A red letter sent by the RBI to the UP Chief Secretary recently categorically states that ``the financial position of your state is not good. Repeatedly, you are going in for overdraft. Please make arrangements to improve your financial position.''

According to state government sources, this is the second time in the past three months that the RBI has served a warning to the UP government for its repeated recourse to overdrafts. It may be mentioned that the apex bank issues a notice to a state government only in case it resorts to overdraft more than three times in a month and fails to clear it within 10 days.

Following this, the state finance department has submitted a proposal to chief minister Kalyan Singh suggesting adoption ofhard measures to tide over the crisis. These include a blanket ban on frequent air trips undertaken by state government bureaucrats, a ban on purchase of new vehicles by all government departments, a blanket ban on appointments made against vacancies arising out of retirement etc.

Apart from this, the department has suggested a freeze on grants to educational institutions and other autonomous bodies at the 1998-99 level while grants to new institutions should be made only on a non-recurring basis. In addition, it has proposed a substantial increase in fees in educational institutions in the state, government hospitals and minimum charges for meeting the minimum costs of their operations.'' It is believed that a proposal for hiking power tariffs in the state is also being considered.

The measures proposed by the finance department apart, sources said that the CM has issued a warning to heads of all major revenue earning departments in the state to get their acts together and start performing. Whileclear-cut instructions have been issued to all department to devise ways of mobilising additional resources, Kalyan Singh has also threatened to stop salary payments of heads of department who fail to achieve the minimum revenue targets fixed for their departments. Not only that, performance of various departments will be assessed on a monthly basis by the CM himself and those failing to submit statements of monthly expenditure of their respective departments would be penalised as well.

State government sources said the CM was being forced to take such drastic steps on account of failure of several key departments in achieving their laid-down targets. Recoveries from the departments of trade tax, excise and transport and stamps and registration, the three main revenue earners for the state, have been estimated at around Rs 1,800 crore in the first quarter ending June 30 against a target of Rs 2,200 crore.''

And while steps are being taken to improve recoveries by these departments, it is being feared thatcertain measures may prove counter-productive.'' For instance, in a bid to encourage more people to register their immovable assets, the state government lowered the rate of stamp duty from 12 and half per cent to 8 per cent in April this year.

Further, powers of sub-registrars were pruned down considerably to minimise harassment of those coming forward to register their properties.

However, sources revealed that the fact that the revenue collection of Rs 258 crore for the first quarter of the current fiscal had fallen short of target by Rs 42 crore showed that these measures had proved counter productive for instead of increasing collections, the steps had been misused by people to undervalue their assets.

However, in view of the latest RBI threat, most state government departments have started making concerted efforts to improve their performance to avoid a `Bihar-like' situation wherein state government employees have been deprived of their salaries for months on end on account of total bankruptcy ofthe Government.