Tuesday, June 01, 2004

Finance: World Bank defers $150 million loan to Tamil Nadu

News from The Hindu on Tamil Nadu's electricity charge rollback, World Bank loan deferred

As Tamil Nadu Chief Minister Jayalalitha went on a roll-back mode, World Bank has decided to have a relook at the $150 million loan awarded to Tamil Nadu state government for softening the impact of the reforms process kickstarted by the government.

Since AIADMK's rout in the parliamentary elections, Jayalaitha has revoked most of her earlier decisions. Some of them have no relevance financially - such as repeal of anti-conversion ordinance. Removal of H mark on ration cards for families earning more than Rs. 5,000 per month would also have not made much of a dent in the finances and perhaps is a welcome move. However she has also rolled back the electricity reforms she has introduced in the farming sector. Now, extending the same, she is cutting down the electricity charges for homes. The new charges, effective from June 16th are:
Electricity
consumption
in units per month
Present rate
(Rs. per unit)
Revised rate
proposed
(Rs. per unit)
0-251.100.75
26-501.300.85
51-1002.601.50
101-3003.502.20
301 and above4.753.05

This is expected to amount to an annual subsidy of Rs. 910 crores, reaching out to 1.17 crore families. Predictably the people are happy. The opposition politicians are saying this is to capture votes in the upcoming 2006 assembly elections. Now Tamil Nadu Chamber of Commerce and Industry wants the same to be extended to commercial operations as well.

However no one seems to bother where the money is going to come from. The state's revenue deficit is expected to now shoot to Rs. 4,500 crores. (Read V. Jayant's comment.)

To add to these woes, World Bank reconsidering its loan of $150 million, at close to 6% interest, that it had sanctioned for Tamil Nadu.

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