The meeting assumes greater significance in the backdrop of repeated claims made by chief minister Manohar Joshi that the state's financial health is sound and its pre-eminence in industrialisation is maintained.

The high rate of growth in revenue expenditure has resulted in a rise in the revenue deficit. The increased revenue expenditure can, however, be attributed to an increase in revenue component of the plan, including expenditure on education, water supply, health and employment guarantee scheme.

Nevertheless, while the deficit is currently within manageablelevels (at about 6 per cent), sources said that there is a trend in the use of the surplus on capital account for funding the revenue expenditure, which is an area of concern. "This may result in a further increase in the deficit levels which could adversely impact the government finances in future.

The state has witnessed a jump in revenue expenditure - which has risen from 37 per cent of the total expenditure in 1993-94 to 37.5 per cent in 1996-97 and 49 per cent in 1997-98. The expenditure on the social sector has increased at 12 per cent compared to -3.2 per cent on economic services. Even in the economic expenditure, there has been a shift in the government emphasis towards, agriculture and drinking water.

Another significant item of indirect subsidies last year was the Rs 900-crore subvention for Maharshtra State Electricity Board for achieving the covenented 4.5 per cent return on net fixed assets. Despite this allocation, the MSEB has failed to maintain a 4.5 per cent rate of return which resultedin the suspension of over Rs 850-crore loan by the World Bank.

The major components of non-developmental expenditure are interest payments and administrative expenditure. The increase in expenditure on salaries has been due to increase in number of employees, pay revisions and hike in the dearness allowances over the years.

The spurt in administrative expenditure expected is due to the provision of Rs 5,000 crore for the implementation of fifth pay commission recommendations. The expenditure on debt servicing has grown at 18 per cent on account of increase in the level of indebtedness with its concomitant interest burden. The state government has acquired high-cost debt in recent years which has substituted the low-cost debt contracted in the past.

The secretaries are believed to have told the governor about various steps taken for resource mobilisation in the form of rationalisation of irrigation and power tariffs, impetus on rising sales tax and excise revenue.