own multiplier effect, both on income and employment generation.
This major initiative taken under the bold and dynamic leadership of our Chief Minister Janab Omar Abdullah Sahib shall be extremely beneficial in the long run for the government, for the J&K Bank, for the Bank’s depositors and for the farming community and entrepreneurs of the State. I am sure that the learned members of this August House shall appreciate the benefits of this bold government initiative.