"The decline in the states' own tax revenues is a matter of concern," said the RBI in its study titled State Finances ¬ A Study of Budgets of 2009-10.

On the non-tax front, the states' non-tax revenue at around 10 per cent of the total revenue receipts appears to be low by international standards, it said.

"The states may, there- fore, make efforts to increase their reliance on non-tax revenues by levying appropriate user charges such as time-bound revision of water supply tariffs, introduction of user charges in health, education and veterinary services and cost recovery from social and economic services," the RBI said.

The RBI study said states may also rein in tax expenditure, which is revenue fore- gone because of preferential provisions of the tax structure, including exemptions, deductions, credits, deferrals and reduced tax rates to arrest the fall in tax receipts.

It further said state governments might consider strengthening their tax ad- ministrations through measures such as computerisation of commercial taxes, online registration and online filing of returns and computerisation of land records.

"These measures may help the states to augment their revenue bases in the medium and long run," RBI has said.