New Delhi: As a follow up to the Chief Ministers meeting with Prime Minister Atal Behari Vajpayee in October, the high-powered committee on state finances on November 6 met Reserve Bank of India (RBI) Governor Bimal Jalan to discuss the issues of swapping high cost loans with lower interest bearing loans.

The finance ministers of West Bengal, Assam, Tamil Nadu and Madhya Pradesh discussed the contentious issue of debt swapping through adjustment of 20 per cent of small savings collection and additional market borrowing.

According to official sources, the states also took up the issue of relaxation in "restrictive circular" issued by RBI in respect of state government loans from banks and financial institutions to fund their plan expenditures.

Sources said that the states also raised with RBI the issue of crisis in raising funds through the ways and means advances (WMA) facility offered by the Central bank.

Although states wanted more than Rs 25,000 crore worth of debts having interest of over 13 per cent to be swapped with low interest loans, Finance Ministry officials said that it was not feasible.

States failed to arrive at a consensus at the October 18 meeting between CMs and Vajpayee on the issue of swapping debt as Centre proposed a meagre interest relief of Rs 950 crore of the staggering Rs 65,000 crore liability of states.

West Bengal Finance Minister Asim Dasgupta earlier said that the Centre should "improve upon" the Rs 950 crore relief package.

Relief on principal amounts was pegged at Rs 4,500 crore, but states also had to contribute by sacrificing around Rs 15,000 crore from small savings.

According to Dasgupta, "The net effect is disadvantageous for the states."

PTI