The 12th Finance Commission, set up last year to recommend the allocation of resources between the Centre and states, will submit its report to the Union government in July 2004.

Commission chairman C Rangarajan told rediff.com in Bangalore that the panel had already initiated discussions with the states on their financial status, including fiscal deficit and resource mobilisation efforts.

"The panel will submit the report to the government in July 2004 so that its recommendations could be implemented for the 2005-2010 period as per the terms of reference," Rangarajan stated.

"We have completed a round of discussions with some states, including West Bengal last week in Calcutta and taking up other states one by one," he said.

"We propose to complete our meetings with other state governments by this year-end so that the report could be readied by mid-2004," he stated.

Asked about the impact of delay in introducing the value added tax regime on the state finances, Rangarajan said he was hopeful that the VAT roll out would take place before the panel's report was prepared so that it could factor its benefits to the states and the Centre.

"We expect the VAT regime to be in place by then as it would lead to enhancement of states' revenue collections, which in turn would enable us to formulate the recommendations," Rangarajan disclosed.

Set up under Article 280 of the Constitution by the President, the commission has been asked to review the state of finances and suggest ways by which the government may bring about a restructuring of public finances to restore the budgetary balance, reduce the fiscal deficit and generate surplus for capital investment.

Unlike in the past, the Planning Commission has been actively involved in the 12th finance panel's working to allocate the resources, achieve macro-economic stability and ensure debt reduction with equitable growth.

"The commission is also studying the fiscal reform facility, the debt position of the federal states, and the calamity relief fund in conformity with the terms of reference," Rangarajan affirmed.

Referring to his keynote address at the silver jubilee celebrations of the Greater Mysore Chamber of Industry during the weekend on the state of Indian economy, Rangarajan said there was an urgent need to formulate a medium and long-term export strategy to increase India's share of total world exports beyond the decimals.

"India's share of world exports declined to 0.53 percent in 1992 from a high of 1.91 percent in the nineteen fifties. Efforts should be made to double it to reach 1 percent in the next years.